Libra, the Facebook-owned digital cryptocurrency, hit a major snag last week when several of its high-profile backers backed out of the project. There are fears that the social media giant's digital currency will never see the light of the day, and with that comes, China's plans of launching an alternative.
Earlier in 2019, the People's Bank of China announced that it was working on yuan-backed cryptocurrency. The revelation had, of course, caught the attention of industry leaders, prompting crypto analysts and experts to share their thoughts on the implications of China's digital currency in light of Libra's shaky status.
CNBC talked to the CEO of financial technology company Ripple, Brad Garlinghouse, who commended China for being "incredibly strategic" about how they view digital currency:
"They [China] have been dependent on the U.S. dollar as the global reserve currency - to the extent that other currencies emerge, and they can help propagate those, they're intrigued by that."
A senior central bank officer for PBoC said that the new Chinese cryptocurrency would bear some similarities to Facebook's libra coin. He added that it would also work on major payment platforms, including the country's own Alipay and WeChat.
China is not backing down and is reportedly moving swiftly with its plans, according to RBC Capital Markets analysts. Following the announcement of Libra in June, PBoC "has expedited its development of a Central Bank Digital Currency."
China and United States are still in the middle of a Herculean economic conflict, and it seems cryptocurrency is another addition to the pile of existing tensions. China has already been called by the U.S. Treasury Department as a currency manipulator, an accusation that could again surface if the new digital currency launches successfully.
Libra, a so-called "stable coin," was announced in June. Facebook at the time had said that it would helm the launch of the cryptocurrency next year. The value of the coin depends on an underlying fiat currency, such as the dollar.
The Libra Association said that the digital coin would be pegged not only to the US dollar but also euro and yen. As of writing, it is not known whether the yuan would be included.
The Facebook-led Libra project started out strong with 28 backers, but some high-profile names have withdrawn from the council, including Stripe, MasterCard, PayPal, and Visa. The exit fueled concerns that the digital coin would end up getting shelved, but the association on Monday met in Switzerland for its first meeting.
The Libra Council now consists of 21 members, all of which are signed onto the association's charter.
