The Chinese government is pro-blockchain but anti-cryptocurrency. While driving cryptocurrency companies and miners outside the mainland, the Asian superpower is getting ready to launch a digital coin of its own. According to a CNBC report earlier this year, the People’s Bank of China (PBoC), was working on a Yuan-linked stablecoin that could revolutionize the Chinese financial system.
A Striking Contrast to the US
The Chinese central bank is embracing digital currencies at the state level, but the US authorities are maintaining an uncomfortable distance with the industry. The Securities and Exchange Commission (SEC) denied the last application for a Bitcoin ETF this month. Social media giant Facebook’s digital stablecoin Libra has also failed to strike a positive note with the lawmakers.
Libra’s lead David Marcus has repeatedly pointed to China taking the lead in the digital payments ecosystem. He suggests that the US should let Libra launch in order to preserve its dominance in global finance. If not, Chinese influence will continue to grow, US sanctions will no longer be 100% effective, and the world could shift towards a new digital reserve currency.
The Real Impact of a Digital Yuan
According to Ripple CEO Brad Garlinghouse, China has a more strategic approach towards digital currencies. “They have been dependent on the U.S. dollar as the global reserve currency — to the extent that other currencies emerge, and they can help propagate those, they’re intrigued by that,” he said.
Zachary Schwartzman and Mark Mahaney, analysts at RBC suggest that China has a strategic geopolitical advantage with a digital Yuan. Their crypto could become the “de facto global digital currency in emerging economies” specially because of the existence of a massive digital payments ecosystem supported by UnionPay, WeChat Pay and Alipay. However, for this advantage to completely unfold, the US will not just have to reject Libra completely but also distance itself from creating supportive regulations for innovators in the crypto industry.