The US regulator can have a sigh of relief as Facebook’s Libra will not use Chinese Yuan in its reserves.
Libra will be backed by the US dollar, euro, yen, pound and Singapore dollar. The social media giant reveals for the first time the composition of the currencies. Libra will be comprised of five fiat currencies which include 50 percent of US dollar and short-term government bonds, 18 percent of Euros and Euro-dominated government bonds, 14 percent of Japanese Yen, 11 percent of UK Pounds, and 7 percent of Singapore dollar.
Behind each Libra token, there would a unit of this currency basket and Facebook could mine as many tokens as these units are in its reserves.
China is also developing its central bank-backed digital currency like Libra. In addition, the Chinese leadership is also trying to make the Yuan a popular global currency. Therefore, Democratic US Senator Mark Warner warned against adding the yuan to the basket of currencies.
Chinese Yuan is not in this list so it could eliminate some US regulator’s concerns who feared that Libra would Chinese currency for its reserves as both countries have been engaged in a trade war for last 14 months. The US blames China for the constant devaluation of its currency to help the export industry. Things got worse when the President of the United States, Donald J. Trump, threaten China to apply high tariffs on all Chinese goods exported to the US.
The report came after the flat rejection of Libra from Germany’s federal government. The German government recently passed a blockchain strategy that prevents any parallel currencies from being issued in the country, including Facebook’s proposed Libra.
Regulators think and warn that there are risks of digital assets being used in illegal and terrorist activities, although they seem to be more concerned about a destabilization of their monetary sovereignty and seem to have been looking for a scapegoat for some time.
Companies and institutions related to cryptocurrency companies must address these problems very clearly as the pressure exerted by governments is increasing.