Will China’s state-run crypto be a knockoff of Facebook’s Libra?

Backers leaving in droves but Libra undeterred

Despite global concerns over Facebook’s forthcoming crypto offering, China appears to see method to its madness as a senior official at the People’s Bank of China (PBoC) has stated that its own planned cryptocurrency will have “similarities” to Libra.

The PBoC has been drip-feeding snippets of information on its proposed digital Yuan, dubbed the Central Bank Digital Currency (CBDC).

It proposes that the new cryptocurrency, which will be totally controlled and distributed by the central bank, be usable on some of the country’s top social media platforms – which do not include Facebook.

Mu Changchun, deputy director of PBoC’s payments department, has stated that the new cryptocurrency would “strike a balance” between financial anonymity and the prevention of money laundering.

Mu noted that CBDC would “bear similarities” to Libra but would not be an exact copy, though he refused to elaborate further on what those similarities might be.

Like Libra – but not

With over 2.2 billion users, Facebook has a massive potential consumer base for its new form of finance.

This, coupled with Facebook’s abysmal track record of securing user data, has U.S. and global regulators understandably wary of the venture.

In comparison, Chinese social platform WeChat is about half the size of Facebook with just over a billion users.

The platform already has its own payments system, and just like Libra, it is completely centralized, available in local currency only and through Chinese bank accounts.

Like Libra, China’s cryptocurrency will not require users to have a bank account, however, they take it a step further in that CBDC transactions can be made even if there is no internet access.

As long as both parties have the CBDC wallet on their smartphones, they can touch their phones to one another and the transaction will go through.

“Even Libra can’t do this,” said Mu.

Deputy Director of the PBOC’s Payment and Settlement Department, Mu Changchun
Deputy Director of the PBOC’s Payment and Settlement Department, Mu Changchun (c40.org.cn)

Libra lights fire under digital Yuan development

China has been researching a state-run digital coin for the past five years and it appears that Facebook’s foray into the scene has accelerated progress.

There are major concerns that a U.S. dollar-based crypto coin owned and controlled by a U.S. internet monopoly and a consortium of U.S. finance and tech firms could undermine economic stability in other countries.

Shortly after the Facebook announcement Wang Xin, director of the PBoC’s research bureau, voiced concerns shared by many governments around the world.

“There would be in essence one boss, that is the US dollar and the United States,” he said.

“If so, it would bring a series of economic, financial and even international political consequence.”

Protecting monetary sovereignty through crypto

According to Mu, development of the state-run crypto coin would help protect the country’s foreign exchange sovereignty.

It would also give the state more control over monetary flow which appears to be the ultimate purpose.

In a transcript of a lecture he gave earlier this week, Mu stated:

“Why is the central bank still doing such a digital currency today when electronic payment methods are so developed? It is to protect our monetary sovereignty and legal currency status. We need to plan ahead for a rainy day.”

He added that the tokens would be as safe as using fiat and would be made available on the top social and payments platforms in China, WeChat and AliPay.

Last month Forbes ran an article stating that the new digital Yuan would be ready by mid-November but this was later refuted by local media so no specific date has officially been announced.

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