Facebook Libra might Inadvertently speed up China’s Central Bank’s Crypto PlansJuly 9, 2019
It goes without saying that the Facebook Libra cryptocurrency got people talking. The initiative is still in its infancy when it comes to actual applications, but the interest it generated is easily comparable with anything cryptocurrency ecosystem generated so far. In many ways, like with Fortnight and other massive esports phenomena, Libra has become its own generator of news, thanks to nothing more than simply coming to the attention of the public.
What is even more important is the fact that the butterfly effect of this seemingly small development that took place inside of a private company. Now, the same effect has included the Chinese Central bank or the PBoC.
In fact, some are claiming that the same institution, which has harbored the notion of launching its own cryptocurrency might now push the same plans closer to fruition. Without any surprise, the same as a range of repercussions and aftereffects, even if the entire story is a rumor.
Central Bank Worries
After Facebook made its announcements, a number of countries, including China and Russia, quickly expressed their worries about the project. In their perspective, the problem lies in the fact that Facebook is a US company and that this signalized another aspect of its rising tech dominance.
Furthermore, many stated that this is especially relevant to the field of financial and possible secret desire by companies, or even entire governments to manipulate the same area on a global scale. In many other quarters, the experts and analysts are dismissive of this type of statements and point to the fact that Facebook is often disliked and pursued by regulators even in many Western nations. After all, the Cambridge Analytica scandal is a great showcase of the same sentiment.
Still, there is a sense that especially in China, the decision of Facebook is seen as an important nod towards the necessity of the same country and its central bank to do something, or risk being left behind in this technological and financial race.
Interestingly, the crypto community at large has mostly ignored the concept Zuckerberg’s company brings to the table. As a centrally controlled and issued stablecoin that is fully in the management of one billionaire and a range of different tech and finance monopolies as his main backers, it is a stark difference from the concept of bitcoin.
The same applies to any other decentralized and blockchain-issues alternatives. Yet, in the People’s Republic of China, even though the original social media is banned, many minds think that it is more than a relevant threat. Just this week, the Chinese central bank stated that it was ramping up its efforts to both research and prototype its own cryptocurrency and thus stop any threats to its cross-border payments, financial sovereignty or monetary policy.
Wang Xin is the PBoC research bureau director and he shares this sentiment. He said that if the Facebook coin is widely used for things like cross-border payments, would it be able to basically function like money. If yes, would it then be able to have the influence of financial stability of the different international monetary systems? Right now, no one can answer that, but only the potential for the same scenario got China and its central bank worried.
PBOC Research into Crypto
This financial institution is by no means a newcomer to the space of cryptocurrencies and blockchain-based fintech solutions. As far as 2014, PBOC began researching the potential of cryptocurrencies in relation to bitcoin, which was back then sending its first clear global signal and emerging as a real financial phenomenon.
The same bank was quick to practically ban it back in 2017 and do the same for initial coin offerings or ICOs. Now, Xin expressed a deep concern that Libra is not only a problem on its own but also the fact that it is controlled through backing by a Swiss consortium of finance and tech giants. This organization is comprised of PayPal, Visa, eBay, and Mastercard, just to name a few, all of which are completely reliant on the US dollar as their main core fiat currency.
It goes without saying that for China the US dollar means the US government, and this is a whole new packet of problems. Clearly, for Chinese officials, now is the time to use the previous five years of crypto experience and put it to use inside of PBoC as soon as possible.
Local Competition to Libra
With its 2.3 billion users, Facebook dominance over social media and chat application is more than apparent. Yet, China has always been a forbidden land for most of its apps and services, making an interesting local dynamic when it comes to any Libra potential in the same country. More importantly, China already has its alternative that is privately held for most of the functionality that Facebook is trying to achieve with its digital token.
WeChat possesses 1.1 billion Chinese users and has an embedded payment system. It is centralized, using yuan and tied directly to Chinese bank accounts, unlike Libra that would be untethered in this sense. Still, WeChat Pay was launched in 2013 and is currently has over 900 million users. Alibaba’s Alipay is another rival that offers a similar possibility to its users. While the central bank pressured WeChat Pay into dropping crypto payment is still has the full regulatory backing.
The same goes for AliPay. The chance of Facebook getting one for its Libra project, especially in the light of the current financial pressures that the US and China are exchanging in their trade war, is practically zero. In other words, the potential for Facebook to move into the Chinese market either directly or indirectly is very slim.
Directly, it faces regulatory stops and political hostility to its home nation. Indirectly, it faces the Great Chinese Firewall and its barriers to users finding ways to access Libra on their own accord.
All this shows that China can and will be hostile to Facebook Libra in almost any shape and form. It is no secret that besides the talk of geopolitical and financial hegemony, Chinese government fears the potential of its citizens to exchange the local currency for other fiat or crypto ones and using them to siphon money from the country.
Yet, the possibility of a PBoC token appearing any time soon also remains something of a lackluster possibility. While PBoC talks about its potential in this domain, many are skeptical that those years of research would quickly manifest themselves into actual working crypto token just like that.