The impending launch of Facebook’s Libra cryptocurrency is seemingly having many implications on both economic and political fronts around the globe. Especially this development is seen with utmost interest among the business circles in China and the strained relationship with the US and the country is also one factor behind this unnerving excitement. The launch of the Facebook stablecoin is sure to make China’s envy about having its own cryptocurrency, which could be based on its digital payment platforms.
Fuelling speculations is the report in South China Morning Post which divulged details about the possibility of China getting its first sanctioned cryptocurrency almost around 2 years after the country officially banned all digital coins. The People Bank of China (PBoC) is reportedly looking into the intricacies of providing such permission and if it happens, WeChat is considered to be the strongest contenders to take the initiative and jumpstart the crypto revolution in the country. WeChat owned by Tencent is the most popular social media platform in China and also offers the convenience of digital payments. Its popularity can be assessed by the fact that on a global scale, WeChat has around 1.1 billion monthly active users, while Facebook leads the pack with 2.3 billion active users.
Reason behind Change of Heart
Chinese authorities are concerned that even if a fraction of Facebook users start using its Libra cryptocurrency, then it could certainly undermine the economic and monetary policy of the country, its financial stability, and in larger terms, the sovereignty of China. These concerns were expressed by Wang Xin, who is the director of the research arm of the Central Bank of China. Xin was speaking at a conference hosted by the Institute of Digital Finance, Peking University when he expressed all these doubts.
Just so you know, WeChat already deals in the digital payments although the medium of transaction is Yuan (Chinese Fiat currency) only. The company operates these digital payment services under the name WeChat Pay and the service was first started in the year 2013. Till now, roundabout 900 milling users are using WeChat Pay to digital transfer their money. Along with China, WeChat Pay is growing quite significantly around the world, although some research reports suggest that the payment system is utilized mostly by Chinese Travelers and expats. The primary rival to WeChat Pay is Alipay, which is a part of the Chinese Alibaba group.
Libra and Policy Framework
The Libra project of Facebook has got Chinese authorities in action as the government is now looking for the ways to come out with proper cryptocurrency regulations rather than outrightly banning it, the move it undertook two years ago and was criticized by the many crypto enthusiasts. The main opposition of the government is the fact that companies like Facebook, WeChat, etc. if successfully implemented their digital coin projects then it might lead to undermining of the rules and regulations set by the government. In a sense, these companies will act like sovereign nations having their own economic ecosystem supported by their currency. This is something Chinese government surely wants to avoid and even if, it goes ahead with the permission for WeChat or AliPay for having their own digital currency, we will witness heavy regulations around their digital projects.