China's central bank plans to develop its own digital currency to cope with the impact of Libra

China's central bank plans to develop its own digital currency to cope with the impact of Libra


According to the South China Morning Post reported on July 8, the Chinese central bank is developing its own digital currency to deal with Facebook's Libra, which may pose risks to China's financial system.

Wang Xin, director of the People's Bank of China Research Institute, believes that “if Libra is widely used for payment, especially cross-border payments, can it play a role like money, thus having a major impact on monetary policy, financial stability and the international monetary system” ?

He said that after the Libra issue, the central bank decided to create its own digital currency because its relationship with the US dollar is still unclear:

“If the digital currency is closely related to the dollar, it is possible to create a situation where the sovereign currency coexists with the dollar-centered digital currency. But in essence, only the dollar can dominate in the two. This is the case, it will bring a series of economic, financial and even international political consequences."

For this reason, the People's Bank of China is said to have obtained approval from the State Council of China's highest administrative authority to start cooperation with other market participants and institutions on the central bank's digital currency.

According to reports, scholars also launched an initiative dedicated to digital finance, and attracted professional resources from Peking University, Renmin University, Zhejiang University and Shanghai Jiaotong University.

It is worth noting that China’s plan to develop a national digital currency has taken a tough stance on cryptocurrency transactions. Financial institutions prohibit bitcoin transactions, ICO projects and encrypted exchanges from doing business in China.

According to earlier reports today, the PBOC's blockchain trade finance solution has processed more than 30 billion yen ($4.36 billion) in foreign exchange transactions since its launch.

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