Last summer, Facebook brought the concept of basketcoins, i.e. stablecoins backed by multiple assets rather than just one, into the limelight with its reveal of the Libra project.
Since then, Facebook and the other 26 members of the Libra Association have notably backed away from plans for a pure basketcoin product. The retreat isn’t because basketcoins aren’t viable, to be sure, but rather because multiple regulators have made it clear they don’t want Facebook releasing its own de facto stab at a world currency.
Zooming out, this retreat has paved the way for another, more nimbler institution to outmaneuver Facebook in releasing a major basketcoin project similar to what the Libra was originally envisioned as. According to news out of China this week, among the institutions to do so first could be the People’s Bank of China (PBoC).
Regional Asian Basketcoin Proposed
Cryptoeconomy chatter around China’s central bank has lately centered on the institution’s in-progress digital yuan, the highest-profile central bank digital currency (CBDC) initiative in the world right now. Yet the bank may help release a separate basketcoin project first.
That’s per a proposal delivered this week amid China’s “two sessions,” which are the national legislative and advisory conferences held annually in the Asian superpower.
The advisory session, dubbed the Chinese People’s Political Consultative Conference (CPPCC), is not akin to a meeting of the U.S. Senate or the U.K. House of Lords. And at the body’s latest session, Neil Shen, a founding partner of Sequoia Capital China and member of the CPPCC, joined with 9 other specialists to call for the creation of a PBoC-backed basketcoin.
In particular, Shen and his peers suggested the new digital currency should be underpinned by reserves of the Chinese yuan, the Hong Kong dollar, the Japanese yen, and the Korean won. The proposed basketcoin’s reserves would be weighted according to the performance of the economies of China, Hong Kong, Japan, and South Korea as such.
Why a basketcoin, then? The initiative’s proposers said the digital currency could spur trade and optimize cross-border payments for the participating nations. They also said it could be launched in close coordination with Hong Kong Monetary Authority and alongside a regulatory sandbox aimed at boosting related innovations.
It’s entirely possible this basketcoin proposal doesn’t move any further in China’s contemporary landscape, but it’s live for consideration now and demonstrates once again that digital currencies are becoming a mainstream topic at China’s highest political levels.
A Sore Spot for Facebook?
There’s no question that with Facebook’s global reach, the Libra basketcoin as originally envisioned could have come to rival traditional world currencies. That’s why the Libra effort hit a regulatory firestorm early on, and that’s why rumors swirled earlier this year that Libra’s initial model was going to have to be reconfigured.
That’s why analysts in the cryptoeconomy weren’t surprised back in April when the Libra Association published an update to the Libra’s whitepaper for the first time. Per the redesign, the body was henceforth going to be releasing multiple single-currency stablecoins, e.g. one pegged to the dollar, another pegged to the euro, and so forth.
With that said, the Libra Association said it would still back a Libra offering, just in indirect fashion and thus not in token form.
“Under this change, ≋LBR will simply be a digital composite of some of the single-currency stablecoins available on the Libra network,” the new whitepaper explained.
The retreat will likely leave the Libra Association thinking what could have been. That is especially true if the PBoC does end up bringing a real basketcoin product to market while avoiding widespread international regulatory pushback.