Facebook Might Not Peg the Libra Coin to the Chinese Yuan

By Daniel Zo Facebook, Libra, China, Yuan, Coin

Facebook’s Libra Coin is currently one of the most expected digital currencies, granted its potential of changing the current dynamics of the market. While many members of the crypto community may argue that Libra isn’t a real cryptocurrency due to its centralized architecture, it certainly shouldn’t be ignored.

Recently, Facebook made several statements regarding its upcoming digital currency. For instance, it presented the Libra Association, a select group of 100 individuals who will be responsible for governing the coin, in an effort to ensure that no person holds complete control over its development. As such, any decision regarding the coin must be made by the association, according to its statute.

One of these pressing decisions concerns the fiat currencies that Libra will be pegged to. So far, it is known that the link between Libra and other fiat currencies will be made via short-term government securities, and bank deposits. Reports indicate that Libra will be pegged to the US Dollar, British Pound, Euro, Japanese Yen and Singapore Dollar.

Surprisingly, the Chinese Yuan, one of the world’s strongest currencies, isn’t present on the list. The reason behind this varies based on the perspective you choose to look at the matter with. For instance, U.S. Senators, such as Mark Warner, have stated that including the Chinese Yuan might give China way to influence the Libra currency.

Another point of view concerns China’s work-in-progress on its very own central bank-backed digital currency, which might serve as a direct competitor to Facebook’s coin, since rumours indicate that they share a similar architecture. However, the Chinese CBDC might offer several new features, such as the ability to transfer tokens between users without an internet connection (via NFC). Additionally, unlike the Libra Coin, the Chinese CBDC will be delivered to the population via commercial banks, rather than the online exchange services that we are familiar with.

In response to being asked about including the Chinese Yuan, Facebook stated that the final decision will be taken by the Libra Association. Additionally, the tech giant has reiterated its stance, and mentioned that regulatory compliance represents one of its top priorities in the United States. The press statement mentions: “We understand that the Libra Association will not offer the Libra digital currency in any jurisdiction until it has fully addressed regulatory concerns and received appropriate approvals in that jurisdiction”. However, Facebook seems open to the idea of launching the Libra coin internationally, similarly to most of the market’s cryptocurrencies.