China’s Central Bank now wants to develop a virtual currency to compete with the recently unveiled Facebook’s Libra aiming to gain the lead in the development of the cryptocurrency and blockchain technologies.

Ever since the ICO boom of 2017, China banned all crypto activities within its jurisdiction. Nevertheless, that stand seems to be changing with the People’s Bank of China (PBoC) announcing that it accelerated the development of its cryptocurrency.

PBOC summarized the proceedings of a lengthy video conference in an Aug. 2 statement. In that statement, the bank highlighted the development targets for the second half of this year. It also conveyed the State Council and the Party Central Committee priorities on financial and economic initiatives ranging from support for small businesses to monetary policy.

PBOC aims to strengthen follow-up research, develop financial technology, and actively meet new challenges. Furthermore, the central bank suggested that it should accelerate the development and research of its digital currency.

The bank also desires to track and study the development trend of cryptocurrencies at home and abroad while concurrently strengthening Internet financial risk remediation. With these developments, the bank will enhance its policy propaganda interpretation and respond swiftly to social issues.

Digital Renminbi to Tackle Facebook’s Libra

Digital tokens have become trending topics in the current financial market. Facebook officially unveiled its Libra encrypted cryptocurrency program in June. The social media giant targets to develop a stable currency based on a secure and stable open-source blockchain. Real asset reserves are set to back that blockchain and will be wholly managed by an independent association.

The way Libra is designed makes it challenging for governments to see who is paying whom, or to limit cross-border payments. PBOC has prioritized the creation of a digital renminbi in response to the growing adoption of cryptos worldwide. As we published last month, Huawei’s founder Ren Zhengfei recently said that China can issue their version of Libra.

Therefore, PBOC is supposedly developing its digital renminbi in response to the announcement of Facebook’s Libra stablecoin project. The PBOC director Wang Xin stated early in July that Libra:

“Could create a scenario under which sovereign currencies would coexist with U.S. dollar-centric digital currencies. But there would be in essence one boss, which are the U.S. dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”

Multinational central banks like the Bank of Canada, the Bank of England, and the Swedish Central Bank are purportedly researching and developing on legal digital currencies. Back in 2017, the PBOC Digital Currency Research Institute was officially set up to do broad digital currency research. The bank reportedly got approval from the State Council to start working with different market participants on digital currency.

Precautions

The former PBoC governor Zhou Xiaochuan warned in July that the country must put in place measures to compete against Libra. Zhou served as the central bank governor from 2003–2018 when the government started cracking down on all crypto-related activities and businesses. During his tenure, all initial coin offerings were banned.

Recently, US lawmakers called for the country to lead in cryptocurrency and blockchain development. They were speaking in a recent hearing on “Examining Regulatory Frameworks for Digital Currencies and Blockchain.” In that context, the US Patent and Trademark Office announced on August 1 that Wal-Mart is applying for digital crypto patents.

At the end of July, Facebook warned that its Libra project may never launch due to the increasing regulatory concerns. In China, the Central Bank Digital Money Research Institute confirmed that it had 74 patents involving digital currency as of August 4, 2019. As explained by Wang Xin, the central bank’s virtual currency is defined as M0 in China. That is a partial replacement for cash.

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