China in a Race to Launch its CBDC Ahead of Facebook’s Libra

It appears Facebook’s decision to
launch a global currency (Libra) to support its platforms which already boasts
of billions of users has become a wakeup call for other industry players. Just
yesterday, Binance announced
a similar initiative – “Venus”. The People’s Bank of China (PBoC) appears to be
next in line.

According to official sources, the PBoC is at the brink of launching its government-backed cryptocurrency – the central bank digital currency (CBDC). A week ago, Mu Changchun, the deputy director of the PBoC’s payment unit revealed that CBDC “can now be said to be ready.” He noted that a working prototype that adopts blockchain architecture has been successfully deployed after five years of R & D.

China Daily reported on August 20 that CBDC may have been influenced by Libra. They said:

The time is almost ripe for introducing the central bank digital currency (CBDC), based on ongoing trials in some areas. But Facebook's unveiling of its digital currency "Libra" may drive Chinese regulators to reconsider the possible model of CBDC, said experts close to the central bank on Monday.

There are speculations that if everything goes as planned, the Chinese government may launch CBDC before Libra. While trials are ongoing, further testing will involve yet-to-be-name parties from private- and state-owned firms.

Shao Fujun, a former official of PBoC and the current chairman of China UnionPay told China Daily that “[CBDC] will have lots of positive impacts, including tracking the money flow in economic activities and supporting making monetary policy.”

While the idea of launching a government-backed may seem promising, global utility and coordination may become a hurdle to cross considering China-US trade war.