Former People’s Bank of China (PBoC) governor Zhou Xiaochuan suggested that China should have a plan to issue its national digital currency, in response to Facebook’s forthcoming Libra.
Zhou Xiaochuan said at an event in Beijing that Facebook had shown the politicians that a “strong” global cryptocurrency, which could be exchangeable for fiat currencies, has a potential to use at a global scale.
Libra can be a solution for emerging countries to enhance their payment system, however, it may pose a risk to the current cross-border payment and weaken national currencies. He said:
“Libra has introduced a concept that will impact the traditional cross-border business and payment system,”
Although China is not facing the risks directly, Zhou said Beijing must “make good preparations and make the Chinese yuan a stronger currency”.
Moreover, he took inspiration from Hong Kong’s monetary system which enables some specific banks to issue HKD banknotes backed to US dollar reserves. By following this currency peg model, China should allow “commercial entities” to issue digital yuan, to avoid the the “huge fluctuations” that plagued cryptocurrencies during their early development.
Specifically, hundreds of millions of people in China has already used digital payment platforms such as Alipay and WeChat which are launched by 2 China-based tech giants Alibaba and Tencent.
Recently, a major auditing company – Deloitte has published a report shown that blockchain is one of the most tech priorities to invest in China.