Facebook's Libra project started out as an ambitious plan to create a global cryptocurrency, but new reports suggest the company is scaling back its vision after facing scrutiny from regulators and losing a slew of initial partners.

The details are still a little murky. But The Information and Bloomberg both report that Facebook's Calibra wallet, initially unveiled as a way to deploy a Libra token backed by nonprofit consortium led by Facebook, would now also include the option to use traditional currencies — so-called stablecoins, that are pegged to the values of things like the euro and the dollar. That would put it closer to existing digital payment offerings, like Venmo, than a direct challenge to existing financial systems.

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The Information also reports that the Calibra wallet system may not launch globally, but instead be limited to markets with restrictions related to financial regulations — a significant departure from the original vision.

Ultimately, this shift shouldn't come as much of a surprise to close watchers of the space. "The Libra team never provided a convincing explanation" for how it was going to manage regulatory hurdles, said Forrester Research partner Martha Bennett.

A Facebook spokesperson told Protocol the company "remains fully committed to the project" and pointed out that The Information corrected its initial story, which first reported that the company would not include the Libra coin in their Calibra wallet.

Meanwhile, in an emailed statement, Libra Association head of policy and communications Dante Disparte told Protocol the organization "has not altered its goal of building a regulatory-compliant global payment network, and the basic design principles that support that goal have not been changed nor has the potential for this network to foster future innovation."

But David Marcus, who leads the Libra initiative at Facebook, had already conceded that the company could be receptive to using currency-pegged stablecoins. So if that situation does ultimately arise, who are the winners and losers?

Winners

Anti-Facebook regulators and lawmakers

The Libra concept was met with fierce backlash from legislators and regulators. Sen. Josh Hawley, R-Mo., told Yahoo Finance it sounded like Facebook was attempting to "expand their monopoly" and urged regulators, including the Federal Trade Commission, which has a history of keeping a close eye on Facebook, to stay vigilant. House Financial Services Committee Chairwoman Rep. Maxine Waters, D-Calif., asked Facebook to hold off until Congress and regulators could investigate, then Sens. Brian Schatz, D-Hawaii, and Sherrod Brown, D-Ohio, urged major launch partners to leave by suggesting their other business operations might receive further scrutiny if they stuck with Libra.

In a July congressional hearing, Federal Reserve Chair Jerome Powell said Libra raised "serious concerns regarding privacy, money laundering, consumer protection, financial stability." The latest reports about Libra suggest the regulatory squeeze in the U.S. was a major factor in the evolution of Facebook's strategy — so it looks like it could have worked.

Libra partners who already jumped ship

In October, some big names dropped out of the initial 28 backers, starting with PayPal. It was quickly followed by Visa, Mastercard, eBay, Stripe, and Mercado Pago — all just before the first official meeting.

Last month, Mastercard chief executive Ajay Banga told the Financial Times his company ditched the project over concerns about its long-term viability amid regulatory concerns.

If Libra finds a way to take off, those former partners will still likely be able to jump back — but if it continues to crumble, they'll have avoided getting extra regulatory scrutiny for a project failed to deliver.

Potential users and existing digital payment vendors

If Calibra ends up offering multiple options including digital stablecoins pegged to established currencies alongside the Libracoin, that will be a good thing for everyday users and small businesses because it will mean more choice, Gartner analyst Avivah Litan told Protocol.

"It's a much better value prospect," she said, especially for users in developed markets. She added: "Would you want to use a currency that you never heard of or would you rather use your dollar?"

But while the theoretical structure of Libra and Calibra, with a basis on decentralized cryptocurrency-style network, would still represent a departure from closed payment systems already available, it may not look that different to users if it's providing essentially the same service as those apps.

For example, if the system ends up not being able to differentiate itself from Apple Pay, Google Pay and Venmo (which is owned by now-departed Libra Association founding member PayPal), it could be less of an existential threat to those who have already established a consumer base.

China

China is working on its own digital currency or stablecoin — and one of Facebook's arguments in favor of Libra is that it could provide an alternative to that, and in doing so help maintain U.S. financial dominance.

"While we debate these issues, the rest of the world isn't waiting. China is moving quickly to launch similar ideas in the coming months," Mark Zuckerberg said when he testified in a Congressional hearing last fall. "Libra will be backed mostly by dollars, and I believe it will extend America's financial leadership as well as our democratic values and oversight around the world," he added.

That could be a lot of spin. But if not, with Libra's future unclear, China could have a more stable playing field to deploy its own strategy.

Losers

Facebook's crypto chief, David Marcus

The vision of Libra that is now emerging is scaled back from the one described at Libra's launch, and Marcus, the architect of the project, is the one who is having to temper expectations. While these latest reports suggest a project in flux, Marcus has been publicly trying to hedge his bets for months —including at a World Economic Forum event on cryptocurrency in January.

"I want to really make that distinction between the network and the assets that are running on top of the network, which I think could be issued by many different entities whether it's central banks or the private sector," Marcus said then, according to Bloomberg.

Current Libra Association partners.

The 20 remaining original launch partners, along with two more-recent entrants — Shopify and cryptocurrency startup Tagomi — are in the uncomfortable position of helping develop a financial system without a clear strategy.

"It's still not clear what exactly Libra is proposing as an alternative to the original construct," Bennett told Protocol. "'Digital version of established currencies' doesn't tell us much."

Still, at least some remain optimistic. "We think there's a lot of momentum building," Tagomi founder Jennifer Campbell told Bloomberg. She said Libra "is definitely first and foremost a payment system. Within that there's definitely also a coin that's part of that strategy."

Telegram

Telegram may not be directly involved in the Libra kerfuffle, but the messaging startup is embroiled in its own legal battle with the Securities and Exchange Commission over cryptocurrency — and seeing that a much better funded rival is backing away from a fight with financial regulators probably isn't a good omen for Telegram's plight.

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The unbanked

Facebook's initial argument for a developing Libra — that there are 1.7 billion unbanked people who could benefit from easier access to digital ways to save, send, and spend money — remains true.

Sure, Facebook sees that as a business opportunity, but the company's global reach through its various products could have uniquely positioned it to offer a way for some of those people to connect and build economic security.

That's especially true in parts of Africa and South America, Litan said. "If you live in a hyperinflationary country, you'd probably much rather use Libra than your local currency."

But the reports that it will launch as less of a global digital currency and more a localized system, dependent on existing financial structures, mean less progress toward that goal.