China is warming up to the idea of Libra-style digital currencies, and that could be bullish for major digital currencies.
That’s according to a recently published Globaltimes editorial, which argues that China cannot afford to be left out from the digital currency competition.
*As of Wednesday June 26, 2019 at 28.30 pm
“Unlike Bitcoin or others, Libra’s value will be backed by currencies and securities to make it more reliable and stable,” says the editorial. “And because of its hard asset reserves, it would not only impact the digital economy but influence international financial systems.”
How? “Once this alliance is formed, Libra will become the de facto representative of the dollar in the global digital economy, where the dollar lacked dominance in the past,” continues the editorial. “With Libra, the US could obtain a significant first-move advantage in digital economic competition, and it will be hard for governments to block Libra’s penetration within their digital economies.”
That’s what should worry China, according to the editorial. “If China cannot participate in this new phase of the digital economic revolution, then it may find itself in a passive position within currency competition, not to mention it could lose its advantages within the internet and financial technology sectors,” says the editorial.
Apparently, the way China can participate in this economic revolution is to “let 1000 Libra’s rise,” allow Chinese Internet giants develop their own versions of Facebook’s Libra.
That could help bring buzz for major cryptocurrencies like Bitcoin, ETH, and XRP, adding fuel to the on-going rally.
Back in 2017, the buzz for Bitcoin and other major digital currencies was crushed by the heavy-handed intervention of the Chinese government, which cooled off investor enthusiasm.
That’s why Clement Thibault, Senior Analyst at global financial markets platform Investing.com, is skeptical of the prospect of China warming up to major digital currencies. “I fail to see a future where the Chinese Government warms up to Bitcoin, at least in the current state of affairs,” says Thibault. “Bitcoin’s nature as a permissionless, decentralized currency is in conflict with much of what the Chinese Government aims for.“
A monopoly to create money and control the financial system and the economy, that is.
Actually, the reason China was the first big government to take action against cryptocurrencies back in 2017 isn’t an accident. Beijing government, more than any other government, wants to have firm control of its financial system, and allocate credit according to a political agenda.
That’s why Beijing won’t allow Bitcoin to compete with the country’s national currency. “China may at some point create its own cryptocurrency with their own rules, but I don’t see that impacting Bitcoin at all, since the two would exist separately and wouldn’t be in competition whatsoever.”
Alex Karasulu, CEO / Founder OptDyn Inc., doesn’t share Thibault’s skepticism. “Short term, China could be hedging against trade wars using Bitcoin,” he says. “However, long term, China realizes it needs its own Libra perhaps associated with its own Petro Yuan. The Libra is essentially a blockchain wrapper around a pool of may sovereign currencies without acting as a safe haven like Bitcoin in case of a global economic catastrophe.”
Meanwhile, the discussion of creating Chinese versions of Libra could provide the next catalyst to keep the rally for Bitcoin, ETH, and XRP going.