Facebook entering the crypto world has disturbed the central banks across the world. Recently in June, Facebook official revealed the launch of its Libra coin by 2020. China, on the other hand, is also seeking to enter the crypto world and earlier revealed that it is developing its own digital currency.
China to launch CBDC in near future
As per the reports in the local media outlet, the People’s Bank of China (PBoC) – the central bank of China has already started testing its digital currency in order to launch it. Numerous methods have been tested by the central bank to release its central bank digital currency (CBDC) in China, authorities and analyst stated. The digital currency is fully backed by the government.
The authorities and analyst want private institutions to involve more in designing its first digital currency CBDC backed by the government.
One of the analysts close to the PBoC said on Monday that, the perfect time for the launch of central bank digital currency on the basis of current trials. But Facebook’s official announcement of launching its Libra coin might have made Chinese authorities to reconsider the existing model of CBDC.
Payments department’s deputy director of PBoC, Mu Changchun mentioned in the previous week that the Central Bank is ready to introduce its own virtual currency, after 5 years of research work. The PBoC began designing work of the system in 2018.
Research Center of Finance Technology Director at Renmin University, Yang Dong said to China Daily, authorities of China have been discussing the design of the digital currency, which has made the developers to rethink so as to include more private institutions in the development cycle.
Further testing is needed before officially launching the Chinese CBDC, gaining inspiration from Libra … The next pilots should focus on the non-governmental and cross-border scenarios of using the CBDC. Multiple players, including private and State-owned companies, can join the process together with the central bank,
However, Yang declined to reveal the names of companies participating in the pilot round.
Expert’s mentions that if everything goes well, then the government-backed digital currency of China might be released even before the official launch of Facebook’s Libra coin.
China UnionPay Chairman, Shao Fujun informed the plan is still unofficial and the crypto project will positively affect the designing of monetary policy through monitoring of cash flows.
As per bank authorities, the CBDC is fully supported by reserves that commercial organizations pay to the PBoC.
Facebook’s Libra coin is completely backed by a set of crypto assets and seeks to have a worldwide network. The coin will be controlled by 27 companies and Facebook. On the other hand, the digital currency of China will be controlled by the central bank, and citizens will be allowed to exchange their virtual currency into commercial organizations. The central bank will use the CBDC to track how its people spend their funds, and Facebook will collect transaction record of Libra to target advertising and increase its revenue margin.
Mu mentioned the organizational structure of Facebook’s Libra is somewhat similar to the structure of CBDC.
Experts say the central bank gained motivation from Libra project to develop its crypto project. The central bank wants to release its CBDC ahead of Facebook. The popular social media –Facebook is completely banned in China, and so is Libra coin.