Responding to concerns from Sen. Mark Warner (D-VA), Facebook stated yesterday that the reserves backing Libra, its cryptocurrency and blockchain, would include the U.S. dollar, Euro, Japanese Yen, Singapore Dollar, and the British Pound.
Senator Warner had asked Facebook to not include the Chinese Yuan in its reserves due to concerns about the currency’s manipulation by the government to gain trade benefits. In recent times, China has purposely devalued its currency in response to imposition of trade tariffs by President Trump. Addition of the Chinese yuan to Libra’s reserves could potentially encourage its usage by other entities and elevate its status as a currency for international trade transactions.
David Marcus, Libra chief, had earlier told Congress that 50 percent of Libra’s Reserves and the remaining would be a mix of sovereign currencies and assets.
“Any decision whether to add a new currency to the Libra Reserve would be made based on all the facts and circumstances at the time, including any direct or indirect regulatory restrictions,” Facebook wrote. The Chinese government is already reported to be developing a digital equivalent of its fiat currency. One of its stated aims is to increase adoption of the Renminbi in international trade transactions.
AML and Combating Terrorism Funding Should Be Part of Design: US Regulator
Meanwhile, U.S. regulators are still keeping a hawk’s eye on Libra’s design. The U.S. Under Secretary of Terrorism and Financial Intelligence Sigal Mandelker, who is in Switzerland to discuss digital currencies with her counterparts in the country, told journalists that developers of digital currencies should be mindful as to whether their networks are being used by terrorists and bad actors for illicit purposes.
“Whether it’s bitcoin, Ethereum, Libra, our message is the same to all of these companies: anti-money laundering and combating the financing of terrorism has to be built into your design from the get-go,” she said.
Her remarks come on the heels of reports that Bitcoin and other cryptocurrencies have become favored payment mechanisms for transnational drug rings in the opioid crisis.