Head of Facebook's Calibra, David Marcus, testifies during a Senate Banking, Housing and Urban Affairs Committee
Head of Facebook's Calibra, David Marcus, testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill. Alex Wong/Getty Images

A new report by consulting giant Deloitte concisely summarizes Libra’s mission, what it needs to do in order to succeed, and the reception of the project thus far. The viewpoint is split into 8 brief sections, each presenting Libra in a bullish fashion.

The proposition of Libra

The first section begins by introducing the reader to a few key market events that have defined finance, including early 20th century bank runs that eventually spurred the creation of the Federal Reserve, and the 2008 global financial crisis which led to widespread reforms in banking.

But the key note from the first section of the report is this:

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“Yet, despite all of the advancements it has enjoyed, the existing financial infrastructure seems to remain a constraint in an increasingly quickening global ecosystem in which information travels faster, work is increasingly virtual, and geographical borders are fading away.”

And here comes in Libra and its mission of building the next layer of the financial system with its global payments system. Layer by layer financial systems have been evolving, in large part locally, which makes global money movement and commerce inefficient, the report reads. Libra intends to be to bridge between the new era of digital assets and traditional financial institutions.

The Libra Association

Although many of the officially announced members of the Libra Association have decided to exit the project, largely due to intense regulatory pressure, Libra still held its inaugural council meeting towards the end of last year.

In the second section, the Deloitte report provides a brief overview of the importance of the Libra Association in managing the project. Trust is positioned as vital if the Libra project is to be successful – first in the individual members of the association and then in the whole association and project.

This section also notes on the numerous organizations that decided to opt out of the Libra venture, making the case for the need of membership growth.

The bridge that is Libra

The third section of the Deloitte report compares, side by side, all of the different types of money we use nowadays – central bank currencies such as USD and EUR, single-fiat-backed stablecoins, and Bitcoin – to Libra.

Table comparing the features of the different types of currencies people use nowadays
Table comparing the features of the different types of currencies people use nowadays. Deloitte Research

When put side by side like that, it is obvious to which type of currency Libra is most similar to. And that’s where a lot of the criticism it has received comes from.

New business models

The report then moves on to explore the Libra business model as well as possible business models that might emerge as a result of the launch of Libra. The mission and business model of Libra itself is well known – cheap movement of money across borders and banking the unbanked.

Among the new business models that might manifest on the sidelines are micro-payment business models and all-in-one goods and services platforms.

This section ends with a brief opinion on how Libra could create a necessary level of competition in the finance sector, shaking up the status quo to force companies to band together and create even more lucrative financial services and products. The consumers is the one who will benefit from that.

Digital identity

The fifth section explores how Libra could actually benefit identity standards. Since the projects acts on an international level and is forced to comply with different standards of security and digital identity, it could actually garner a “harmonized decentralized open standard that transcends borders,” the report reads.

The silver lining of the pushback

Section six of the report doesn’t simply mentioned the regulatory pressure the project has received since its announcement, but also identifies the fact that this sparked a serious conversation surrounding digital assets:

“Typically, the introduction of a new digital asset may inspire a measure of discussion about the asset per se. But the introduction of the digital asset proposed by the Libra Project has inspired conversation that goes well beyond the merits of the digital asset itself, creating awareness and momentum in the form of dialogue and pushbacks around the role of digital assets in the global economy more generally.”

Risks

Next, the report covers actions and scenarios across 7 areas that the project needs to consider if it is to be successful:

  • Regulation – considering the scope of the project, countless regulatory rules are knocking on the door and they all have to be respected by Libra and Facebook-owned Calibra before launch day.
  • Criminal activity – the multitude of moving parts on the table, both governmental and technological, make for a possible situation where malicious actors could exploit the system. Libra must avoid a scenario like that at all cost.
  • Finance and economics – a potential scenario where Libra becomes more popular than a local currency might arise, causing depreciation and instability. Moreover, unforeseen causes of volatility in the Libra digital asset itself will create an unpredictable and unstable situation.
  • Consumer protection and privacy – consumer data needs to be protected at all cost. Dispute resolutions could be difficult to process considering the structure of Libra.
  • Taxes – playing on an international level, the question of taxing the Libra digit asset causes a lot of uncertainty for consumers, merchants, and Libra Association members alike.
  • Governance – since the Libra Association consists of individual organizations, each motivated by their own personal interests, a common criticism of impassable arguments arises.
  • Technology – being a digital asset, Libra is exposed to a still-experimental technology that might come with unforeseen vulnerabilities. Be it caused by Libra or third-party developers, security issues might cause serious problems for the project.

The future

In the final section of the report, the authors emphasize on the importance of Libra, but also on its infancy:

“The Libra Project is opening the door to the role of digital assets, and ecosystem participants may have a unique opportunity to help shape the path forward with conversations and reaction. Yet, the Libra idea is still more abstraction than tangible. The full blossom of its promise is expected to take time to be realized.”

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