Over $200m in a Day: How Facebook Used a Security Token to Fund the Libra Association
Facebook and its partners have recently launched the Libra Association, marking the largest security token sale in history. Take a look at just what this means for the world of blockchain and digital assets.
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On Tuesday 18th June, Facebook, along with 28 partners from diverse industries, unveiled plans to launch Libra: a new currency and payment mechanism based on blockchain technology. Described as “a simple global currency and financial infrastructure that empowers billions of people,” Facebook, as well as its partners, is bringing cryptocurrency to almost a quarter of the planet.
The news has been met with both celebration and some angst in both crypto community and traditional markets, with commentary alternating between anticipation at broader adoption of digital assets and fears over the privatization of money.
In all of the excitement, many have missed the fact Libra has chosen to raise its funding for its foundation by issuing a security token, or the “Libra Investment Token (LIT)”, as they call it. With the Libra Association receiving over $200 million dollars, this issuance represents a meaningful step in the institutional adoption of security tokens.
A not-for-profit organization based in Switzerland, the Libra Association, will have various layers of governance, compliance, privacy and data storage in order to ensure the protection of all members and investors. The most powerful of these is a council, similar to that of traditional shareholders.
“The council delegates many of its executive powers to the association’s management but retains authority to override delegated decisions and keep key decisions to itself, with the most important ones requiring a greater than two-thirds supermajority,” in a statement released on the Libra Association’s website.
In order to become a member, there are certain criteria which have to be met to be accepted. A business must be on the list such as the Fortune 500, S&P Global 1200 or FTSE EU30. Businesses must purchase a minimum of $10 million Libra Investment Tokens (LIT), and each $10 million invested gives the member one vote in the council.
Of course, investing this $10 million in security tokens does not go unrewarded. The Libra Association members will have access to the Libra Reserve when it is fully operational. This will mean that once the expenses of the association have been covered these investors will receive a dividend via the Libra Investment Token (LIT) for their early stage contribution. Much the same as a dividend stock but in a tokenised form, Facebook and the Libra Association will be setting up arguably the largest security token to date.
Mastercard, Andreessen Horowitz, eBay, Uber and Spotify all make up some of the original 28 partners, with the foundation receiving over $200 million thus far. However, there is expected to be no limit on the number of partners who wish to sign. By creating the Libra Foundation, Facebook and its members hope to regulate the underlying Libra currency. In a quote from the association’s page, it states that Libra members will play additional roles in order to achieve success.
“In these early years of the Libra network, there are additional roles that need to be performed by the association: … the raising of funds from the members as well as other investors through the sale of Libra Investment Tokens (a token that grants rights to a share of the future interest accumulated in the Libra Reserve.”
By doing so, Facebook has not only shown 28 of these behemoth businesses that the STO model can work, but it also opens up the possibility of more STOs coming to fruition of the back of Libra’s success. In short, Facebook has just signed some of the largest global corporations up to the security token model.
Significant Progress towards Mass Adoption
Libra’s decision to fund the Libra Foundation with a security token is an excellent development for the space.
As it stands, the LIT will become one of the most successful security tokens to date. And with no cut-off point for members joining, there is no limit to how many more LITs could be sold. In doing so, Libra is introducing a wide variety of very successful businesses to security tokens and the blockchain-based infrastructure.
Now that some of the largest brands and names in the world have “dipped their toe in the water”, we believe many businesses will follow suit. Libra will be a very successful showcase for the security token framework, which in turn will highlight their efficiencies and benefits.
For us at TokenMarket, it marks an extremely exciting time. Having been passionately involved in the STO space for a long time, we look forward to Libra complementing our efforts to promote security tokens. The Libra Association may not know it, but they’ve just verified the possibility of a simple idea transforming into a multibillion-dollar industry. We for one, are excited to be a part of it.