Facebook’s move into the cryptocurrency arena could take a different approach than first thought, with suggestions that the company may use multiple cryptocurrencies backed by major global currencies like the dollar, instead of using a single digital token.
David Marcus, head of the Libra project, told a banking seminar that the group’s primary objective remained to create a more efficient payments system, but said they were open to looking at alternative approaches for the implementation of that system.
Facebook’s original proposal would have seen them use one synthetic unit of value that would be tied to a basket of currencies and government debt.
“We could do it differently,” Marcus said. “Instead of having a synthetic unit … we could have a series of stablecoins, a dollar stablecoin, a euro stablecoin, a sterling pound stablecoin, etc.”
“We could definitely approach this with having a multitude of stablecoins that represent national currencies in a tokenized digital form,” he said. “That is one of the options that should be considered.”
A stablecoin is a cryptocurrency that is pegged to a government-backed currency such as the dollar. The concept is not new and numerous stablecoins are already in circulation, with Tether being the most famous.
The aim of stablecoins is to reduce the volatility seen with traditional cryptocurrencies like Bitcoin. Such an approach would make sense with the goals of the Libra project in mind.
The Libra project has been hit by a number of stumbling blocks since its launch was announced. Payments giants Mastercard and Visa have backed out of their involvement, and on Friday J.P. Morgan CEO Jamie Dimon described the project as “a neat idea that’ll never happen”.
Libra has also been met with fierce opposition from authorities and regulators around the world, with the currency seen as having the potential to wreak havoc on the global financial markets.
The G-7 said last week that no stablecoin project should be allowed to go ahead until the attached legal risks are addressed, in a statement that presents a serious barrier to Facebook’s plans.