The basket of fiat currencies in the line up to back Facebook’s Libra “cryptocurrency” may not include the Chinese Yuan.
According to Bloomberg, the likely backers include the US Dollar, the Euro, the British pound, The Japanese Yen, and the Singapore dollar.
Facebook offered up this potential list after Virginia Democratic Senator, Mark Warner, shared concerns that China may nudge the firm to include the Yuan as a stabilizing currency.
Warner highlighted several instances where China had attempted to coax the Yuan into national reserves to add stability to the currency; a point of contention with the US government which has previously referenced the currency as manipulated. As such, the senator urged Facebook not to include the Yuan within Libra’s basket of stabilizing fiat currencies.
However, the decision is not Facebook’s to make; instead, the firm shifted the responsibility to the Libra association; a non-profit group co-founded by Facebook and several other technology and finance giants.
“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,” relayed Facebook.
Regulate or die
Amongst Warner’s more anxious queries was the worry that Facebook may forge ahead with Libra outside of US jurisdiction. Allying the fears somewhat, Facebook replied that Libra association wouldn’t offer Libra in any territory in which the cryptocurrency wasn’t adequately regulated.
Apprehensions pertaining to the regulation of Libra have mostly brought facebook’s plans of financial insurrection to a standstill. Both US and EU regulators have pulled Libra up for its alleged anti-competitive behavior; calling for Facebook to cease plans until due diligence is satisfied.
Just how this compliance will be satisfied, however, remains a conundrum. Chair of the Federal Reserve Jerome Powell offered a worrying insight into the lack of regulatory competence surrounding the issue. “There isn’t any one agency that can stand up and have oversight over this,” he told a House Financial Services Committee.
Moreover, a Senate Banking Committee Hearing quizzed the co-creator of Libra, David Markus, on the issue; asking whether the venture should be regulated as a bank or not. In response, Markus reiterated that regulatory oversight should be undertaken by the group of seven (G7); seven advanced economies that Libra will be working alongside.
On the whole, It seems relatively unlikely that China will force the Yuan into Libra; especially considering its own ambitious, and highly competitive digital asset venture.
It’s no secret that the Peoples Bank of China is developing a sovereign national cryptocurrency. Analysts suppose that the development of the central bank digital currency (CBDC) may have been hurried in an effort to subvert capital flight into Facebook’s Libra.
On top of this, Changchun Mu, the head of china’s digital currency, recently compared Libra to the incipient CBDC; suggesting that it would hold the same characteristics as facebook’s venture. However, in pure one-upmanship, Mu went on to state that the CBDC would be transactable without an internet connection. “Even Libra can’t do this,” Mu added.
With this in mind, it seems doubtful that China would petition libra to include the Yuan; especially given the embroiling situation around the US-China trade war.