As we all know, PayPal has been very supportive – for the most part – of Libra, Facebook’s new cryptocurrency project, but the company was also among the first to exit the Libra Association. PayPal has remained relatively quiet regarding the details of its exit, but now chief executive Dan Schulman is sharing his thoughts on Libra and explains why his company refused to engage any further in the project’s progression.
Schulman: It Wasn’t Regulation that Spooked Us
Libra is arguably one of the most controversial cryptocurrency projects to ever exist. The coin is a network designed to assist people looking to purchase goods and services through Facebook, which has turned a lot of people off. Many are worried that a company with a relatively shady history (i.e. the Cambridge Analytica scandal) would have access to their financial information.
This has spawned many questions from lawmakers regarding how the cryptocurrency will work. Will it leave doors open for money laundering? How will it protect people? Who will be allowed to use it? Several questions have remained unanswered, though Facebook has pledged cooperation. Both David Marcus – the head of Facebook’s blockchain division – and Mark Zuckerberg, the founder of the company, have stood before Congress to give testimony regarding how Libra will work.
In addition, Zuckerberg has even said that his company will be forced to leave the Libra Association granted the project doesn’t have full regulatory approval by the time its ready to
In a recent interview, Schulman says that it wasn’t regulatory concerns that made PayPal leave the Association. He explains:
It wasn’t an acrimonious divorce or anything like that… [We] have an extremely robust relationship with every regulator out there. We are extremely trusted on that. That wasn’t really what spooked us on it.
He commented that PayPal is going to keep an eye on Libra’s operations and that it’s looking for other opportunities to potentially work with it in the future. He says that one of the big things that prompted PayPal’s exit was that he doesn’t think blockchain is appreciated or understood enough at this time, and thus blockchain-related business isn’t likely to garner much of a following. He also says that there isn’t anything crypto can do that traditional financial institutions can’t still do better.
Crypto Isn’t Strong Enough
On the crypto side, it’s still very volatile, and therefore, we don’t have much demand for it by merchants because merchants operate on very small margins… We think a lot of the neat stuff that can happen on blockchain is around identity.
Despite his negative words towards crypto, Schulman admitted in the interview that he does own some bitcoin and that PayPal is also working on its own crypto project, which is unnamed at the time of writing.
Libra Updates White Paper, Removes Dividends for Libra Association
The white paper for Facebook’s proposed Libra currency has been quietly updated, according to a Dec. 10 article written by Georgetown University law professor, Chris Brummer. Aside from expected amendments reflecting the revised Libra Association members, the biggest change is the removal of dividends payable to those early investors.
Change in use of interest on reserve assets
While the initial Libra white paper published in June specified that interest on the reserve assets would be used to cover system costs, keep transaction fees low, support growth, and pay dividends to the early investors i.e. Libra Association members, mention of dividends has now been removed, so it now reads:
Interest on the reserve assets will be used to cover the costs of the system, ensure low transaction fees, and support further growth and adoption.Dividend removal alleviates potential conflict of interest
The problemwith awarding dividends, and potentially the reason for the change according to Brummer, is that it created a potential conflict of interest between Libra Association members, and end-users of the currency.
To encourage uptake of Libra, the reserve assets with which they are backed should be stable. However, if dividends are paid from the interest on these assets, this gives an incentive to load the reserve with higher-risk assets.
This in turn would reduce trust in and uptake of Libra, because the supposed stablecoins could lose their value.
Avoiding branding as securities
There is also the possibility that the changes are in some way addressing concerns that Libra may be classified as a security.
As Cointelegraph reported earlier this month, two lawmakers in the United States would like Libra and other managed stablecoins to be defined as securities. However, Brummer believes that this is an unlikely outcome, due to the very nature of stablecoins not increasing in value
Facebook Libra News Today – Top Headline for Facebook Libra December 13th, 2019
- Facebook’s Libra will push regulators to take a stand on the ongoing Libra criticism says R3 chief David Rutter
- Libra set the pace as Countries contend for cryptocurrency omnipotence
Facebook’s declaration of creating its cryptocurrency termed Libra to billions of users globally will mount pressure on central bankers and regulators to take a stand. According to R3 CEO David E. Rutter, it is a good thing for bringing legality to the sector. Rutter went thus:
“If we’re going to legitimize this world which has been fraught with fraudulent ICOs that are bringing no value, and we want to tokenize real assets, securities, natural gas contracts, gold, oil, diamonds, art, there needs to be a legitimate secondary market where you as an individual or as a corporation can go and transact and know that it’s appropriately regulated.”
R3 provides Corda, a DLT, for companies to conserve a shared, absolute ledger of transactions. This allows the financial, health care, trade, and digital assets industries to share information steadily and privately. While Corda users can accept or reject new transactions before obliging the changes.
Bitcoin (BTC) Price Today – BTC / USD
Recently, Microsoft announced bigger incorporation with a commercial version of Corda on its Azure Blockchain Service. Commenting on this, Marc
Rutter also discussed Thailand’s Siam Cement Group which is running on a blockchain solution established on Corda. The application known as Procure-to-Pay is aimed at simplifying procurement and payment for 2,400 suppliers by 2020.
Libra Set the Pace as Countries Contend for Cryptocurrency Omnipotence
Facebook project Libra has set the pace for national regulators. Facebook brought not just its universally recognized brand to the obscure world of cryptocurrencies but also an army of banks, payment providers and other financial institutions, which all supported its project. The subsequent criticism from regulators, which questioned if Libra could offer consumers with security and privacy and the market with financial stability, took enthusiasts by surprise. This prompted criticism has so far left a dent on Facebook and its leagues of a partner. Visa and MasterCard are among those partners who have left the project thus far.
Libra has gradually become the yardstick for governments’ outlooks to crypto assets. Even though politicians and regulators have kept up with developments going on with stablecoins, Mr. Zuckerberg’s involvement with Libra, promising affordable and swift money transfers is quite convincing.
Nobel Prize-Winner Myron Scholes Backs Stablecoin to Rival Facebook’s Libra
The Saga Foundation, a Swiss non-profit created last year dedicated to developing new technologies in open and decentralized software, is launching a new virtual currency called Saga (SGA). The token is connected to the International Monetary Fund’s (IMF’s) cash reserve that can initially only be owned by accredited and identified investors. The news was published by CNBC on December 10.
A CBDC in Disguise?
The Saga (SGA) token launched this Tuesday is the first cryptocurrency that seeks to emulate the management mechanisms of a central bank. The founders include a group of famed economists and financial innovators who want to create a digital currency that meets the needs of the classic financial world, without making central banks and regulators nervous.
To obtain SGA, it is necessary to undergo know your customer (KYC) practices, assuring Saga’s economy is compatible with traditional financial institutions. Moreover, unlike Libra, the value of Saga will be linked to the IMF’s Special Drawing Right (SDR), an international reserve asset that’s included in a basket dominated by the Euro and U.S. dollar.
Its monetary policy will be automatically regulated by a smart contract using a method very similar to that of fractional reserves used by banks. Saga’s smart contract adjusts the money supply to meet market demand in order to avoid market fluctuations. So, when the economy expands, the contract increases SGA supply, slowing price appreciation. Conversely, when Saga’s economy shrinks, the contract reduces the money supply. The same job a central bank does by changing interest rates.
According to Saga, its governance model would be more democratic than that of its rival Libra. In Saga, “the holders are
The blockchain is therefore limited to the execution of contracts, all other governance functions must occur on-top of it.
Developed by Bankers for Bankers
The team behind Saga has raised funding from a group of investors up to the tune of $30 million. Some of the investors include Initial Capital, Mangrove Capital, and the Singulariteam Technology Group.
According to the founder and president of Saga, Ido Sadeh Man, launching the Saga tokens via an initial coin offering (ICO) would have been counterproductive to the lofty ambitions of the project. In fact, more than a truly global currency, Saga seems to be a cryptocurrency created specifically for the traditional financial sector. Having mandatory KYC, a manipulable monetary policy, and the value covered by a basket of FIAT currencies, Saga is nothing but a classic currency disguised as a cryptocurrency.
The founders themselves explicitly declare that they do not believe in decentralized governance models such as Bitcoin as they are inefficient and unpredictable. However, Saga could be a competitor to Libra, as its reputation is well regarded by traditional financial institutions. However, as reported by the CNBC, currently the SGA token will not be available for US citizens due to regulatory uncertainties.