Libra Facebook cryptocurrency and bitcoin cryptocurrency, Libra coins concept. Credit: Mercigod/Shutterstock.

After facing nearly unanimous international backlash, last week Facebook Inc. unveiled new plans for its cryptocurrency Libra, including backing a coin with multiple currencies. Despite the changes, Facebook hasn't made it clear what Libra is and how it should be regulated, and lawyers said the company will likely face stiff apprehension from regulators.

The Libra Association, the group responsible for the governance and development of the Libra network that includes Facebook's Calibra, Lyft, CoinBase, Spotify and others as members, released an updated white paper announcing the changes. 

Most notably, Libra will not be a separate digital currency, as originally announced in June 2019. Instead, the Libra Association plans to release a series of stablecoins, which are cryptocurrencies backed by currencies or commodities, directly tied to a specific government-backed currency. This allows Libra users to directly access a stablecoin in their currency, if their country has issued single-currency stablecoins, Libra explained.

Additionally, the association will issue a "digital composite" of multiple single-currency stablecoins available on the Libra network, which includes the U.S. dollar, euro and others instead of a single currency. The digital composite is available for cross-border transactions and for use in countries with no digital currency, unlike the single-currency stablecoin, the association wrote.

Libra also announced it scrapped its permissionless blockchain plan and is limiting Libra support for the underbanked and unbanked to strengthen its compliance framework.

To be sure, the changes were made in response to various regulators' sovereignty and security concerns, the organization admitted. However, lawyers said the latest changes may not be enough because Libra hasn't said exactly what it is—and most importantly, what government agency should regulate it.

"The main question in my mind is whether this instrument would be regarded as a transferable security for the purposes of the EU Prospectus Regulation and/or an ETF [exchange-traded fund] for the purposes of the Investment Company Act of 1940," wrote Anderson Kill partner Preston Byrne in an email.

Byrne noted an unfavorable regulatory decision could end any company's stablecoin ambitions for a cryptocoin backed by multiple currencies. 

"An adverse determination in either jurisdiction would severely limit the ability for the Libra Association to promote that instrument as a medium of exchange in each jurisdiction and, accordingly, world-wide. Libra is attempting to mitigate this by registering as a payments firm with the Swiss regulator FINMA, but Swiss law classifications are not dispositive to U.S. and EU regulatory treatment," he noted.

Shipkevich founder and principal Felix Shipkevich, whose practice includes blockchain technology and corporate governance, said most countries aren't going to budge on their resistance until Libra declares what it is.

"I don't know if legislators can necessarily block it, but [instead] pause the effort in order to first understand who will regulate it," he said. "You have to take a position if you're offering a financial product of any kind [and say], 'I'm issuing X, subject to the purview of this law.'"

Facebook's high-profile roadblocks highlight a broader push to understand regulating and bringing a stablecoin to market, Shipkevich argued.

"We are on uncharted territory; that makes this whole case study with Libra and how governments will respond to it very interesting," he said. He noted the rare joint France-Germany financial statement released September 2019, which stated Facebook's blueprint failed to address money laundering, terrorism financing, data protection and financial and monetary sovereignty concerns raised by cryptocurrencies and stablecoins.

While Libra's outcome is in the air, Shipkevich said stablecoins' future isn't tied directly to Libra's success or failure.

"I think what this does still show to the mainstream is that cryptocurrency is still important if Facebook and other organizations are [still] on board with the Libra Association," he said.