China says new digital currency to be similar to Facebook’s
Facebook’s proposed cryptocurrency has sparked concerns among global regulators
The People’s Bank of China building in Beijing, China. Photograph: Wu Hong/EPA
China’s proposed new digital currency would bear some similarities to Facebook’s Libra coin and would be able to be used across major payment platforms such as WeChat and Alipay, a senior central bank officer said.
Mu Changchun, deputy director of the People’s Bank of China’s payments department, said the development of the coin would help protect country’s foreign exchange sovereignty as commercial applications of such currencies expanded.
“Why is the central bank still doing such a digital currency today when electronic payment methods are so developed?” said Mr Mu, according to a transcript of a lecture he gave this week that was published online.
“It is to protect our monetary sovereignty and legal currency status. We need to plan ahead for a rainy day.”
He said the tokens would be as safe as central bank-issued paper notes and could be used even without an internet connection. They could also be used on Tencent’s WeChat and Alibaba-backed Alipay.
The state-run newspaper Shanghai Securities News reported his comments on Friday.
China’s central bank set up a research team in 2014 to explore launching its own digital currency to cut the costs of circulating traditional paper money and boost policymakers’ control of money supply.
It had said little since but Mr Mu last month announced that the digital currency was almost ready. US financial magazine Forbes, citing sources, said the currency could be ready as soon as November 11th.
Some analysts say China appears to have accelerated the push to digital money after US social media giant Facebook announced plans in June to launch digital coin Libra.
Mr Mu said China’s digital currency would strike a balance between allowing anonymous payments and preventing money-laundering. It would also bear some similarities to Libra in design but would not be a direct copy, he said without elaborating.
Facebook’s proposed cryptocurrency has sparked concerns among global regulators that it could quickly become a dominant form of digital payment and a channel for money laundering given the social network’s massive cross-border reach.
Libra will be a digital currency backed by a reserve of real-world assets, including bank deposits and short-term government securities, and held by a network of custodians. Its structure is intended to foster trust and stabilise the price.
Like other cryptocurrencies, Libra transactions will be powered and recorded by a blockchain, which is a shared ledger of transactions maintained by a network of computers.
Mr Mu said the advantage a central bank-issued digital coin had over those issued by WeChat and Alipay was that commercial platforms could in theory go bankrupt which could cause users losses.
Its ability to be used without an internet connection would also allow transactions to continue in situations in which communications have broken down, such as an earthquake. – Reuters