Facebook’s Libra represents American interests to the point that it can be considered a digital currency issued by the US Federal Reserve, according to the head of a Chinese blockchain think tank during an event on Friday.
Why it matters: As central banks around the world debate the need for sovereign digital currencies, China’s central bank has been accelerating the development of a new digital fiat currency, or what it calls its digital currency electronic payment (DC/EP) system, in response to Facebook’s Libra plans.
- US Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin said earlier this week that there is no need for the country to issue its own digital currency for the next five years.
Details: During a panel discussion at the International Cooperation Forum on Digital Economy and Blockchain in southern Hainan province, Long Baitao, executive deputy director of Tsinghua University’s blockchain research institute, spoke out against the idea that Facebook’s digital currency is separate from the US dollar.
- “Libra 100% represents the US’s interest,” Long said, adding that in fact people can understand Libra as “the US’s central bank-issued currency.” The notion of Libra challenging the dollar’s sovereignty is merely an “illusion” created for the people of the world, he said.
- The heated debate in Congress over recent months had been for show, said Long, when in fact “we are all slaves for the financial system, for the dollar system.”
- Libra should be based on the US dollar rather than a basket of currencies, according to Omer Ozden, a partner of ZhenFund International, as it would be politically beneficial and help with compliance. The views on Libra in the US are very divided, Ozden said, but there is recognition that the US government has to move forward with Libra.
Context: Libra has faced backlash since it was announced in June from financial regulators around the world, including those in the EU, US, and China. The Chinese central bank regards Libra project as a rival and a direct threat to the development of the DC/EP.
- In the white paper, Facebook declared Libra a global digital currency to advance financial inclusion.