Facebook Reveals Initial Currencies Backing Up Its Libra Cryptocurrency
Lawmakers and regulators are worried of the launch of the Libra cryptocurrency, the so-called stable coins that are designed to overcome great price swings that made Bitcoin and other cryptocurrencies impractical for commerce because other powerful countries under suspicion of manipulating its own currency might find their way in.
Facebook Inc and more than two dozen partners of the US social media giant are currently developing this cryptocurrency.
Initially called the "GlobalCoin" or "Facebook Coin," by now, Libra will include the euro, pound, Singapore and US dollar and the yen.
The Libra cryptocurrency is to be handled by the Libra Association, a membership organization founded by Facebook's subsidiary, Calibra, and 27 others involved in nonprofits, online marketplace, payment, technology, telecommunication, and venture capital.
The launch is to be in 2020.
Virginia Democratic Senator Mark Warner is worried that China may push the Libra Association to include its yuan in its so-called stable coin.
This worry came from China encouraging governments to include yuan in their reserve holdings and the belief that Beijing manipulates its own currency.
Warner wants Facebook's commitment that it will not include China's money in the Libra basket.
Facebook cleared that it is the Libra Association that will make the decision of including potential currencies.
It did clarify that "any decision to add a new currency to the Libra Reserve "will have facts and circumstances at the time" together with "direct and indirect regulatory restrictions" considered.
The company and the Libra Association had gotten pushback from lawmakers and regulators on having a digital currency saying that Facebook's issues with privacy make it unsuitable for such projects.
What differentiates Libra is unlike Bitcoin and other digital currencies, it would have the backing of a reserve fund made up of government-issued currencies and debt instruments.
To avoid volatility, the Libra token will be backed by financial assets such as a basket of currencies together with US Treasury securities.
Each of the partners like Uber, Visa and venture capital firm Andreessen Horowitz will put in an initial US$10 million for a full asset backing.
These Libra service partners will be the ones creating new Libra currency units based on demand.
The Libra currency will be retired the moment they get redeemed for conventional currency.
Amid lawmakers' concerns, Facebook also gave a hint that the Libra Association might launch the cryptocurrency outside the US even amid regulators' concerns.
It assured that the Libra Association won't be offering the Libra digital currency anywhere until regulatory concerns get fully addressed.