Faced with the opportunities and the threat posed by the Facebook Libra cryptocurrency project, the central bank of China should reconsider the plan for creating a national digital currency (CryptoYuan), says the former head of the People’s Bank of China.
According to the South China Morning Post, former People’s Bank of China (PBoC) manager Zhou Xiaochuan said at a Beijing event this week that thanks to Libra, Facebook showed that there is potential for a “strong” global cryptocurrency that can be exchanged for fiat currencies.
According to Zhou, although Libra can help developing countries improve their payment systems, it also poses a threat to existing cross-border payment systems and can weaken national currencies.
“Libra introduced a concept that will impact the traditional cross-border business and payment system.”
According to Zhou, in the face of this new risk, even if it is not fundamental to China, the government should “prepare well and make the Chinese yuan a stronger currency.”
One way forward can be to enable “commercial organizations” to issue digital yuan, as Hong Kong does with its dollar.The Hong Kong system allows several banks to issue HKD notes secured by reserves in US dollars, while the de facto central bank (Hong Kong Coin Office) is working to maintain a peg to the US dollar.
Orient Securities senior analyst Chen Defei said large technology firms such as Alibaba and Tencent, which have already set up large payment networks, could potentially take part in the issuance of national digital currency.
Previously, when Zhou was at the head of the NBK, he supported the development of the digital currency of China, saying in due time that the launch of such a currency is “inevitable”. Despite the fact that the work will continue for at least several years, there were no signs of accelerating the launch of China’s national cryptocurrency.
If Libra goes ahead, despite all the regulatory problems that the project is currently facing, this could change and China’s cryptocurrency (Crypto-Yuan) will appear much earlier.