Crypto Reaction: People’s Bank of China Reportedly Set to Jumpstart National Digital Currency
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The People’s Bank of China (PBoC) announced that it has approval from the state administrative authority to start working on a national digital currency in order to combat the uncertainty of Libra.
According to bank representatives, Facebook’s Libra could introduce problems for the local market as it’s planning to provide global payment opportunities. Since Facebook has access to nearly three billion people worldwide, the bank is fearing that Libra will somehow tamper with local monetary policy.
Furthermore, it’s expected that Libra will be backed by the USD, making it even more dangerous to the yuan.
In order to combat such a threat, the PBoC has been given the green light to develop their own version of digital currency that can facilitate inter-state payments while complying with national monetary policy.
Cryptocurrency in China?
The bank hasn’t specified that it will be a cryptocurrency necessarily. It’s likely to be electronic money which is processed via a blockchain, as the CCP (Chinese Communist Party) has become extra aversive towards cryptos.
Active bans in China prevent not only crypto trading but crypto mining as well, prohibiting the flow of the billions of cryptos stored in hardware situated inside of China. Such a ban prevents institutions from making large investments and driving the market forward, but the CCP’s decision is absolute.
This is why it’s unlikely for them to use cryptocurrency as their digital payment system, resorting to digitalized money instead.
But many investors are saying that Libra doesn’t actually pose that much of a threat and that the CCP is trying to simply limit Facebook’s influence on the Chinese population. Which more or less makes sense, as the CCP has been notorious for favoring local alternative brands over global companies such as Facebook and PayPal.
If policy conflicts between the West and the East are driving the new initiative, it’s highly likely that China’s northern neighbor could also start seeing Libra as a potential “threat”.
Russia calm about Libra
The northern neighbor, aka Russia, is strangely calm about Libra’s integration with the local economy, as policy differences between the West and Russia are less severe compared to China.
Furthermore, the Russian state Duma doesn’t consider cryptocurrencies to be quite so threatening to the country’s monetary policy while rumors that the country is considering combating US sanctions by using crypto have also died down.
However, one reason why Russia might commit to combating Libra is if Facebook does not agree to follow local guidelines, which are to connect to the country’s security agency and to comply with banning any prohibited content within Russia’s jurisdiction.
As for other, smaller countries neighboring China in the South East, they too may face pressure from the social networking giant.
Singapore is also reportedly researching the pros and cons of Libra, indicating that lawmakers are making their diplomatic moves as China possibly prepares to position a new PBoC digital currency to dominate the ASEAN region.