China’s timeline to make a state-run cryptocurrency just got moved forward.
The announcement of the impending launch of Facebook’s Libra in 2020 has put pressure on China’s central bank to get the ball rolling. Speaking at the Peking University’s Institute of Digital Finance, Wang Xin, director of the People’s Bank of China (PBoC), said that a successful U.S.-based cryptocurrency would negatively affect China’s financial system.
According to the South China Morning Post, Wang said, “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?”
China has never thought much of Mark Zuckerberg’s social network. For more than a decade it has banned Facebook–alongside other American-owned sites like Google and Twitter–as part of its stance against American companies operating on its soil. Libra it seems, is no different.
China was one of the first jurisdictions to implement a blanket ban on the trading of any cryptocurrencies–while still hosting some of the world’s largest crypto mining operations. But China’s relationship with blockchain is complicated. While it doesn’t believe its citizens should trade crypto, it does see value in the technology. As we’ve reported before, the Chinese state sees blockchain as a natural ally when it comes to mass surveillance and control.
Facebook’s currency, like its social network isn’t likely to play along with China’s blockchain vision. Instead, Libra will be used to pay for goods and to side-step fees for sending money overseas. To keep it steady, it will be pegged to national currencies such as the euro, the Japanese yen, and the US dollar–the latter of which is what the PBoC is worried about. Wang argued that if Libra was in China it would create “one boss:” the US dollar.
“If so, it would bring a series of economic, financial and even international political consequences,” he added.
Interestingly, U.S. lawmakers are worried about precisely the opposite. They argue that Libra is the start of a separate financial system—one that doesn’t depend on the U.S. dollar. Congress has already declared a moratorium on any forward momentum of the coin. However, while the US government can employ checks and balances to Facebook’s development, it can do little to stop China’s roll out of its own native coin.