Opinion | a16z: Libra should give up a basket of currencies, only anchored with the dollar

Libra's choice of a basket of currencies is very simple, because they want to make the value of this stable currency more consistent, and the rise or fall of any one of the currencies in a basket of currencies has a limited impact on Libra's value. Not only that, but Libra can also change the "basket structure" to further protect Libra from price fluctuations if needed.

If the Facebook digital currency Libra does not choose a basket of international currency support, but only anchors with the dollar, what will happen?

Due to a series of “strikes” on Libra by national regulators, some of the founding members of the Libra Association have opted out, including Visa, MasterCard, PayPal and eBay. This has also made the Libra Association less likely to leave the founding members. Some nervous.

Now, given that regulators are increasingly worried that Libra may challenge its legal currency supremacy and potentially damage the global economy, one of its founding members has proposed a major reform of Libra, which is the well-known venture capital firm Andreessen Horowitz (a16z) ).

Last week, Andreessen Horowitz encryption risk partner Chris Dickson gave a speech at TechCrunch Disrupt. He said he still believes Libra will be released, but may need to make some changes in order to get approval from the government and regulators. When asked what changes need to be made to ease the pressure on regulators, Chris Dixon replied:

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• US Treasury Secretary: Visa, PayPal, etc. withdraw from Libra because they have not yet reached regulatory standards and are worried about government action
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"I can give a hypothetical example. Libra can be a digital currency that is only denominated in dollars. My understanding is that letting regulators know that Facebook is not creating a new currency, it is just focusing on payment channels."

According to Chris Dickson, this means that Libra will only be tied to the US dollar, rather than "peg" a basket of international currencies as it is now.

According to a report from Reuters quoted by Der Spiegel, the English name of Facebook's digital currency has been identified as "Libra", and the Unicode symbol will be used. The proportion of its basket of currencies is: 50%, 18%, 14%. Yuan, and 11% pound and 7% Singapore dollar.

Libra's choice of a basket of currencies is very simple, because they want to make the value of this stable currency more consistent, and the rise or fall of any one of the currencies in a basket of currencies has a limited impact on Libra's value. Not only that, but Libra can also change the "basket structure" to further protect Libra from price fluctuations if needed.

However, if Libra is only denominated in US dollars, regulators—especially US regulators—may not worry that people will choose to use Libra instead of the US dollar. Not only that, Libra's only peg to the US dollar is also an attitude of Facebook, indicating respect for the US economic system and responding to government management.

Of course, if it is only linked to the US dollar, it means that Libra is vulnerable to fluctuations in the value of the US dollar. However, since many international currencies are also directly linked to the US dollar, Libra can have many precedents in terms of operation. Another benefit linked to the US dollar may make Libra more acceptable to other governments because some national regulators don't know much about cryptocurrencies. They are more worried about their domestic currency not being directly affected. Libra is linked to the US dollar. It means that there is a dollar endorsement that also allows regulators to reduce some of their concerns.

On October 14th, the Libra Association will hold a meeting to determine final membership, as well as a board of directors and a charter to regulate its work. However, we are not sure how this meeting will determine which currencies Libra will be linked to.

Other national regulators have raised concerns about Libra, mainly because Libra may affect the value of its currency. For example, if Libra is popular, many people around the world use this cryptocurrency. If Libra Association suddenly changes the composition of the basket currency or forcibly removes a country's legal currency from their basket of currencies, then it will definitely Affect the value of the relevant legal currency.

French Finance Minister Bruno Le Meyer has said before: "Libra is a currency privatization performance, which will pose a potential threat to national currency sovereignty… We cannot authorize Libra to grow and develop on European soil."

In the past few months, Libra’s head, David Marcus, has been trying to eliminate the idea that regulators “Libra poses a threat to national monetary sovereignty.” He continues to emphasize that Libra is allowed on top of existing legal tenders…not Create a new currency, and they will strictly abide by the sovereign state's right to monetary control. Even so, many national regulators remain largely reluctant to release Libra in 2020.

On the other hand, linking Libra to the US dollar will result in a significant reduction in the flexibility of the Libra Association to maintain the stability of the token value, and the Libra Association itself will have reduced management power. Since they no longer worry about whether their national legal currency will be “kicked out” by Facebook from Libra's basket of currencies, governments do not care whether they need to maintain a positive relationship with the Libra Association. In this way, Libra becomes a real, dollar-linked digital currency, and Libra competitors will not be the legal currency of each country, but a stable currency like Tether.

Chris Dickson also announced that Andreessen Horowitz will launch the "a16z Crypto Startup School" to provide a free education program for blockchain entrepreneurs, enabling the founders of cryptocurrency startups to pass on their extensive experience and knowledge. "Novice" in the field.

Chris Dixon revealed that the best-performing students in the school have the opportunity to get an investment from Andreessen Horowitz, which is not a requirement. Compared with other payment companies still rooted in the traditional financial system, Andreessen Horowitz seems to have a low probability of withdrawing from the Lirba Association, but can the "loyalty" of this veteran Silicon Valley venture capitalist bring them a corresponding return? Perhaps we can only see the answer when Libra meets regulatory requirements and really enters the market.

Original link: https://techcrunch.com/2019/10/11/libra-denominated-in-dollars/

Author: White Night

Editor: Qin Jin

Produced: Carbon Chain Value (ID: cc-value)

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