The organization will use the funds parked in a group of stable banks (essentially, a basket of bonds) which will then theoretically maintain a relatively stable price over time. So there’s a stable price mechanism, and Libra Coins will be minted against the Libra Reserve, against those assets.
Allocation of Libra Coin will happen two ways:
The first way, which people may be somewhat familiar with, is allotting Libra Coins to Founding Members based on their $10m buy-in or membership fee. The Founding Members will then turn around and “stake” those coins in the Libra Network (which we’ll talk about later), essentially guaranteeing the safety of the network at the risk of losing this investment.
The second way—which people aren’t as familiar with—is through the currency that individual consumers use to buy into the network.
Libra Developer Spotlight: Check out the exciting new projects being built on the testnet: https://t.co/QmbkmmA4e0— Libra Dev (@LibraDev) 12 settembre 2019
New Libra Coins will be minted for users as a 1:1 equivalent for “fiat and transfer of that fiat to the reserve.”
This hasn’t been discussed as much but is a crucial element of the network and one that brings up a lot of outstanding questions.
It also leads us to our last feature we’ll discuss in the Libra Reserve: Authorized Resellers
In the Libra Reserve white paper, it says:
“Users will not directly interface with the reserve. Rather, to support higher efficiency, there will be authorized resellers who will be the only entities authorized by the association to transact large amounts of fiat and Libra in and out of the reserve.”
To partition off KYC / AML and local regulations, Libra creates a barrier between the Libra Reserve and customers by creating a class of network participants called “Authorized Resellers”. In an episode with Laura Shin on her podcast Unconfirmed, Libra’s Head of Communication and Policy suggested Libra would push down local regulation, and adherence to the Authorized Resellers with Libra Reserve would typically deal with international AML laws that are currently in place for international financial institutions.
So, the authorized resellers will be digital wallets that act as the on- and off-ramps for customers. They will take local currency from users of their digital wallet and provide Libra Coin in return. In some sort of transaction, those authorized resellers will either purchase a large amount of Libra Coin in their local currency, or somehow obtain a large amount of Libra Coin which they then distribute to their users.
https://pages.consensys.net/understanding-libra
