Conspicuously missing from the entire libra story is how they are actually going to manage the peg. How will they handle the custodian counter-party risk? What I mean by that is: for libra to actually be a stablecoin, for every libra unit in circulation, FB and their merry band of friends will need to stash a frozen combo of {dollar, euro, yen} somewhere. That "somewhere" is actually not easy at all to design from a…
All of this is answered in the Libra whitepaper.
> is how they are actually going to manage the peg. How will they handle the custodian counter-party risk?
"The assets in the Libra Reserve will be held by a geographically distributed network of custodians with investment-grade credit rating to provide both security and decentralization of the assets."
> be regularly audited by independent auditors
Pretty much any custodian with investment-grade credit ratings will be audited and heavily regulated.
> Worse, these custodians of what is already essentially virtual money are going to be sitting on a huge pile of currency and to guarantee the peg, won't be allowed to do anything with it.
The funds are not held in currency -- the funds are invested in "a collection of low-volatility assets, such as bank deposits and short-term government securities in currencies from stable and reputable central banks."
> be risk-free (and there is no such a thing) or the peg will drift.
Also answered: "as the value of the underlying assets moves, the value of one Libra in any local currency may fluctuate. However, the reserve assets are being chosen to minimize volatility, so holders of Libra can trust the currency’s ability to preserve value over time."