While the release of Facebook’s Libra cryptocurrency is uncertain due to regulatory pressure, the People’s Bank of China (PBoC) is developing its own cryptocurrency that will eventually compete with Libra. According to a report published by Reuters on 6 September, the decision was made to protect their ‘monetary sovereignty and legal currency status’.
Previously, the PBoC has announced that a dedicated team, the ‘Digital Currency Research Lab’, is working on the national competitor in a closed-door environment. Mu Changchun, the deputy director of the PBoC, told Reuters that they started developing the currency in 2014. In essence, the goal was to reduce expenses when dealing with traditional paper money and to significantly increase the control over the money supply.
He further added that they need to ‘plan ahead for a rainy day’, implying that China requires its own independent solution in the case that crypto adoption reaches global levels. Changchun notes that the tokens could be used offline and that they would be as safe as paper money.
Regarding other potential use cases, the deputy director states that the token could be implemented into Tencent’s or Alibaba’s ecosystem. As we can already see that crypto can be adopted on instant messaging services like Telegram, the same could be done on WeChat or Alipay.
Regarding the potential release date, Forbes cited its sources declaring that the new Chinese currency could go online on 11. November. The decision to launch the cryptocurrency this soon may be attributed this year’s announcement that Libra is scheduled to launch in 2020. If both launches would occur on the dates described above, China may end making the first move.
Ever since the Congressional hearing of Mark Zuckerberg, Facebook faced with enormous regulatory pressure, due to possible concerns of the company selling private data. The pressure has spilled onto the Libra Association as well, with some of the 28 founding members losing their support for the project as they fear that their own brands may face regulatory pressure.
While the Libra cryptocurrency, a stablecoin backed by real-world assets, would serve for making international payments, both banks and governments fear that the internet giant would create an unsupervised global bank. With the additional fear that Facebook may maliciously misuse both private and transactional data, both national governments and agencies have taken the move to further investigate Libra.
According to Changchun, the Central Bank’s currency may hold an advantage compared to currencies that would be created by Tencent and Alibaba for their services. He states that both commercial platforms could potentially go bankrupt and lose all their customers.
His stance is backed by the belief that the national cryptocurrency would work even without an internet connection. In the chance of an electrical outage, Tencent’s and Alibaba’s customers could not make transactions and would have to use other solutions like one of the Central Bank.
Shenzhen as a Testing Ground?
A recent article by China Daily reported that several nationally-owned banks would be the first one to gain access to the new currency. Among them, fintech companies such as Union Pay, Alibaba, Tencent, and an anonymous company would also receive access.
However, the currency would not be available in the entire country upon launch. In an article published by Global Times last week, PBoC’s currency may first reach Shenzhen so that the project’s use case is tested before national launch. The decision correlates with the Central Bank’s creation of a research institute in Shenzhen, which has recently created various job posts that searched for cryptography specialists and blockchain architects.
In the case that Libra does not even launch due to further powerful pressure, it seems that the new Chinese cryptocurrency will lack a competitor. However, other global key-players will surely attempt to create their own national currency, in order to prevent a power vacuum.