By
Chimamanda U. Martha
April 12th, 2024
The way Libra is designed makes it hard for governments to see who’s paying whom, or to limit cross-border payments. Thus the People’s Bank of China (PBOC) has vowed to create a currency it can manage- likely one that will be linked to real identities.
Huawei’s founder Ren Zhengfei recently gave us all something to think about. He said that China can issue their own version of Libra. He said:
“Why should we wait for others to do it? The power of a country is always stronger than that of an Internet company.”
Founder of Huawei: China can just issue our own version of Libra. Why should we wait for others to do it? The power of a country is always stronger than that of an Internet company.
Source (in Chinese): https://t.co/llbM6noiMI
— cnLedger (@cnLedger) July 26, 2019
The truth is, since Facebook announced its bold entry into the world of cryptocurrency with details of its Libra project, the world hasn’t stopped talking about it. In China, it has caused a lot of emotions as tech leaders began to propose their own opinions and local media began to draw comparisons with their digital payment systems such as WeChat Pay, QQ Coin, and Alipay.
Let’s not forget that China has abandoned all cryptocurrencies as well as Facebook itself (and Google, and Instagram…), and searches for “Libra” on the nation’s web search giant Weibo are really high currently ranking in third place.
In April this year, China proposed banning all cryptocurrency miners within its borders. China has banned Initial Coin Offerings since 2017 and made it harder for domestic citizens to transact on cryptocurrency exchanges by banning them domestically. It is clear that the Chinese state is not a fan of permissionless blockchains and cryptocurrencies built on top of them.
However, now facing with the possibilities and threats posed by Libra, China’s central bank might be rethinking their plan for a national digital currency.
And it’s not just Zhengfei who thinks that. Former People’s Bank of China (PBoC) governor Zhou Xiaochuan said that, with its Libra offering, Facebook had shown that there is potential for a “strong” global cryptocurrency that can be exchanged for fiat currencies. However, as such, Libra could pose a threat to existing cross-border payments systems and could weaken national currencies. Xiaochuan said:
“Libra has introduced a concept that will impact the traditional cross-border business and payment system. In the face of this new risk, even if not a major one for China, the government should make good preparations and make the Chinese yuan a stronger currency.”
He added that one way of doing that would be similar to Hong Kong’s enabling of non-specified “commercial entities” to issue digital Yuans (as Hong Kong allows with its dollar). However, he went on suggesting that the founders of early digital currencies were interested in a quick profit rather than establishing a viable means for financial transactions.
“One problem in the early development was that people had been too eager to make quick money to turn cryptocurrencies into items for speculation instead of a means of trade.”
Senior analyst at Orient Securities, Chen Dafei thinks major tech companies as are Alibaba or Tencent could potentially take part in the issuance of a national digital currency.
Wang Xin, director of the PBOC Research Bureau said that the central bank supports market-oriented institutions to help with the research and development of the currencies bid in the crypto market, under the approval of the State Council.
He added that the CBDC (central bank digital currency) would eventually reduce and “counterbalance” the risks of Libra’s eventual domination of the market. He said:
“A digital currency issued by the central bank can improve the efficiency of monetary policy, and help to optimize the payment system.”