According to the report by South China Morning Post, People’s Bank of China might be accelerating the research aimed at releasing a cryptocurrency to compete with Facebook’s Libra. There are several reasons why PBOC considers this step to be necessary.
Threatening China’s financial stability:
Since the release of the Libra whitepaper, PBOC have been paying high attention to the Facebook’s ambitious project. The main concern of the PBOC is that Facebook’s Libra, being a cross-border payment platform with a large user base, has the potential to have a great impact on China’s financial stability and monetary policy.
USD to become the global standard?
Another reason for China to be wary of Libra is its possible effects on further globalization of certain currencies, especially USD. Because the digital asset will be connected to major Western financial companies and a number of fiat currencies and governed by organization based in Switzerland, there is a major chance that USD will play a bigger role than CNY in Libra ecosystem.
PBOC is sure that, if the aforementioned scenario turns to be real, USD will take the role of the leading global currency, with sovereign currencies losing their importance. Wang Xin, director of the PBOC commented:
“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."