China‘s proposed new digital currency would bear some similarities to Facebook‘s Libra coin and would be able to be used across major payment platforms such as WeChat and Alipay, a senior central bank official said.
Mu Changchun, deputy director of the People’s Bank of China’s payments department, said the development of the coin would help protect the country’s foreign exchange sovereignty as commercial applications of such currencies expand.
“Why is the central bank still doing such a digital currency today when electronic payment methods are so developed?” said Mu, according to a transcript of a lecture he gave this week that was published online.
“It is to protect our monetary sovereignty and legal currency status. We need to plan ahead for a rainy day.”
He said the tokens would be as safe as central bank-issued paper notes and could be used even without an internet connection. They could also be used on Tencent’s WeChat and Alibaba-backed Alipay.
The state-run newspaper Shanghai Securities News reported his comments on Friday.
China’s central bank set up a research team in 2014 to explore launching its own digital currency to cut the costs of circulating traditional paper money and boost policymakers’ control of money supply.
It had said little since but Mu last month announced that the digital currency was almost ready. US-based financial magazine Forbes, citing sources, said the currency could be ready as soon as November 11.
Some analysts say China appears to have accelerated the push towards digital money after US social media giant Facebook announced plans in June to launch its digital coin, Libra.
Mu said China’s digital currency would strike a balance between allowing anonymous payments and preventing money-laundering. It would also bear some similarities to Libra in design but would not be a direct copy, he said without elaborating.
Facebook’s proposed cryptocurrency has sparked concerns among global regulators that it could quickly become a dominant form of digital payment and a channel for money laundering given the social network’s large cross-border reach.
Libra will be a digital currency backed by a reserve of real-world assets, including bank deposits and short-term government securities, and held by a network of custodians. Its structure is intended to foster trust and stabilize its price.
Like other cryptocurrencies, Libra transactions will be powered and recorded by a blockchain, which is a shared ledger of transactions maintained by a network of computers.
Mu said the advantage a central bank-issued digital coin had over those issued by WeChat and Alipay was that commercial platforms could, in theory, go bankrupt which could cause users losses. Its ability to be used without an internet connection would also allow transactions to continue in situations in which communications have broken down, such as an earthquake.