Offshore Funds

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Offshore Funds

Contributors

Philip Graham
Philip Graham
  • Philip Graham

  • Partner
  • British Virgin Islands
Lewis Chong
Lewis Chong
  • Lewis Chong

  • Partner
  • Vancouver
Ian Gobin
Ian Gobin
  • Ian Gobin

  • Partner
  • Cayman Islands
Marc Parrott
Marc Parrott
  • Marc Parrott

  • Partner
  • Hong Kong
Matthew Blakebrough
Matthew Blakebrough
  • Matthew Blakebrough

  • Associate
  • British Virgin Islands
Fiona Chandler
Fiona Chandler
  • Fiona Chandler

  • Counsel
  • London
Marco Martins
Marco Martins
  • Marco Martins

  • Partner
  • Cayman Islands
George Weston
George Weston
  • George Weston

  • Counsel
  • British Virgin Islands

Libra – cryptocurrency game changer or regulatory firestarter?

The crypto world is awash with news of Facebook’s ‘Libra’ digital currency whitepaper following its release on 18 June 2019. The announcement has triggered a mixed reaction around the world with excitement from crypto enthusiasts balanced with cautionary words from a number of the G7 central banks and finance ministries.

What is Libra?

Libra is Facebook’s new proposed digital currency ‘stable coin’ which will allow Facebook Messenger and WhatsApp members to send tokens via the apps which can then be exchanged for real FIAT currencies. The coins will be backed by a basket of bank deposits and short term government securities that will be held in the so called ‘Libra Reserve’ to help the value of the digital currency remain stable.

Is Libra even a cryptocurrency?

Perhaps surprisingly given the media hype, many crypto ‘purists’ have actually been arguing that Libra is not a cryptocurrency at all. Unlike Bitcoin which is built on a truly ‘de-centralised’ network with no government or corporate entity sitting behind it, Libra will have a number of real companies controlling it in a group known as the ‘Libra Association’. This not for profit Switzerland based consortium includes Mastercard, PayPal, Visa, Stripe, eBay, Coinbase, and Uber among its founding members.

Regulation

Facebook’s often controversial position in the public eye from a digital security perspective has meant that regulatory scrutiny of Libra has begun instantaneously. France’s Finance Minister has expressed concerns that Libra may grow to replace traditional currencies which would be ‘out of the question’ and in the US, House Financial Services Chairman Maxine Waters has requested that Facebook halts its cryptocurrency plans for now.

This level of scrutiny from the finance ministries of some of the world’s largest economies could be a positive or a negative for cryptocurrencies. On the one hand it may prove a catalyst for a global consensus or standard on the regulation of crypto assets. However, it may also have the opposite effect and result in an outright ban in more jurisdictions.

The offshore perspective

Enquiries regarding stable coins like Libra are pouring into the British Virgin Islands and the Cayman Islands. The regulatory approach in both jurisdictions remains ‘wait and see’ and so they both represent very attractive jurisdictions to launch a stable coin product.

It is once again a pleasure to contribute to the funds blog, please be on the lookout for more digital asset and crypto content soon.