Emerging markets need more say on digital currencies like Libra, says Chinese official
Governments in emerging markets should be given a greater say in the regulation of digital currencies such as Facebook Libra that could facilitate illegal capital flows and disrupt foreign exchange management, said a senior Chinese official.
China has been moving to embrace financial technologies such as blockchain, and is preparing to launch its own digital currency to rival Facebook’s Libra.
President Xi Jinping said last week that China should accelerate the development of blockchain technology, which sent the price of Bitcoin soaring and has boosted blockchain-related stocks today.
“Financial technology can promote the opening up, innovation and development of a country’s financial market,” said Sun Tianqi, chief accountant of the State Administration of Foreign Exchange, according to Reuters.
“But it could also bring a lot of illegal cross-border financial activities. This should be a matter of great concern to all countries, especially emerging markets,” he told a finance forum in Shanghai.
Sun’s comments underline Beijing’s antagonism towards Facebook’s Libra project. Politicians and regulators from around the world have raised concerns that Libra could be used for money laundering or even undermine the global financial system.
A recent G7 report said Libra must not go ahead until Facebook demonstrates it is safe and secure, and the project recently lost the support of a series of major backers including Paypal and Visa.
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In China, digital currencies like Libra must abide by foreign exchange regulations, and must not replace the yuan in domestic transactions or “it should be banned”, Sun said.
Sun also said the country is ramping up its crackdown on illegal capital flows facilitated by fintech, and has shut down over 2,000 illegitimate foreign exchange platforms and other cross-border trading systems.
President Xi said on Friday that China should “seize the opportunity” blockchain technology offers. According to Chinese state media, Xi described blockchain as a “core technology” and called for additional support and investment.
Xi’s comments sent the price of Bitcoin – the largest cryptocurrency by market capitalisation – climbing over the weekend.
The cryptocurrency jumped as high as $10,332 on Saturday, according to Coindesk data, but dropped back slightly to $9,375.04 by lunchtime on Monday.
The Chinese president’s endorsement also sent blockchain-related stocks soaring. An index tracking 53 stocks linked to the technology rose almost nine per cent on Monday, according to data provider Wind. Shenzhen’s tech-focused Chinext index climbed 1.74 per cent.
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Nigel Green, chief executive of Devere Group, said Xi’s support for blockchain was “an important breakthrough for independent innovation of core technologies”.
“This is a clear signal that the leader of the world’s second-largest economy is moving towards embracing the technology – in which Bitcoin plays a vital part – and therefore taken as a positive boost for the whole digital currencies sector,” he added.
Main image credit: Getty