Libra appears to have revealed the percentage breakdown of a basket of global currencies that will underpin its cryptocurrency, both Reuters and Der Spiegel reported last week.
Der Spiegel claimed that the revelation had been made by a letter from Facebook to Fabio De Masi, a German legislator and a former member of the European Parliament. In the letter, Facebook confirmed the widely-held belief that the US dollar would make up 50% of the basket, followed by the euro which will hold 18%, the yen holding 14%, the British pound holding 11% and the Singapore dollar with 7%.
The Chinese yuan will not be included in the basket according to the letter, possibly in response to reports that suggested excluding the Chinese Yuan might be a positive move that would help Libra’s plans in US, given the tensions in the trade relationships between the US and China.
Since it was announced by Facebook in June, a number of jurisdictions have raised concerns about the potential threat to the world’s financial systems and inbuilt insecurities such as whether deposit will be insured to protect depositors and whether the security of data will be compromised. Libra is to be a stablecoin, designed to be anchored to a basket of supporting currencies to facilitate global payments. It is to be governed by a consortium led by Facebook and which includes Visa, Uber and PayPal.
Regulators in US, France and Germany among others, and also central banks, have come out strongly to express concerns about Libra and the perceived threat that it poses to the financial stability of centralised financial systems and national currencies. These include fears of the possible loss of economic sovereignty and over monetary policy. In France, the finance minister alluded to plans to block Libra, while in China, where the cryptocurrency is perceived as a powerful threat, the People’s Bank of China is developing its own central bank digital currency to counter Libra.
Whether this adverse reaction to Libra from some of the world’s most powerful jurisdictions and financial institutions results in members of the Libra Association disengaging from the group and its cryptocurrency remains to be seen, although to date, the overall response is that their commitment to Libra remains strong.
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