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Facebook’s Libra has already created a deep impact on regulatory bodies across the United States and Europe. Now, according to a new report, China is also concerned about Libra as it can bring instability to the financial system of the authoritarian state, which pushes it to advance its research of its own state-based cryptocurrency.
The People’s Bank of China (PBOC) is going to play a major role in the efforts to develop the country’s own cryptocurrency. The PBOC has been studying digital currencies since 2014 and exploring ways to encounter the challenges of cryptocurrencies, and mostly Bitcoin. The Director of the People’s Bank of China research bureau, Wang Xi, has already warned about the financial disruption that cryptocurrency could bring to the current monitory system.
Facebook’s plan to launch its own cryptocurrency has forced China’s PBOC to advance its research into creating its own digital currency. According to the People’s Bank of China official, Libra could potentially threaten Chinese cross-border payments, monetary policy, and even financial sovereignty.
During an academic conference hosted by Peking University’s Institute of Digital Finance, Wang Xi has touched the matter and asked:
“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?”
According to Wang, the PBOC is making considerable efforts after Facebook has released the whitepaper of Libra and a related blockchain-powered payment infrastructure project.
Following cruptocurrency research that started in 2014, the PBOC set up a research institution in 2017 to accelerate further study. But yet, it has so far made little progress. “We had an early start … but lots of work is needed to consolidate our lead,” Wang added.
A Global Cryptocurrency Race
The main concern raised due to Libra is that it can start a whole new race of international virtual currency competition and a challenge to financial sovereignty. According to Libra’s whitepaper, it will be linked to major payment gateways and governed by a Switzerland-based non-profit consortium, the Libra Association. The non-profit consortium includes well-known payment companies such as Mastercard, Visa, PayPal, and other companies such as eBay, Uber, etc. in general.
An open research initiative on digital finance was also inaugurated on Monday to boost crypto research and a number of top Chinese universities have also become a part of it.
Huang Yiping, a former central bank adviser, a Peking University professor and the rotating current chairman of the research initiative, said: “It remains unclear if Libra will succeed … but the concept won’t disappear, But it has sent a warning to China that its lead [in digital finance] is not a sure thing.” Compared to the United States, China has done well promoting digital finance, he added.