Amidst rising tensions between China and the US, an official from the People’s Bank of China (PBOC) implied on Monday that Facebook’s Libra could pose a threat to his country.
Speaking at an event hosted by Peking University’s Institute of Digital Finance, Wang Xin, director of the PBOC’s research division, said that if Libra is used as money it could influence governments’ monetary policies.
“If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system?” asked Wang according to the South China Morning Post.
Facebook has said that Libra is likely to be tied to a number of different fiat currencies but, as of yet, the social media company has not said what those currencies will be.
And that’s something that Wang and the PBOC would like to know. The central bank appears to fear that the US dollar will dominate Facebook’s cryptocurrency.
If that is the case, Wang said, it could be a problem for China-US relations and spark further geopolitical tensions between the two countries.
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“If the digital currency is closely associated with the US dollar, it could create a scenario under which sovereign currencies would coexist with US dollar-centric digital currencies,” said Wang. “But there would be in essence one boss, that is the US dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”
Perhaps to combat the impact that a US-controlled digital currency might have, the PBOC has been developing its own cryptocurrency. In 2017, the regulator set up a research division to look at how such a currency could be launched.
According to Wang, however, Facebook’s efforts have put the central bank on the back foot.
“We had an early start … but lots of work is needed to consolidate our lead,” said the PBOC director.