Facebook, according to Bloomberg, has informed US senators that a bouquet of fiat currencies, namely the US dollar, yen, euro, Singapore dollar and British pound will back Libra. Notably, the Chinese yuan may not be part of the assets that will back the Libra.
Facebook supposedly issued the list of assets that will back the Libra after Mark Warner, Virginia Democratic Senator, sent an inquiry to the company. Warner has pointed out that China is promoting other governments to include the yuan in their Forex reserve holdings.
On its part, Facebook has clarified that the final decision related to the list of currencies that will back Libra is left with the Libra Association, a consortium made up of several stakeholders in the Libra project. Facebook stated:
“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.”
The above statement implies that Libra may not be introduced in China. However, it may be introduced in numerous countries, regardless of regulatory concerns raised by the US.
A month before there were reports that China is planning to introduce its own central bank digital currency ahead of Libra. Government news sources indicate that relevant organizations in China are working on the digital renminbi as a response to Facebook’s Libra, but the government has denied claims that the digital currency will be ready for launch by November.
It seems that the People’s Bank of China, the country’s central bank, has finished the job of creating a prototype for issuing a national digital currency. Notably, Tether, the firm behind the USDT, a dollar backed stable cryptocurrency, stated that it is launching a stable coin pegged to the yuan.
The offshore yuan is much different from the domestic currency. The primary difference is that the yuan can be traded freely on Forex markets and is not linked to any change in monetary policies announced by Beijing.