China’s central bank announced Friday that it was pushing ahead with research into a “lead digital currency”, in a move that many have taken as a response to Facebook’s Libra project. Concerned about the potential impact that Libra could have on global monetary policy, the People’s Bank of China (PBOC) plans to ratchet up their research to ensure they are well positioned if the need for a national cryptocurrency arises.
China’s Strong Reaction to Libra
The reaction from Chinese officials towards Libra has been swift and somewhat surprising in its scope, with “Libra” becoming the second most searched term in the country shortly after it was announced. In early July, Wang Xin, the director of the PBOC’s research bureau, said that the bank was paying “high attention” to the Libra white paper and that the bank was looking into the prospect of creating its own digital currency as a direct result. He also said at the time that in order to compete, other countries would have to develop their own official cryptocurrencies, or turn to intergovernmental organizations like the International Monetary Fund to work up an international digital currency based on an agreed upon basket of currencies.
Is a Digital Yuan set to Launch?
To illustrate that China’s plans are more than just talk, the bi-annual PBOC review held Friday specifically mentioned cryptocurrencies, stating that the PBOC planned in the second half of 2019 to “Accelerate the pace of research and development of China’s legal digital currency (DC/EP), track and study the development trend of virtual currency at home and abroad, and continue to strengthen Internet financial risk remediation.” While the update does not give any specifics on a token itself, it is clear that there is a sense of urgency within the PBOC, who don’t want the country to be left behind in any potential cryptocurrency arms race. However, the fact that China has all but eradicated cash while the US struggles to do away with easily defrauded paper checks, it seems that they needn’t worry all that much.