- China’s e-Yuan to launch before Facebook’s Libra
- Facebook Libra to promote financial inclusion
The world has been focusing on Facebook’s proposed cryptocurrency Libra and forgot about China’s proposed e-Yuan. It seems e-Yuan will launch before Libra as they do not have any regulatory issues to contend with unlike what is going on in the U.S. So far, regulatory bodies and global banks are trying all their efforts to delay the launch of Libra. According to them, Libra will harm the global financial systems and carries in-built risks to future e-borrowers that need to be addressed.
According to Reuters, Beijing us set to launch the world’s first digital currency. The primary roll out seems cautious, aiming at consumer spending. Installing new technology extensively in the country’s banking system could be a bad step.
Though information on the proposed currency is scarce, Mu Changchun, the head of the PBOC’s digital currency research institute, insinuated sometime in November that an “e-yuan” will be shared through commercial banks, Alibaba-backed Ant Financial and Tencent.
Authorities’ unique capacity to trail and monitor online spending movements could be a powerful tool against fraud, tax evasion, and money laundering but also clear China’s financial system from up to 2.4 trillion yuan ($341 billion) of formally recognized bad local debt. This bad debt stems from the general practice of promising the same asset – bonds, deposit certificates, and shares – as collateral for multiple loans.
Facebook Libra to Promote Financial Inclusion
The announcement of Facebook’s proposed cryptocurrency Libra sparked several reactions from both government, citizens and central banks globally. It seems 2020 will be the year for Libra as it is about promoting “financial inclusion” and support people by “ lift themselves out of poverty,” Zuckerberg declared. He projected then that China is “moving quickly to launch similar ideas in the coming months”.
Commenting on Libra, he stated: “Libra will be backed mostly by dollars, and I believe it will extend America’s financial leadership as well as our democratic values and oversight around the world.”
The major issue the proposed Facebook project is having is trust, as people do not trust Facebook to handle such financial details owing to several breaches that have occurred on the Social media platform.
The Libra Association, the nonprofit group established to manage the currency is made up of 20 other firms including Facebook. The association will manage a “reserve” of government-issued money that is meant to back each digital unit and keep the currency stable. According to Zuckerberg, half of that reserve will be U.S dollars, while the other half will be made up of British pounds, Japanese yen, euros, and Singapore dollars.
Max writes about blockchain projects and regulation with a special focus on United States and China. He joined Smarterum after years of writing for various media outlets.