Ever Since Libra was unveiled, it has attracted the attention of several people, from analysts to the US Congress, regulators and most recently, the Asian giant, China. Reports say that China is looking to develop its own digital currency because Libra poses a massive risk to global financial and monetary systems.
Facebook Poked The Giant Bear
The People’s Bank of China is stepping up its research to develop its own digital currency to counteract Libra. Wang Xin, the director of the People’s Bank of China (PBoC) expressed concerns over the potential of a small group of tech companies controlling a centralized digital token that could ultimately impact global finance as reported by South China Morning Post.
Wang said, “If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system?”
China is well aware of the fact that if Facebook’s Libra is a success, the US government will gain supremacy in the digital currencies world, besides presently dominating the traditional financial markets via the dollar.
Also, Libra will be backed by several fiat currencies with the US dollar at the core. With this knowledge, Xin suggested that China is developing its own digital currency in order to stop Libra in its tracks before it further empowers the US dollar.
He said, “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.”
China Is Already Gearing Up For The Digital Currencies Arms Race
Mr. Xin revealed that the People’s Bank of China is hastening its efforts to develop an official digital currency to offset Facebook’s Libra and has already received relevant internal approvals to develop a central bank digital currency. Wang even said that PBoC was the first major central bank to study digital currencies in 2014 in a bid to counter challenges brought about by digital tokens such as bitcoin.
Yesterday, a committed research initiative was launched to further research on digital currencies and its set to include resources from prestigious universities in China such as Peking University, Renmin University, Zhejiang University, and Shanghai Jiao Tong University.
It is evident that Libra does not constitute an immense danger to bitcoin and other cryptocurrencies due to its unfavorable centralization feature. On the other hand, Libra has aroused some serious concerns from governments, case in point, US government regulators asking Facebook to halt development of Libra.
However, China cannot make such a regulation. This gives the US the upper hand and China knows this and hence the reason why plans to develop its own digital currency are underway.