Recently, Facebook’s stablecoin Libra released some changes to its whitepaper, and consequently Binance Research has released the assessment of the implications.
Binance Research, the entity in charge of Binance’s market research and analysis, recently released a new report on the changes made to the project’s technical document in order to comply with regulations.
Is the stablecoin Libra friendly to regulators? Will it meet expectations?
Since this project was announced by Facebook, it has received multiple criticism and pressure from both the public and regulators. Now, some time later, they have decided to modify their White Paper in order to comply with the regulations.
In particular, the fundamental modification lies in the move from being a stablecoin backed by a basket of fiat currencies to being a new global payment system and financial infrastructure.
Therefore, the fundamental question that the report published by Binance Research seeks to answer is: “Will Libra live up to its initial ambitions?”
Initially, the report emphasizes that the stablecoin’s new Libra white paper includes changes to its mission and overall narrative.
Binance Research analysis
Libra’s latest technical document establishes the following three pillars:
- A distributed ledger: by this he means a blockchain called the Libra Blockchain.
- A set of Stablecoins, called Libra Coins, which will be backed by collaterals in the project Reserve. These collaterals will be traditional assets, that is, cash, their equivalents and short-term government debt securities.
- A governance system from an independent organization based in Switzerland (Libra Association) and its subsidiary (Libra Networks) that develop and operate the network.
The main modification resides in point number 2, given that, previously, it was a single stablecoin Libra that would be backed by a basket of fiat currencies. Now, they are different Libra Coins each with its respective backing.
What will be its impact?
In its new report, Binance Research analyzes the possible impact of this project on the stability of the world monetary system and on the rest of the stablecoins in the market.
In particular, it considers that the project has the potential to change the game rules of the global payment system. However, they assure that this project and its stablecoins will not compete with the use cases of existing stablecoins.
In fact, regulators’ main concern about Facebook’s digital currency was the possibility that it would destabilize the monetary system. In particular, it is considered that it could affect the monetary policy of the countries.
In this way, Binance Research establishes that the Libra team made compensations in the short term with the aim of reducing the initial impact of the stablecoin, since open access to the project has been postponed.
However, the research team considers the low probability that Libra affects the monetary stability of developed countries. But, it could affect how people decide to replace the local currency with the new stablecoin.
It is precisely for the foregoing that Libra has informed its intention to maintain a dialogue with the Central Bank of each country regarding said circumstances.