Facebook's blockchain aspirations looked unstable this week after some top officials bowed out of the initiative. But while Libra gets off the ground gradually, China is looking for an alternative to burst into the scene.
Earlier this year, the People's Bank of China confirmed it was working on a yuan-backed digital currency, possibly motivated by the announcement from Facebook. Analysts and industry leaders in cryptography are stressing China's geopolitical implications of first introducing a digital currency- especially as libra reaches a brick wall with US regulators.
China is extremely pragmatic on how we thought about cryptocurrencies, "Ripple CEO Brad Garlinghouse told CNBC in a telephone interview. "We are reliant on the U.S. dollar as the global reserve currency- to the point certain currencies arise, and they can help spread such currencies, they were fascinated by that."
Based on a transcript of a speech that was released online, China's latest digital currency will resemble many parallels with the rival crypto, a senior central bank executive said. He also pointed out that the electronic currency could be used through major payment platforms, including the omnipresent WeChat and Alipay from China.
RBC Capital Markets analysts said this week that China's preparations are moving rapidly, based on recent discussions and meetings in Beijing. Following Libra's announcement in June, the analysts said, the People's Bank of China "has accelerated the creation of a Central Bank Digital Currency."
Cryptocurrency would add to a long list of global superpower tensions. The U.S. and China were stuck in a trade stalemate, and a 5 G dominance war, the mobile network offering faster data rates. China has also been branded as a currency manipulator by the U.S. Treasury Department - a claim that could be amplified if a yuan-backed cryptocurrency begins off.
Fed Chairman Jerome Powell stated earlier this year that the U.S. is keeping an eye on sovereign-issued digital currencies but that it was not something that he was "actively considering." Moreover, other digital currencies could "dampen the U.S. dollar's commanding impact on global trade," said Bank of England Governor Mark Carney earlier in a speech in Jackson Hole, Wyoming.
Facebook disclosed last June that it will spearhead the roll-out in 2020 of an electronic currency controlled by the not-for-profit Libra Association headquartered in Switzerland. Referred to as a "stable coin," which means the crypto's market valuation is connected to that of a dollar-like fiat currency.
According to the Libra Society, its underlying technology, the blockchain, would be integrated into the Chinese yuan, the US greenback, and euro currency. Meanwhile, Libra has come under intense scrutiny since several of the initiative's biggest names, including Visa, MasterCard, and eBay have distanced themselves away from the company. Facebook announced late Monday an updated list of 21 firms that are still committed to overseeing the program.
