On June 18, 2019, Facebook published the White Paper for Libra, the cryptocurrency launched by the American giant. According to the document, Libra aims to fill the gap in financial services for clients who remain unbanked, enabling the quick and easy use of a global platform at the lowest possible cost[1].
Although this cryptocurrency is based on blockchain, there are two crucial differences between it and other cryptocurrencies with this technology. Firstly, the platform allows mass processing of transfers, addressing the issue of scalability of this type of solution[2].
Secondly, this currency will be tied to a basket of fiat currencies, as well as liquid assets and securities, addressing the issue of volatility which has made this type of cryptocurrency a means of exchange rather than a unit of value[3].
These characteristics can make the difference to the commercial success of Libra, however, they can also bring regulatory implications different to those caused by the digital payment solutions in our market. One of the pillars of this product is Calibra, the subsidiary of Facebook in charge of interacting with the Libra issuer via a mobile wallet. Calibra will seek authorization from millions of Facebook users to receive and hold personal financial information, and with this it will eventually build a type of “global digital financial identity”[4].
However, it is important to make a functional analysis of the nature of this crypto asset, i.e. whether it is a commodity, a security, a currency or a derivative financial product. Its classification and method of local distribution will determine its level and type of regulation.
In any case, we assume that given the number of Facebook users, the regulator will want to investigate the details in more depth, such as the protection of personal data and consumer protection, in a way that has been previously unexplored for financial products offered from other countries.
[1] Libra Association: Libra Presentation, Report. Available
at: https://libra.org/es-LA/white-paper/
[2] https://www.economist.com/business/2019/06/20/what-facebooks-new-currency-means-for-the-banking-system
[3] Zetzsche, Dirk Andreas and Buckley, Ross P. and Arner, Douglas W., Regulating LIBRA: The Transformative Potential of Facebook’s Cryptocurrency and Possible Regulatory Responses (July 4, 2019). Available at SSRN: https://ssrn.com/abstract=
[4] See, The Transformative Potential of Facebook’s Cryptocurrency and Possible Regulatory Responses, note 2.
Editorial Board
