According to a report in the South China Morning Post and Cointelegraph, China’s central bank is developing its own digital currency in response to Facebook’s Libra as the latter could purportedly pose a risk to the country’s financial system.
Wang Xin, director of the People’s Bank of China (PBoC) research bureau, argued that “if [Libra] is widely used for 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?”
Wang also added that another reason for issuing its own digital currency is because there is no clarity about the US dollar’s role once Libra is being used. He said, “If the digital currency is closely associated with the U.S. dollar, it 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, that is the U.S. dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”
Allegedly, the PBoC has received approval from China’s chief administrative authority, the State Council, to begin work with other market participants and institutions on a central bank digital currency.
Furthermore, academics from Peking University, Renmin University, Zhejiang University and Shanghai Jiao Tong University have also launched a committed initiative on digital finance.
What is most notanle that this move has come at a time when China has taken a very hard line on digital currencies, with a ban on bitcoin trading, ICOs and cryptocurrency exchanges.