The Central Bank thinks that cryptocurrencies could seize and completely change the financial market
People’s Bank of China (PBoC) thinks that Facebook’s cryptocurrency, Libra, could generate changes of vital importance for the world of finance and economy by allowing international payments when this asset begins to operate.
The digital currency of Facebook would allow unbanked users to operate and receive payments without problems. For this reason, Wang Xin, Director of the People’s Bank of China Research Bureau, talked about it during an event at Peking University.
Xin offered more details about the financial institution’s position regarding the creation of its own cryptocurrency, and also presented some considerations related to the initiative that Facebook plans to promote.
“We started early with this initiative, but it takes a lot of work to consolidate our leadership in the matter. Xin says Libra could impact monetary policy, and China is preparing.”
For these reasons, Xin said that the Chinese bank is evaluating this situation very carefully, and that Facebook’s announcement about launching its own cryptocurrency in 2020 could serve as an impulse for the Asian entity to develop its own digital currency more quickly, which already has several years under consideration.
The South China Morning Post reported Wang’s comments, who said the PBoC is paying “high attention”to new advances since the release of Libra’s white paper last month.
Debating and Changing Previous Opinions
Some weeks ago, many legal representatives from different countries such as The United States, Russia, France and The United Kingdom expressed their financial and legal concerns in relation to Facebook’s initiative, which seeks to make financial mechanisms more flexible for unbanked users.
The reasons against Libra are that, according to what some the representatives of those countries commented Facebook has an extensive amount of personal information about its users; thus, they think Facebook has to clarify everything related to the operation of the cryptocurrency first.
About this point, Wang said he disagree with Libra’s close correlation to the U.S. dollar. If the digital currency will be linked to different cryptocurrencies, Wang said he is worried considering that other sovereign currencies in the world would suffer financial consequences of a U.S. dollar-focused currency, mainly, U.S. control over a leading digital currency.
Additionally, it is also informed that Libra would be associated with companies such as Visa, Mastercard, PayPal, Stripe, eBay and Uber.
A Hard Competition
In order to compete with the power that new cryptocurrencies could have, Wang says that other countries would have to develop their own central bank digital currencies. Another option would be to look to intergovernmental organizations, such as the International Monetary Fund (IMF), to set up an international digital currency.
Right now, China does not allow new listings or trading with digital currencies, including Bitcoin (BTC). Currently, authorities of the region consider tokens as “risky” assets so they are watching their behavior first.
This is not the first time that the People’s Bank of China investigates about cryptocurrencies. The central bank began studying digital assets in 2014 in an effort to keep up with Bitcoin, according to the SCMP. Also, it established a research institution in 2017 to further facilitate research.
The PBOC has the approval of the State Council and continues to work on creating its own currency, but there are not public announcements of the progress until now.
During the event, Huang Yiping, a Professor at Peking University, said: “It is still unclear if Libra will succeed, but the concept will not go away, and this has sent a warning to China that its leadership in digital finance is not a sure thing.
By María Rodríguez