Ex-PBoC Governor: China must not alienate itself from Libra conversations

According to a report by the South China Morning Post, Min Zhu has said that China must join other countries in regulating Facebook’s upcoming stablecoin Libra. Zhu is the former deputy governor at the People’s Bank of China (PBoC). He said:

I think it’s critically important to join the discussions and take part in coordinated global regulation of Libra. 

Zhu noted that there is no clear timeline for launching the digital yuan, also called Currency Electronic Payment (DCEP). These comments by Zhu come at a time when central banks and financial institutions are putting forward guidance and instructions on how to regulate stablecoins better. 

China is already racing Libra to launch its stablecoin - digital yuan. In 2019, Facebook’s David Marcus warned US legislators that China will win the currency race if Libra is further halted. Marcus oversees Facebook’s blockchain wallet subsidiary Calibra and is a member of the Libra governing council.

Chinese central bank authorities have reiterated that digital yuan is way more advanced in many technical aspects compared to Libra. However, China could potentially lose significant financial clout in many countries if Libra prevails. 

The PBoC fears Libra could erode its ability to carry out effective monetary policies as the bank would lose its absolute control over demand and supply of the currency market. Another reason for China’s fear is that Libra, partly backed by the US dollar, could accelerate the currency’s dominance over the international financial system. This makes it even more difficult for China to internationalize digital yuan.