Libra Announces Currency Basket, Stays Away from Yuan
The Libra asset will be backed by a basket of relatively stable fiat currencies, but Facebook is wary of including the Chinese yuan.
Facebook may base the price of its Libra token on a basket of currencies, including the dollar, euro, British pound, Singapore dollar, and Japanese yen, but will probably avoid the Chinese yuan, reported Bloomberg.
Facebook revealed the currency basket during a recent US Senate hearing, addressing concerns that China may pressure the company to add the yuan as a reserve currency. The trade wars between the US and China, along with the attempts of China to devalue the yuan, makes it a worrying fiat currency that may adversely affect the adoption of Libra.
“Any decision whether to add a new currency to the Libra Reserve would be made based on all the facts and circumstances at the time, including any direct or indirect regulatory restrictions,” Facebook wrote in its latest testimony.
Facebook was met with a significant regulatory and political backlash after the announcement of Libra in July, and the company even admitted that the actual launch of the coin may never happen, if there are too many hurdles. Still, Facebook has continued to communicate with regulators and explain its case.
Facebook has also stated it will not follow the path of many crypto startups, and exclude the US while launching worldwide. The company has expressed readiness to address all concerns of US regulators, and only then issue Libra.
“We understand that the Libra Association will not offer the Libra digital currency in any jurisdiction until it has fully addressed regulatory concerns and received appropriate approvals in that jurisdiction,” wrote Facebook.
In the meantime, US financial regulators have given multiple permissions for the launch of purely dollar-backed digital assets. Companies like Paxos Standard have managed to launch multiple assets, including the PAX dollar-pegged coin, Paxos Gold (PAXG), and Binance USD (BUSD).
But Facebook will have to deal with matters such as international screening KYC procedures, as well as fiat currency market fluctuations.