The former People’s Bank of China (PBoC) governor, Zhou Xiaochuan has proposed, the country to create a digital currency that could counter Facebook's Libra, according to a reports by South China Morning Post on July 11.
As per the report, Zhou made the proposal at an event by People’s Bank of China (PBoC) in Beijing. While he believes that Libra may help developing countries to improve their payment systems, he said it would also pose threat to existing cross-border payment systems and could weaken national currencies, adding that “Libra has introduced a concept that will impact the traditional cross-border business and payment system,"
The statement reads; "Such a currency, in turn, would challenge cross-border payments and weaken the role of sovereign currencies that do not have a stable value – in a way the US dollar has become a widely accepted means of payment in Zimbabwe, Turkey and countries in Central Asia." He said.
Zhou drew his point from Facebook's Libra white paper that was released in June this year, which states that Libra will be linked to a basket of major currencies and governed by a Swiss-based non-profit consortium, comprised of more than two dozen companies including Visa, Mastercard, PayPal, eBay and Uber.
As to face this threatening development, Zhou want the government to create a digital currency, if not a major one for China, they should “make good preparations and make the Chinese yuan a stronger currency,” and also introduce bank notes that can be issued by Central Bank.
Hong Kong system permits various banks to issue banknotes backed by U.S. dollar reserves, while the de facto central bank, the Hong Kong Monetary Authority, works to maintain the rate of $7.8 each.
Zhou have a track record of always backing the idea of developing China’s digital currency, during his time as the PBoC governor.