Faced with the ongoing probabilities and the associated threats exposed by the Facebook’s upcoming cryptocurrency project named ‘Libra’, China’s central bank should rethink about its plan to develop a national digital currency, as per its former head.
In line with a recent news by the native reporting media ‘South China Morning Post’, former PBoC [People’s Bank of China] governor named ‘Zhou Xiaochuan’ said within an event held earlier this week in Beijing, that with Facebook’s Libra ‘project‘, it had shown that there’s potential for a “strong” global ‘cryptocurrency‘ which can be exchanged into standard fiat currencies.
While Libra might assist developing countries improve their existing payment systems, Zhou said, it’d additionally pose a threat to existing cross-border payments systems and can further weaken national currencies.
Explaining further, he said:
“Libra has introduced an idea that will indeed impact the formal cross-border business and payment system.”
In the face of this new risk, even though not a significant one for China, the Govt. should “make smart preparations and build the Chinese yuan a stronger currency,” per Zhou.
One way forward would be to permit non-specified “commercial entities” to issue digital yuans, as Hong-Kong offers with its dollar.
The existing system in Hong-Kong permits several banks to issue HKD banknotes backed by the USD reserves, whereas the de facto financial organisation, the Hong-Kong Monetary Authority, works to maintain a peg to USD.
The Post spoke to a senior analyst at Orient Securities, Chen Dafei, who said that he interpreted the comments as that means that the leading tech firms like Alibaba and Tencent – have already engineered size-able payments networks – and might probably participate within the issuance of a national digital currency.
Previously, when earlier incharge of the PBoC, Zhou backed the work on developing China’s digital currency, stating at the time that its launch is “inevitable.” whereas that work has been presently ongoing for past few years, however there have been no signs of an imminent launch.
If Libra goes ahead, despite all the associated ‘regulative issues‘ it’s presently facing, that might be set to change.