Since Facebook publicly announced its planned Project Libra digital currency payment system, policymakers around the world have scrambled to address new concerns about the technology’s potential impact. As the South China Morning Post reported today, Chinese officials are also concerned – and may respond by creating their own digital currency.
According to People’s Bank of China (PBOC) research bureau director Wang Xin, the Chinese central bank is closely monitoring Facebook’s plans and may accelerate its research into a potential Chinese cryptocurrency to counter potential threats to its cross-border payments, monetary stability, and financial sovereignty:
“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?”
As SCMP notes, the Libra white paper suggests that the Facebook currency will be pegged to a group of major fiat currencies, which will almost certainly include the U.S. dollar. Wang said that Chinese officials are interested in learning the exact composition of the basket of currencies and the specific relationship to the U.S. dollar:
“If the digital currency is closely associated with the US dollar, it could create a scenario under which sovereign currencies would coexist with US dollar-centric digital currencies. But 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.”
Wang noted that the PBOC has been continuing its studies of cryptocurrency technology, in hopes of creating a central bank digital currency. While there has been no official announcement on the effort’s progress, it’s likely that the pace of research will now accelerate to counter any perceived threat from Libra.