USD to Lead a Group of Fiat Currencies Backing Libra

As per the reports, Facebook’s cryptocurrency, Libra will be backed by 50% by the US dollar and the rest by Japanese Yen (comprising 14%), Euro (comprising 18%), Pound Sterling (comprising 11%) and Singapore Dollar (comprising 7%). Chinese Yuan has not been included in the list till now.

Facebook’s Libra is considered as the most popular stablecoin in the crypto market backed by very short-term government securities and traditional money deposits.

Facebook founder Mark Zuckerberg wrote a letter addressing the US senators about the possible influence of Chinese currency Yuan on the crypto market. The letter was not immediately returned and a lot of speculations were made regarding this issue. The senators declined to comment on the specific breakdown of the Libra Reserve. However, it said that the Libra Reserve would be backed by short term government securities that are denominated by US Dollars, Japanese Yen, Pound Sterling, and Singapore Dollar.

Senator, Mark Warner also asked Facebook to tick off the Chinese Yuan from the list of asset baskets that have been supporting Libra’s stable cryptocurrency. To this, he added if any decision needs to be taken to add new currencies to the Libra Reserve it would depend on the circumstances prevailing at that point of time. The decision will be jointly taken by the Libra Association and Facebook and not Facebook alone. The officials had earlier raised concerns about the growing stature of the Chinese Yuan as the reserve currency.

The proposal of the US Dollar to remain the main currency underpinning Libra has been reacted to with much wariness by the regulators. There are also concerns that such a proposal can destabilize the global financial system.

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