If Facebook is to stand any chance of getting its cryptocurrency business off the ground it needs to forget about launching its own virtual coinage and instead use stablecoins issued by regulated third parties, according to a position paper by online brokerage eToro.
The social media giant's Libra project has come under fire from politicians and regulators in the US, UK and Europe, who are worried by Facebook’s scale and power, as well as its previous track record with customer data.
However, eToroX Labs, the blockchain research arm of eToro, says that Libra’s aim of creating a peer-to-peer payment network that could be used by millions of unbanked consumers around the world is too great to ignore.
Rather than create its own digital currency, dubbed ‘ZuckBucks’ by US politicians, eToro believes the issuance of stablecoins backed by fiat currencies should be delegated to regulated third party partners. This would remove Facebook from the responsibility of controlling a currency, so it could focus on Calibra becoming the first wallet to provide infrastructure for a payment system that could be accessed by over 2.7 billion users globally via WhatsApp and other Facebook platforms.
EToro has already launched its own stablecoins but has had little uptake in the absence of a single standard that would enable merchants to accept them as currency.
Libra has floated the idea of using a range of stablecoins pegged to sovereign currencies like the US dollar, pound sterling and the euro, but authorities have balked at Facebook controlling that level of currency.
Yoni Assia, CEO and co-founder of eToro, explains: “The Libra project is a trailblazing opportunity for radical innovation in financial services. Instead of pursuing a single synthetic asset class, the Libra Association should lobby for harmonized and simple regulatory frameworks for the governance of the third parties using the Libra chain for executing payments."
“The regulatory burden and associated compliance costs would befall those who use the ledger for their own gains, be it in the issuance of collateralized stablecoins, commodities or other financial instruments, effectively removing Libra from the money trail altogether.”