Facebook’s plans to create its own cryptocurrency have forced China’s central bank into stepping up research into creating its own digital currency as Libra could potentially pose a challenge to Chinese cross-border payments, monetary policy and even financial sovereignty, a People’s Bank of China official said on Monday.
“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?” asked Wang Xin, director of the People’s Bank of China (PBOC)’s research bureau during an academic conference hosted by Peking University’s Institute of Digital Finance.
The PBOC are paying “high attention,” according to Wang, after Facebook released a white paper in June outlining plans to create its own long-awaited cryptocurrency and a related blockchain-based financial infrastructure project. The PBOC was the first major central bank to study digital currencies in 2014, a step to counter the challenge from cryptocurrencies like bitcoin, with a research institution set up in 2017 to further facilitate the research.
China maintains a blanket ban on new listings or trading of any digital currency, including bitcoin, as Beijing regards digital tokens as a source of financial risk. At the same time, China’s central bank has been longing for a “sovereign” digital currency that would fall under its control, although it has so far made little progress. Concerns have risen, in some quarters, that Libra will fuel a new round of international currency competition and a challenge to financial sovereignty. According to Facebook’s white paper, Libra will be linked to a basket of major currencies and governed by a Switzerland-based non-profit consortium, the Libra Association, which includes more than two dozen companies, including Visa, Mastercard, PayPal, Stripe, eBay and Uber.