CBDC Expected To Launch Before Facebook’s Libra Digital Currency
The PBoC (People’s Bank of China) is close to launching a government-backed digital currency, according to official sources. News was broke by China Daily, a CPC-owned news portal in English, on August 20. The report also highlighted that the CBDC (central bank digital currency) was influenced by Libra.
It is mentioned that the CBDC has been in the work for 5 years now, according to Mu Changchun, the bank’s payments deputy director.
Currency trials are ongoing and the bank reports that it is testing various project approaches. The official expectation is that the launch is going to take place before Facebook launches Libra.
What is interesting is that the original design that was planned for CBDC was influenced by Libra. According to Yang Dong, due to the announcement of Libra, more non-governmental institutions were involved in the issuance process and development of the currency. He added:
“Further testing is needed before officially launching the Chinese CBDC, gaining inspiration from the Libra.”
The following CBDC trials will involve private firms, state firms and the central bank. The focus will be put on cross-border and non-governmental applications.
The Expected Positive Impacts Of CBDC
According to Shao Fujun, China UnionPay chairman, CBDC:
“…will have lots of positive impacts, including tracking the money flow in economic activities and supporting making monetary policy.”
He however added that the currency faces various challenges, like global coordination and global exchange rate policy.
It will be the PBoC that will control the digital legal tender and the project is backed by reserves paid by commercial institutions. People can change the currency in various commercial institutions.
Mu highlighted the fact that there are different designated institutions that will take various technical routes in order to develop the electronic payment infrastructure and the actual CBDC currency. The organizational structure of the CBDC will be similar to Libra’s.
The last thing that should be mentioned is that Binance is also now working on a blockchain project that focuses on localized stablecoins. This would also directly compete with Facebook’s Libra.