Digital Yuan Rollout Is ‘Response to Facebook’s Libra’

A South Korean financial expert says that China’s forthcoming digital yuan will be used in cross-border trading – possibly replacing the United States dollar in many international deals – and has been sped up as a response to Facebook’s Libra project.

Per Maeil Kyungjae, Kim Jong-han, a senior researcher at the Korea Institute of Finance, a leading economic think tank, progress on China’s digital yuan – already being piloted in a minimum of five major cities around the country – has been stepped up in a bid to offset the damage caused by the coronavirus pandemic.

But Kim went a step further, claiming,

“Countries that have received COVID-19-related humanitarian aid from China will likely be more disposed to making use of the digital yuan.”

He added that Chinese authorities were motivated to intensify the pace of the digital yuan’s rollout after Facebook unveiled its Libra plans.

Kim stated that Beijing believed that Libra would find its way into the Chinese economy, and hoped to offset this by launching its own project – beating the American tech giant to the punch.

Kim warned that too much secrecy could undermine the digital yuan project, however. He remarked,

“Using the digital yuan will help cut down on money laundering and counterfeiting, but all payments information is set to be collected by the People’s Bank of China, which will need to be transparent and open if it wants to succeed.”

Bloomberg columnist Andy Mukherjee expressed similar sentiments in a recent op-ed piece. He wrote that although there were “more mundane reasons” for a digital yuan rollout, “there’s also a power play” at work.

He wrote,

“It isn’t a coincidence that China’s project picked up speed last year as Facebook announced Libra […] The idea of ‘a regulated global network for cost-effective retail payments,’ as described by Singapore state investor Temasek, a new member of Libra’s governing body, remains alive.”

Mukherjee added,

“For Beijing to shake the dollar’s hegemony, it has to pre-empt Silicon Valley from taking the pole position. Hence the hurry for China’s test runs.”

Last week, experts claimed that the digital yuan was expected to be interoperable with a range of Chinese payment apps, a fact that could make it device- and platform-agnostic from the outset.