In response to Facebook’s new cryptocurrency, Libra, China’s central bank is reportedly developing its own cryptocurrency.
According to the South China Morning Post, Libra poses a threat to the country’s financial system, and this has spurred on the development of the bank’s own digital coin.
At an event at Peking University’s Institute of Digital Finance yesterday, the director of the People’s Bank of China (PBoC) research bureau, Wang Xin, argued that if Libra effectively functions like money, then it will likely have a huge influence on “monetary policy, financial stability, and the international monetary system.”
In other words, it could greatly affect the value of China’s fiat currency.
Wang explained the issue further, focusing on the link between the Libra coin and the US dollar:
“If the digital currency is closely associated with the US dollar, it could create a scenario under which sovereign currencies would coexist with US dollar-centric digital currencies. But there would be in essence one boss, that is the US dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”
For this reason, PBoC has received permission from the State Council to develop a central digital currency and will work in tandem with other market institutions to do this.
China’s Cryptocurrency: Years in Development
However, the bank has reportedly been developing a digital currency for years. It seems, though, that Libra has made it look at the situation with “high attention” and, as such, it will ramp up development.
There is still no indication of how close it is to completion.
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Facebook revealed its Libra project in mid-June after a year of rumors and speculation. The coin is created as a stablecoin and is backed by several fiat currencies and government bonds.
According to Wang, China is now pressing hard to find out exactly what those currencies are and if the US dollar will be strongly linked.
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