In October, there was a series of events that created an unfavorable environment for the issuance of new digital currency, Libra. It has been reaffirmed that the plan to launch Libra has been hit hard since its first announcement.

Libra project continues to face a tough environment

First, on October 11, some companies among the founding members departed from the Libra Association. In total, seven companies, including PayPal, Visa, and MasterCard, have pulled out. This departure of major payments companies was a blow to the plan in terms of securing the stores where Libra can be used. The objective of the departure was to avoid a deterioration in relations with the financial authorities, which became increasingly wary of Libra. However, if Libra is issued, these companies would probably return to the Libra Association.
At the G20 Finance Ministers and Central Bank Governors' Meeting held on October 17 and 18 in Washington, it was agreed to introduce strict regulation for stablecoins, including Libra. In a report released on October 17, the G7 Working Group reaffirmed its assertion that the stablecoins, whose values are stabilizing, “should not be allowed to operate until the legal, regulatory, and supervisory challenges and risks are addressed.”
This tough standpoint of the authorities has been consistent shortly after the announcement of the plan to launch Libra. However, a concrete regulatory plan has not yet been formulated. The impression is that there is a standoff between the authorities and Facebook regarding the plan to launch Libra, with both of them waiting for the other to make the first move. In the future, it will be important for both sides to engage in direct dialogue.
On October 23, Facebook CEO Mark Zuckerberg testified at the House Financial Services Committee about the Libra. He said, "We're not going to launch Libra unless the U.S. regulators approve". There was a clear view that the issuance of Libra, which was originally scheduled for the first half of 2020, will be postponed.

Incorporating Libra into existing financial systems

Mr. Zuckerberg’s fairly compliant stance toward the authorities reflects his strong commitment to launching Libra. Since Libra ostensibly comes with the social significance of encouraging financial inclusion, as it enables many people to access financial services at low cost, the authorities cannot easily crush the plan for its launch as long as Facebook remains receptive to regulations. Thus, this has proved to be a very clever strategy from Facebook.
This series of events reaffirm the difficulty of the plan to launch Libra, but at this point, there are no clear signs that the plan will fail.
However, even if it fails, the second and third Libras, in other words, other global digital currencies, will emerge. Platforms other than Facebook may also plan to issue global digital currencies.
The plan to launch Libra has already opened a Pandora’s Box that has turned the traditional world of finance upside-down, and it is no longer possible to reverse the new trend in digital finance.
Global financial authorities will need to carefully study this opportunity to develop a new regulatory regime, which will have to incorporate private-sector digital currencies into the existing financial system and maximize people's convenience.

Preparations to issue a digital yuan

Meanwhile, taking inspiration from the Libra issuance plan, China is rapidly preparing for the issuance of the central bank digital currency, the so-called digital yuan. If realized, it will be the first among major countries to do so.
While China has indicated its intent to eliminate Libra within the country, it is aiming to expand the use of yuan overseas in the digital market against Libra. For remittances in Chinese yuan made between China and the rest of the world, the digital yuan will be able to provide a new means of payment that can be made quickly, cheaply, and with the guarantee of the central bank. If this high level of convenience leads to an increase in yuan-denominated transactions worldwide, it will help in the internationalization of the yuan. This is, after all, part of the battle for dominance between the U.S. dollar and the yuan. For a basket of major currencies including Libra, the U.S dollar is expected to account for about half of its weight. In this respect, Libra is a digital dollar for China.
In this way, the issuance of Libra and the Chinese digital yuan can be captured in the broader context of the fight for currency hegemony between the dollar and yuan.