eToro believes Facebook should partner with authorized brokerages of fiat currencies in order to succeed. What do you think?
A new position paper by cryptocurrency exchange eToro is asserting that Facebook should use stablecoins issued by regulated third parties rather than create its own crypto assets for its Libra project.
Libra has come under fire from politicians and regulators in the US, UK and Europe, who are worried by parent company 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 and benefit a huge unbanked population.
Authored by Yoni Assia, CEO of eToro, Professor Omri Ross, eToro’s chief blockchain scientist and Johannes Rude Jensen, eToroX product and project manager, the position paper asserts that Libra is a trailblazing opportunity for radical innovation in financial services. However, eToro CEO and co-founder Yoni Assia feel that “… 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.”
According to Assia, 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.
Libra has already 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. eToro’s proposal builds on this approach by partnering with authorized organizations, such as crypto asset brokerages, which would store fiat currencies with qualified custodians and issue stablecoins representing a legal claim to assets under custody.
In Assia’s view, such a system would offer the benefits of convenience, speed and security at the heart of blockchain technology, while being built on a decentralized open-source infrastructure that appeals to consumers skeptical or untrusting of the current monetary system. By removing Facebook from the issuance of the actual currency, eToro believes this removes a major stumbling block while opening up the project to vital input from existing innovators in the crypto and blockchain sector.
Assia concludes: “At eToro, we believe that innovation in financial services is key to achieving structural reform for the global economy. When we launched our own stablecoins, it became clear the real barrier to adoption is a single standard that would enable merchants to accept them as currency. A decentralized approach to building governance from the ground up will enable the Libra project to move ahead in collaboration and compliance with existing institutions and procedures and deliver on its vision of financial inclusion that we at eToro share.”