In the questioning, how does Libra's currency basket fall? Single anchor instead of integrated anchoring?

Author: Sister shallot

Source: Shallot blockchain

Libra is still full of uncertainty. It was once called a "world currency" anchored with a basket of currencies. Some people call it a "continuation of the dollar hegemony." How the currency basket behind Libra falls, it is still not accurate. The answer, but now Libra will be making a new round of "basket currency" adjustments.

In the middle and late September of this year, Facebook officially disclosed that its stable currency, Libra, will be exchanged for five currencies, namely the US dollar, the euro, the Japanese yen, the British pound and the Singapore dollar. The structure of the reserve asset currency basket is: US dollar. 50%, Euro 18%, JPY 14%, GBP 11%, Singapore Dollar 7%.

But yesterday's Calibra CEO, Libra project leader David Marcus (Marcus) told Reuters that Facebook's cryptocurrency program Libra would have the potential to create a variety of single-currency coins (subdivided into US dollar stables, euro stable currencies, and The cryptocurrency of the pound stable currency, etc., rather than originally based on a basket of currencies.

Marcus said that the main goal of the Libra Association is still to create a more efficient payment system, but it is open to finding alternatives to using Libra.

"We can do it differently / we can do it differently," Marcus said.

“In addition to having a comprehensively anchored unit (Unit, or Libra), we can also have a range of stable currencies linked to a single legal currency, such as US dollar stable currency, Euro stable currency, Sterling stable currency, etc.”

In addition, Marcus also stated:

“We can achieve this by having a variety of different stable currencies. These stable currencies represent national currencies in the form of digital tokens. This is one of the options that should be considered.”

There are many explanations for Marcus's rhetoric. The Libra project is currently open to Libra's alternatives. Does this suggest that a new alternative to Libra has become possible? Libra became a single anchored stable coin or it became possible.

Second, the Libra team is still considering "achieving their goals by having a variety of different stable currencies", which means that in addition to Libra, which anchors a basket of currencies, Facebook's cryptocurrency project will also have a series of Libra's "derivatives". Stabilizing coins, they are anchored separately from different legal tenders.

Since the release of the Libra white paper, it has survived in a highly regulated environment. The hearings have been constant and the regulatory voices have been chaotic. Recently, seven giant companies such as PayPal, Mastercard, Visa and eBay have successively withdrawn from the Libra Association. The more questions you have, the more Libra is looking for change.

Moreover, Libra's basket of currency issues has always been a controversial issue. For example, Chinese insiders and outsiders are more concerned about the lack of RMB in the Libra basket currency. Some people worry that Libra will continue the hegemony of the US dollar. Others believe that Libra is still global. currency. In addition, there are also concerns about how to maintain the stability of the basket currency structure and exchange rate risks.

At the same time, the regulatory pressure, in the context of many interest groups, Libra how to implement the basket currency behind it makes the problem more difficult.

Libra, global currency or dollar hegemony? a worry under a basket of currencies

“Libra's mission is to create a simple, borderless currency and financial infrastructure that serves billions of people,” writes Libra's white paper.

It can be seen that Libra's original intention is not based on the stable currency of the US dollar, but is designed as a liquid currency across sovereign currencies. However, the evaluation on the market has always been a question of the issue of "dollar hegemony".

Long Baizhen, a Ph.D. and monetary and financial researcher at Tsinghua University, believes that having the highest weight of the US dollar in the Libra reserve pool and the high probability of using the US dollar as its unit of valuation will fully safeguard the dollar’s ​​currency hegemony and extend it to Digital world.

He believes that Libra fundamentally protects the interests of the traditional legal currency system, because it uses French currency (and/or French currency-denominated national debt) as a reserve pool, and is a “pseudo-innovation” based on the traditional legal currency system. The biggest benefit behind Libra is the dollar.

In addition, the Bank of England's position on Libra can be basically understood as the Fed's "review machine", which has always emphasized "conforming to the highest regulatory standards." The EU's leader, Defado, is opposed to Libra. The root cause or Libra represents the US dollar interest, which has eroded the monetary sovereignty of the euro zone.

Earlier, in Libra's currency basket, the dollar and the euro accounted for 50% and 18% respectively. Compared with the 40% and 30% of the dollar and euro respectively in the French currency settlement, the US dollar was strengthened, while the euro was strengthened. Was significantly weakened.

National regulators are also keeping an eye on the structure of the Libra currency basket. Perhaps a reasonable currency basket, or a currency basket that weighs the interests of all parties, may make Libra's regulatory fire more moderate. But Libra's mission is not here, but to build a simple, borderless currency and financial infrastructure that serves billions of people. If Libra is "soft", it will be contrary to its goals.

At the same time, there are many opinions that Libra is striking the dominant position of the US dollar.

Maxine Waters, chairman of the Financial Services Board, has publicly stated that Facebook seems to be seeking to build a new global financial system to counter the dollar.

Gu Yanxi, a senior researcher in blockchain/digital currency, also said that Libra's original intention was not based on the dollar's stable currency… I think Libra stable currency is a tool to expand the influence of the US dollar, which I think is not accurate. Although Libra has announced the types of legal currency and their respective proportions in the current package of legal currency, it remains to be seen whether the current design will actually land. This is obviously the focus of attention of the relevant sovereign currency countries involved.

In addition, Libra's anchoring of a basket of currencies will also bring exchange rate risks and unstable currency basket structure. Former Bank of China Vice President Wang Yongli issued a document stating that it seems that the Libra basket currency structure is stable and stable, and that Libra's exchange rate stability against various basket currencies is maintained. The two "stability" can only take one of them, and this will generate exchange rate risk, but This bearer may be the holder of Libra. How to maintain the currency structure behind Libra in Libra's dynamic redemption and exchange process becomes a problem.

Regulatory pressure, will Libra's new currency basket come?

Recently, the spurs of relevant regulatory agencies are still overweight.

The Group of Seven (G7) pointed out in its report that a cryptocurrency such as Libra poses a risk to the global financial system, and that any stable currency project should not be operational until the challenges of regulation are adequately addressed. The Financial Action Task Force (FATF) also expressed discomfort with Libra, saying that stable currencies could have a serious impact on global efforts to combat money laundering and terrorist financing. “If the stable currency event spreads, it may lead to new risks in money laundering and terrorist financing.” The G20 believes that Libra “will pose serious risks” in terms of regulation and other aspects, and should not issue risks before responding to risks. .

Whether Libra anchors a basket of currencies and the regulators point out, Libra will disrupt the financial order and trigger new risks of money laundering and terrorist financing. Libra is looking for solutions and changing currencies. Basket, looking for alternatives or maybe one of them.

But Libra's goal has remained the same, and Libra has always been open to how to implement it, as Marcus said. Currently, Marcus said Libra is considering introducing a single stable currency that anchors a range of fiat currencies and is open to Libra's alternatives.

However, this does not only mean that Libra's currency basket will change, but also means that Libra is no longer just a single Libra but a "basket of Libra."

As early as 2018, the stable currency boom, there have been stable currencies anchoring various legal currencies, the dollar, the euro, the pound, the renminbi, the yen and so on. If Libra will do the same thing, its innovation will be weakened, and how Libra will face regulation, how to put and use these stable coins is still a tricky issue.

But the correct solution to these problems may not even be understood by David Marcus/小扎 himself.