Facebook’s Libra must be under Central Bank oversight, PBOC says

Facebook’s announcement last month of its plans to issue a digital currency prompted global central banks including the European Central Bank and the Bank of England to voice concerns.

The PBOC has been working on developing its own digital legal tender, but hasn’t announced a time table for issuing any such currency. (REUTERS)

Facebook Inc.'s push to create its own cryptocurrency, called Libra, must be put under the oversight of monetary authorities, according to a senior official from China's central bank.

As a convertible crypto asset or a type of stablecoin, Libra can flow freely across borders, and it "won't be sustainable without the support and supervision of central banks," Mu Changchun, deputy director of the People's Bank of China's payments department, wrote in comments provided to Bloomberg.

Mu said digital currencies can be used for lending, could disrupt monetary policy, and induce foreign exchange risks in economies with a volatile local currency. In addition, Facebook hasn't made clear its commitment to anti-money laundering and anti-terrorist financing responsibilities, as well as how it will protect the privacy of its users, Mu wrote.

Caixin published similar comments on Libra from Mu this weekend.

"In the longer term, the yuan will be damaged by Libra if it's not convertible," Mu told Bloomberg. Making the yuan freely exchangeable would deal with that risk, he said.

The central bank is organising market-oriented institutions to jointly research and develop a central bank digital currency and the programme has been approved by the State Council, Wang Xin, director of the PBOC Research Bureau, told a seminar at Peking University on Monday.

"From the government's perspective, we pay more attention to its influence on financial services, monetary policy and financial stability," Wang said, according to a report in the China Daily.

The California-based tech giant's announcement last month of its plans to issue a digital currency prompted global central banks including the European Central Bank and the Bank of England to voice concerns. Though Facebook itself is not generally accessible in China, the PBOC is also signaling that it is worried by issuing a public response.

Mu said the central bank's research team tested Libra's code and found it's "still in an initial stage and the quality of the code isn't stable." He also said it's questionable whether Libra would indeed use blockchain technology, because it can't meet the high concurrent transaction requirements necessary for retail sales scenarios.

The PBOC has been working on developing its own digital legal tender, but hasn't announced a time table for issuing any such currency.