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A Chinese financial expert said that China will be the first country to properly float a digital currency, adding that Facebook’s Libra efforts will fail.
While Facebook continues its arduous battle with U.S. authorities regarding the launch of its Libra digital currency, China seems to be making a lot more progress not just with the development of its own Central Bank Digital Currency (CBDC), but also with the acceptance of the technology in the country, especially after the President’s statement. Now, an ex-government official has said that China’s CBDC will definitely be the first in the world, to issue a properly applicable cryptocurrency.
Expressing these comments at the first Bund Financial Summit in Shanghai, CCIEE (China Center for International Economic Exchanges) vice-chairman, Huang Qifan, said China will lead the way, but also added that Facebook’s attempt at launching its own cryptocurrency will largely be unsuccessful. Speaking on China’s CBDC, Qifan said:
“The People’s Bank of China has been studying DCEP (digital currency electronic payment) for five or six years, and I think the technology has matured. PBoC is probably the first central bank to introduce digital currency in the world.”
Qifan, who also used to be the deputy director of the Congressional Financial and Economic Affairs Committee, also touched on other finance-related issues including the growth of financial technology, wider access to financial services as well as proper ways to manage funds. He stated clearly that for the best results regarding monetary issues and proper financial distribution, government authorities including the central bank, have to be the ones to release a digital currency. Qifan also added that doing this in such a way that the official digital currency is tied to other national financial factors such as gross domestic product (GDP) and fiscal revenue, is the only way to make sure that extensive security is achieved.
Speaking on the Libra, Qifan believes that any entities that issue their own digital currencies and defy authorities would very likely not stand the test of time because they are not tied to real currencies. He also grouped Bitcoin in the same category, saying:
“In this digital age, some companies try to challenge sovereign currency by establishing financial products such as Bitcoin and Libra. These decentralized currencies based on blockchain are not supported by sovereign money. The basis of issuance cannot be guaranteed, the value of the money cannot be stabilized [and therefore], it cannot truly become real wealth. I do not believe that the Libra will succeed.”
Even as China is about to release its own currency, there is the general worry in the government which has caused them to delay outgoing transactions, especially in large amounts. This is because the Chinese government is trying hard to prevent funds as much as possible, from leaving the country. This is a tad ironic, especially when it’s considered that China is also putting in a lot of effort into attracting capital and all-round investment, into the country.
As highlighted by Peking University professor and former member of China’s monetary policy committee, Huang Yiping, there are risks that have to first be properly addressed.
“There are many concerns about premature opening…the odds of a crisis may be as small as once in 10,000 years, but when it actually takes place, it could kill you,” said he.