China in particular is racing Libra to launch its stablecoin, the digital yuan. Last year David Marcus, who oversees Facebook’s blockchain wallet subsidiary Calibra and is a member of the Libra governing council, warned U.S. legislators that China would win the currency race should Libra be halted.

A former senior official with the People’s Bank of China (PBoC) believes the nation should join a global conversation about regulating stablecoins, with a particular focus on the Libra stablecoin.

Min Zhu, former deputy governor at the PBoC, said China should join other nations in regulating the Facebook-led Libra stablecoin, according to a report by South China Morning Post. 

“I think it’s critically important to join the discussions and take part in coordinated global regulation of Libra”, Zhu said, noting there is still no specific timeline to launching the digital yuan, which is also called Digital Currency Electronic Payment (DCEP), according to the report.

The comment comes as central banks and financial institutions put forward guidance on how to better regulate stablecoins. International organizations such as the G7 working group and the Financial Action Task Force have taken steps to evaluate and regulate Libra’s potential impact on the global financial system.

Facebook CEO Mark Zuckerberg repeated the claim in his testimony before congressional lawmakers.

Meanwhile, officials from the Chinese central bank have repeatedly said the digital yuan is more advanced in several technical aspects than Libra. However, China could lose substantial financial clout at home and abroad if Libra prevails.

Like many central banks, PBoC fears the rise of Libra could erode its ability to carry out effective monetary policies as the bank would lose its absolute control over demand and supply of the currency market.

China also fears Libra, partly backed by the U.S. dollar, could amplify the currency’s dominance over the international financial system, making it even harder for China to internationalize the yuan.

The Chinese central bank initially assembled a task force in 2014 to develop its own national digital currency. However, it accelerated the process and released more details about DCEP when Facebook unveiled its plan to launch Libra in June 2019.

Ex-Official Trolls Libra, Says China Likely to Issue Digital Currency First

A former high-ranking Congressional official said China’s central bank is likely to be the first to issue its own national digital currency, as he contended that Libra was doomed to fail.

Speaking at the Shanghai Bund Summit, Huang Qifan, former deputy director of the Congressional Financial and Economic Affairs Committee, explained how the national digital currency could affect the global financial market, according to a Chinese media report.

Huang said:

“I think the technology is getting more mature, and it is highly likely that China’s central bank will be the first to issue a national digital currency.”

In his speech, Huang affirmed the best way to fend off the stablecoins issued by private companies such as Facebook’s Libra is to let governments and central banks issue a country’s own digital currency.

“I personally don’t believe Libra will succeed”, he said. “Some companies attempt to challenge sovereign currency by issuing bitcoin or Libra. The decentralized blockchain-based currencies are not supported by sovereign credit and hard to become real wealth.”

The long-time economics pundit made his comments after Chinese President Xi Jinping’s announcement that he would encourage the country’s blockchain agenda along with a new cryptography law that could pave the way for the launch of China’s national digital currency.

The People’s Bank of China started to conduct research on cryptocurrency as early as 2014, and aims to develop its national digital currency Digital Currency Electronic Payment (DCEP) via the Digital Currency Research Institute established in June 2017.

While Chinese officials said DCEP is not a copy of Facebook’s Libra, the central bank compares its national stablecoin with Libra in multiple official documents.

The central bank appointed former deputy director of Payment Systems Changchun Mu as the head of the research institute in September to accelerate the development of DCEP. The move came three months after Facebook officially announced its Libra initiative

Huang said he also envisions the value of DCEP to be pegged to the country’s credit, gold reserve, fiscal income and gross domestic product.

China is now one of many major economies exploring a national cryptocurrency and supporting blockchain technologies, according to Huang.

“Twenty four countries are currently developing the distributed ledger technology through more than 90 multinational companies”, Huang said.

The EU, Japan and Russia are trying to build international cryptocurrency payment networks to replace the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a global financial institution that facilitates cross-border transactions.

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