A few days ago, the President of the Swiss Confederation, Ueli Maurer, spoke out about the failure of the Facebook Libra project, at least in its present form.
These statements have a certain significance especially because they come from a prominent politician in Switzerland, the country where the Libra Association has its headquarters.
In addition, Maurer is also head of the Swiss Federal Department of Finance (FDF), which makes him a person who is certainly aware of the circumstances.
The problem raised by Maurer lies in the basket of currencies chosen as the underlying of the Libra tokens, namely the US dollar, euro, British pound, Japanese yen and Singapore dollar.
In this regard, to the explicit question about Libra’s real chances of landing on the market, he answered:
“I don’t think so, as the basket of currencies being deposited in that currency will not be accepted by the national banks. As a result, the project has actually failed in that respect”.
He added nothing else, but the concept expressed is clear, especially because Maurer is not the first to raise these doubts. For example, even during the famous hearing with the Libra project director in the US Senate, doubts were raised as to whether the decision to use a basket of currencies as a basis for this stablecoin was a good one.
A while ago the co-founder of Wirex, Georgy Sokolov, also expressed the same doubts during an exclusive interview with The Cryptonomist, explaining that the problem, in this case, would lie in the fact that every single Central Bank behind the five currencies involved would have a reason to consider Libra a potential threat to their currency.
The solution might consist in issuing five different tokens each based on a single fiat currency, rather than a single token based on a basket of five currencies.
This would eliminate the need to identify and manage a basket of currencies, although obviously, the issuance of five tokens instead of just one could complicate its use by end-users.
The Libra Association has not yet pronounced itself on this issue, even though the project seems to be going ahead.
On Twitter, they keep saying that it is not a currency, but a payment system and that they will launch it only when they have the approval of all the regulators involved. This suggests that they may also be willing to change the very nature of the project in order to complete it, for example, by taking the implicit or explicit suggestions of Ueli Maurer and Georgy Sokolov.
Recently, for example, they have written:
“The Libra project is backed by a reserve made to keep its value stable”.
— Libra (@Libra_) December 10, 2019
This tweet of a few weeks ago doesn’t mention the basket of currencies, or the number of currencies included in it, but refers only to the basic concept, i.e. the existence of an underlying to keep its value stable. This is not enough to claim with certainty that they are aware of the problem, although it may suggest that they are.
In fact, without the necessary approvals from the Swiss regulators, the Libra project would have failed as of today, so the Geneva-based Association absolutely cannot afford to ignore what Maurer said. In addition, replacing the basket with five tokens supported by individual currencies would make the project more acceptable even to the United States of America itself, where it would most probably have the greatest adoption.
Consequently, it is more than plausible to imagine that the Libra Association is evaluating the problem in search of possible solutions, otherwise, according to the words of the President of the Swiss Confederation, the project would indeed seem to have already failed.