Libra: Shaping the evolution of financial infrastructure | Risk | Deloitte Netherlands


Libra: Shaping the evolution of financial infrastructure

A bold new proposition

Despite its advancements, 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.

Libra: Shaping the evolution of financial infrastructure

What is Libra?

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.

What differentiates Libra?

While other kinds of innovative undertakings in the payments space have emerged in the past with varying levels of success, to date, none have reached the scale and transparency that the Libra project proposes. So, what distinguishes such a bold new proposition as Libra that would make success possible on a global scale? One of the biggest differentiators, although not the only one, is the Libra Association—the initiative’s governing body. Under the Libra association charter, the Libra Association will manage the Reserve as well as guide the technology roadmap (initially a permissioned blockchain network) on which this new digital asset is expected to be based.

The collective stature of the association members should offer the Libra initiative unprecedented scale and reach, and the kind of strong brand equity and financial commitment that may engender trust among the user communities.

The larger Libra ecosystem

The Libra Association is a part of a much larger story, for what would make the Libra initiative work is an even larger ecosystem of stakeholders of which the Libra Association is just one, albeit important, part. The fuller Libra Project ecosystem is expected to include players who may have a direct participatory role in the daily operation of the Libra Network, including the association, association members, developers, merchants, and users. Other players—including regulators, central banks and financial services institutions—would also play a critical role in the long-term success of the Libra digital asset.

Libra as a platform for innovation and a driver of new business models

Assuming regulatory compliance, the power and enduring success of the Libra Project will likely depend on the digital asset’s acceptance as a convenient form of representing and moving value across a wide swath of goods and services providers. Due to its collaborative framework to evolve financial infrastructure, the Libra Project could become a platform for innovation and, in so doing, enable new business models and create new opportunities for existing and future users all within a global, borderless context.

Libra risk considerations

No initiative of any kind—and certainly nothing as ambitious as the Libra global payment network and its global digital asset —can take place without consideration of various risk factors. To potentially achieve successful launch and beyond, significant work remains to address such risks and secure regulatory alignment in a way that reflects the global and harmonized character of the Libra Project. While any list of such risks could almost never be entirely complete, high-level consideration should include a common set of risk factors including regulatory, economic, tax, consumer protection and privacy, among other risk considerations.

The road ahead

Implementation of anything as ambitious and far-reaching as the Libra Project would require resolution of a full panoply of issues that are both granular and not so granular, and certainly too numerous to list. 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. Such cases have emerged in the past where something new upends current thinking and ways of doing things. The Libra initiative is expected to follow a similar path as it traverses the journey from idea to fully realized promise.

More information

For more information about Blockchain, please feel free to contact Floris van Lieshout via the contact details below.

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