Libra: Shaping the Evolution of Financial Infrastructure

The evolution of financial infrastructure is marked by turning point moments. Some of these moments came about because of sudden market events. Financial panics in the early part of the twentieth century led to the creation of the U.S. Federal Reserve System. The financial crisis in 2008 and 2009 led to widespread global reform in banking practices. Some moments spoke to longstanding economic conditions. Many countries adopted the gold standard to provide long-term price stability in the wake of inflationary and hyperinflationary conditions. The introduction of a fiat monetary system sought to reverse some of the limitations brought on by the gold standard.

For their part, emerging digital technologies have also inspired moments of profound changes in financial infrastructure, including the way people engage institutions and even what it means to be an incumbent within the larger financial ecosystem and how anything of value can be characterized.Yet, despite all 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. Such may be true because today’s existing financial system remains an artifact of decades of careful evolution, where traditional infrastructure intermediaries, transaction delays and fees are optimized, without really breaking through structural limitations.Now enter Libra—a potentially evolutionary milestone in the continuing legacy of financial infrastructure innovation over the past century. The Libra Project represents a bold new proposition to create financial infrastructure in this new global ecosystem.

According to Project leadership, the Libra initiative is defined as a payment tool that seeks to facilitate a more connected global payment system, remove inefficiency in global money movement and commerce, and foster financial inclusion and economic participation. At the center of the Libra Project is the Libra –a digital asset with global reach backed by a basket of currencies and near-currency assets held in the Libra Reserve.

But any undertaking that aims to disrupt the status quo, and potentially increase competition and choice for consumers, should be hard work to develop and achieve widescale acceptance on the global landscape. Thus, emerge several potential risks and rewards for users, central banks, regulators, merchants, and financial services institutions. 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. And certainly, as individuals and organizations evaluate the potential of the Libra Project and its impact in the ecosystem, key questions remain. At one level, these questions are high-level and dispositive: Will the Libra initiative succeed as envisioned? And how long will it take?

In this report, we explore the road ahead, the roadblocks and potential opportunities of this exciting new financial infrastructure.