Competition and Threat
China’s moves coincide with Facebook’s plans to launch a cryptocurrency called Libra.
The emergence of Libra was an “alert” for Beijing, according to a former senior central bank official quoted in the Chinese press.
Due to roll out next year, Libra should offer a new payment method outside traditional banking channels to buy goods or send money as easily as an instant message.
Like bitcoin, Facebook’s virtual currency “represents a competition and threat” to the yuan when Beijing is anxious to stabilise its currency, said Song.
But it is not only authoritarian Beijing that is worried about the growth of cryptocurrencies.
Facebook’s plan has faced heavy criticism from regulators and lawmakers in the United States and Europe, with chief executive Mark Zuckerberg expected to face questioning from Congress.
French Economy Minister Bruno Le Maire has warned that Libra poses a threat to the “monetary sovereignty” of governments and could not be authorised in Europe.
The French Senate has advocated the creation of a public cryptocurrency, under the aegis of the European Central Bank.
The controversy has seen huge financing firms like Visa, Mastercard and eBay pull out of the scheme.
Nonetheless, many analysts expect more and more transactions around the world to move online, in one form or another.
For China, a home-grown system of electronic cash controlled by the central bank offers the convenience that consumers want with the control that authorities crave.
The People’s Bank of China, must “stay relevant in an age of declining usage of paper currency,” said Song.