30 Sep 2019
Hardly a week passes without news about Facebook’s much anticipated, and much debated, cryptocurrency Libra. A few days ago, a spokesperson of the Geneva-based Libra Association, which is spearheading the development of the cryptocurrency at hand, let the public on some details regarding the underpinnings of the digital monetary unit that’s being currently developed by Facebook’s blockchain division in Switzerland.
According to the statement, Libra will have a much wider backing than the common stablecoins like USD Tether, USD Coin and some others, the value of which is pegged solely to the American sovereign currency. Unlike them, Libra will have several price components, represented by the following national currencies:
It was rumored that the national currency of China should have made the appearance among the ones included in the basket, but Facebook was quick to deny these speculations. In its official explanatory letter to the U.S. Senate, the social media behemoth assured that the renminbi would not be featured in the pool of fiat currencies designed to provide the necessary stability of Libra. The letter served as a response to the persistent inquiries made by Senator Mark Warner about corporation’s plans regarding CNY, which seem to be relevant in the face of the ongoing trade war between the United States and China.
Evidently, the decision to leave yuan out of the so-called Libra Reserve was dictated by the tactical considerations. It is of immense importance for Facebook to make every possible effort to appease the American regulators and political establishment, giving how viciously these officials have lashed out on Facebook right after Libra’s official introduction that had been made in June.
After the politicians mopped the floor with David Marcus at the infamous hearing of the U.S. House Financial Services Committee, which had subsequently resulted in a pronounced drop of the entire cryptocurrency market, Facebook decided to play it safe by trying to come to terms with the regulators before making any significant steps forward in the development of Libra.
The practicality of the decision to leave yuan out of the basket is questionable since CNY is gradually becoming the second reserve currency and its inclusion in Libra’s backing basket would have suited the Chinese-speaking users of Facebook. However, the Libra Associations has bigger standing issues to address as the regulators are putting grit in the bearings by threatening to create insurmountable legal barriers for the further development of Libra. Apparently, this is the main reason behind the inclusion of the Singapore dollar in the Libra Reserve. Nevertheless, the details about the currency basket show that work on this widely anticipated crypto is underway, so we should expect more news in the coming weeks.
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