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China Fast-Tracks Central Bank Cryptocurrency to Fight Facebook’s Libra

Last Updated March 4, 2021 2:37 PM
Jose Antonio Lanz
Last Updated March 4, 2021 2:37 PM

The announcement of Libra marked the beginning of the strategic pulse involving players from the world of crypto and fintech while attracting the attention and alarms of important actors in global geopolitics such as the U.S. Congress and, more recently, the government of China.

According to the South China Morning Post;  Wang Xin, director of the People’s Bank of China research bureau, expressed concerns over the possibility that a group of private companies becomes responsible for controlling a currency that could change the monetary scene on a global scale.

“If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability, and the international monetary system?”

In politics, finance is perhaps as important as the military or diplomatic area, and this is something that the Chinese government is very aware of.

China’s hostility to decentralized public cryptocurrencies like bitcoin is well-known but the country is ahead of the world in digital finance. | Source: Shutterstock

Former candidate to the Senate Mark Dankof explains  that without spending a bullet, economic sanctions are as aggressive and harmful as any military invasion:

“Sanctions are an act of war. It is important for the American public and the world to understand this … One could not find a worse foreign policy and national security advisors to an American President than John Bolton and Mike Pompeo, just to name two”.

Libra Could Be a Game Changer on a Global Scale… And That is Dangerous For China

China has never stood still in the face of a threat, and the announcement of Libra is no exception. If Facebook succeeds in globalizing the use of its cryptocurrency, the U.S. government would move from dominating the traditional financial market with the dollar to indirectly controlling the world of digital currencies with Libra.

It is important to note that Libra must comply with U.S. regulations, and its value is backed by a basket of fiat currencies in which the dollar has a fundamental role. If companies do not give China the share it deserves (think of FMI’s Special Drawing Rights), the Asian Giant is likely to fall behind in a new global economic order driven by the digital age.

This scenario is what China wants to avoid: A sort of repetition of what happened after the United States controlled — and ended — the Bretton Woods agreements. Today China does not want Libra to become a lever to give more power to the dollar:

“If the digital currency is closely associated with the U.S. dollar, it could create a scenario under which sovereign currencies would coexist with U.S. dollar-centric digital currencies. But there would be in essence one boss, that is the U.S. dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences,”

China is Ready to Fight The Digital War

To counteract Facebook’s influence, China is speeding up its efforts to create a possible official cryptocurrency. Mr. Wang revealed that the Chinese government is launching a research initiative for digital finance made up of several prestigious universities in the country, including the Beijing University, Renmin University, Zhejiang University, and Shanghai Jiao Tong University.

Facebook’s initiative is dangerous not only for China. Japan is worried about Libra’s influence, and even the U.S. government has also expressed its concerns, asking Mark Zuckerberg’s corporation to pause its development. This, however, is something that the Chinese government cannot do; which is why it’s a reminder of how even before its birth, Facebook’s Libra puts the United States in an advantaged position vis-à-vis the Asian giant.