Social media giant Facebook unveiled a digital currency called Libra in June this year. The stablecoin was expected to be pegged to a basket of government-backed securities. According to the latest reports, Facebook has confirmed that it will peg the coin to five fiat currencies.
Ignoring the Yuan
The company recently informed US senators that it would be tying the value of Libra to five fiat currencies which include US Dollar, Japanese Yen, Euro, Singaporean Dollar, and British Pound. It will be ignoring the Chinese Yuan, the official currency of the second-largest economy in the world.
Mark Warner, Virginia Democratic Senator, earlier voiced his concerns saying that China will try to persuade Facebook into including the Yuan in the Libra lineup of currencies. Note that Facebook and its 23 partners, who form the Libra Association, are developing the digital currency at the moment.
Warner revealed that China has been trying to persuade different governments to hold Yuan in its reserves. Given Libra’s extensive impact, Facebook should commit that it will exclude Yuan from its list of pegged currencies. The whole issue stems from the currency manipulation allegations against China. Recently, when US President Donald Trump said that he would impose a fresh round of tariffs against China, the government let their currency fall below 1:7 ratio.
Libra Association will take decisions
Though Libra is a Facebook project, it will be managed by the Libra Association based in Switzerland. According to the company, Facebook alone will not take decisions about the inclusion or exclusion of Yuan from the list. It wrote, “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.”
However, decisions related to Yuan will not ease the regulatory burden on Facebook. The company’s cryptocurrency project has received severe backlash from the regulators. The House Financial Services Committee and the Senate Banking Committee held two hearings for the company in July this year, which were attended by Libra lead David Marcus. Despite these hearings, the lawmakers are not convinced about Libra’s prospects and see it as a threat to the global financial system.
The fact that Facebook has had several issues with data security and user privacy in the past are some of the biggest points of contention. Even the crypto community has criticized Libra for not being a true digital currency as it is highly centralized.