US Dollar Dominates Facebook’s Libra’s Basket of Currencies, But No Chinese Yuan
In its letter to German politician Fabio de Masi, Facebook revealed the percentage breakdown of the global currencies that would back its cryptocurrency project Libra, reported German newspaper, Der Spiegel.
According to the explanation, the US dollar will dominate this basket of fiat currencies, representing 50 percent of the backing for Libra.
The remaining support to Libra will come from the euro, accounting for 18 percent, Japanese yen – 14 percent, British pound – 11 percent, and 7 percent of Singapore dollar.
Chinse yuan, the currency of the second-largest economy, however, will not be a part of this basket.
The reason for the same could be the social media giant’s plan, as Reuters suggests to smooth its stablecoin’s path in the US where the officials have raised concerns about the yuan's growing stature as a reserve currency during the intense trade war between the two nations.
Furthermore, last month, CNY fell past key level of 7 against the US dollar and the US designated China as a currency manipulator.
China on Libra
However, China has a lot of positive to say about Libra.
During the Shanghai Wanxiang Blockchain Conference, Li Lihui, head of the Blockchain Research Working Group at the National Internet Finance Association of China and former President of the Bank of China said,
“If Libra obtains regulatory approval, it will become a trusted organization that issues digital currency. Once it covers all corners of financial infrastructure, it will immerse itself into people’s everyday life and become a major fintech competitor.”
Meanwhile, Changchuan Mu, the new director of China’s Research Institute on Digital Currency said, “No countries welcome Libra, but it might be unstoppable anyways.”
“It is very unlikely that one can totally stop people from buying Libra despite rigorous regulations,”
Lawmakers, all over the world, have been raising concern over the company's cryptocurrency initiative with France finance minister going as far as having plans to block Libra.
Some members of the Libra Association, as a result, may exit the group — reports of two of the firms considering pulling out came last month.
However, just like with Bitcoin, even if Facebook is blocked in China, Mu said people will use indirect ways to purchase it.
China, meanwhile, is developing its own central bank digital currency (CBDC) that will tackle the challenges faced by Libra.