The South China Morning Post reported that China’s central bank may be involved in the development of their own digital currency in response to Facebook’s Libra. Their Director of the People’s Bank of China (PBoC) research bureau stated that if Libra is widely used for cross border payment settlement then it implies that it will have a large scale influence on monetary policy, financial stability and the international monetary system. He said that the bank has decided to create its own digital currency due to lack of clarity on the role of the USD once Libra is issued.
Libra’s partners have been officially asked by US lawmakers to halt further activity and development of Libra and Calibra wallet until the case has been examined and addressed by the House.
The SCMP further shed light on the footsteps of Chinese authorities and mentioned the apprehensions and anxieties of the officials. China is known to take control of their own economy and controlling outside influence and impact on monetary policy and financial stability. Wang Xin’s said that, “There would be in essence one boss, that is the US dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”
PBoC has received approval from the Chief Chinese administrative authority – the State Council, to begin working with market participants and institutions on the currency. China’s hard line take on crypto trading was followed by this interesting development, and that is not all.
As reported earlier, PBoC’s blockchain trade finance solution has processed over 30 billion Yen, equal to $4.36 billion in foreign exchange transactions since its inception. Their reserves rose from $18.23 billion to $3.119 trillion in June 2019.
It is in China’s interest to ensure that Libra doesn’t take hold of the country and to resist any pressure from US lawmakers. China’s digital currency is similar to Facebook’s Libra and the central bank will continue to maintain control over its economy. China’s stance on cryptocurrencies and Bitcoin has been hostile. The country’s financial institutions have previously banned bitcoin trading, ICOs, and crypto exchanges. China has been against the crypto revolution since its onset because they believe digital currencies like Bitcoin or Libra can harm the rigid capital rule which the Chinese government has set since 1949. Digital currencies are recognized by the government as disinter mediated and a frictionless circulation of value that can destroy the economic strategies and cultivate money laundering issues on a larger scale.
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