Libra can ‘reshape the global payments industry,’ Binance report details

Libra can 'reshape the global payments industry,' Binance report details

Binance Research remarked in its latest report that Facebook’s crypto project Libra can “reshape the global payments industry.”

After a thorough review of Libra’s new whitepaper, Binance Research noted that Libra could bring a significant impact on the industry.

The published report is entitled “Will Libra Live Up to Its Initial Ambitions?” Binance Research explored and assessed the updates in Libra’s new methodology.

What are the recent updates on Libra’s whitepaper?

Binance Research detailed Libra’s methodology under three core pillars:

  • Libra Blockchain – Libra will be built on its own distributed ledger. It will focus on scalability as it plans to have the capacity to process a multitude of transactions.
  • Libra Reserve – It will have its own stablecoin called “Libra Coins.” This digital asset will be backed by collateral assets under Libra Reserve’s custody. Collaterals include fiat currencies, its equivalents, and short-term government debt securities.
  • Libra Association – It will have its own governance structure headed by an association of independent institutions supported by the Libra Networks. This network will consist of its developers and operators.

Digital payments through cryptocurrency

What are some of the notable differences detailed in the report?

While its new whitepaper retains some of the functions from its initial plans, there are some notable differences that the report revealed:

  • More regulatory compliant – The parties that will make up the Libra ecosystem, as well as its digital assets, are more clearly described. The technological system, however, will still follow the initial set-up as detailed in its plan from 2019.
  • Increased support for currencies – Libra Network will now offer single-currency stablecoins. It also plans to have stablecoins that represent more currencies in the global financial system as the work progresses. These will be backed by “high-quality liquid assets.”
  • Less vulnerable to currency risks – All single-currency stablecoins will be fully collateralized with dedicated assets, ensuring that it is less exposed to foreign exchange fluctuations.

Is Libra still a threat to monetary stability?

There had been reports about G20’s Financial Stability Board (FSB) stand on Libra. FSB was skeptical in the adoption of stablecoins, like Libra, because they might pose risks on the monetary stability among different countries.

Libra tried to allay those fears by pointing out that Libra Association will work with regulators and central banks. This is to ensure that the possibility of “currency substitution” remains far from likely.

The report expressed its optimism with the latest developments in Facebook’s Libra project. According to them:

“Libra could thus do to payment systems, what SpaceX did to the space industry […] shake the foundations of a well-established sector with high entry barriers. The mere advantage of issuing widely-available programmable money would already initiate manifold efficiency gains.”

The report also noted that Libra could “ultimately reshape the global payment industry” if it can be accessible to third parties and if it maintains a “user-friendly interface.”

Images courtesy of Marco Verch/Flickr, Jack Moreh/Stockvault

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