China is vigilant towards the supposed threat by Facebook’s cryptocurrency Libra to its economy. Thus, the news about China developing its digital currency was making rounds in the last few months.
In the last month, Mu Changchun, Deputy Director of the Peoples Bank of China Payment Department, has already announced the upcoming release of the new currency around November 11 of this year.
Mu Changchun said, “the new Chinese digital currency will resemble Facebook’s Libra coin but won’t be the exact copy of it.”
While delivering a public lecture, he said, “It is to protect our monetary sovereignty and legal currency status. We need to plan ahead for a rainy day.”
Mu also elaborated that the new digital currency would be equally safe as paper currency and can be used even without an internet connection. It would regulate a balance between anonymous payments and prevention of money- laundering. It would be instrumental in maintaining foreign exchange sovereignty of the country.
A research team had already been appointed in 2014 to explore the viability of launching China’s digital currency. It was exploring the possibilities to cut down the production cost of paper money and ways to gain sovereignty on the money supply. But, the steps gained momentum after Facebook announced supposed to release its coin Libra in June 2019.
There is a growing perception that Facebook’s Libra can create a risk to the Chinese major payment platforms like Alipay and WeChat. Changchun thus, assured that the new currency could be used for Tencent’s WeChat and Alibaba group’s Alipay which have 20 percent users of the world’s population.
Interestingly, the announcement came after the keyword ‘Libra will compete with Alipay and WeChat’ was the second most searched phrase on Chinese microblogging site Weibo.
Searches for ‘Libra in China’ were also trending on Twitter in July after Facebook released its highly anticipated Libra white paper.
The announcement by the people’s Bank of China came amidst the growing concerns from global regulators that Facebook’s upcoming cryptocurrency can dominate the world’s digital payment market. Possibilities of money laundering can also increase considering the extensive reach of Facebook across the borders.