Facebook’s June announcement the Libra project sent large parts of the world’s regulatory and financial spheres into a flurry of activity. In the US and the EU, hearings were scheduled and task forces formed. In other parts of the world, governments of developing countries began to take preemptive measures to keep the coin out of the hands of their citizens.
China’s reaction to Libra, however, was unique. Rather than taking direct action against Libra, the announcement seemed to spur China to quickly complete the stablecoin initiative that it had begun working on several years ago as a competitor to Facebook’s proposed currency.
Now, the launch of the stablecoin, dubbed DCEP (Digital Currency/Electronic Payments), is imminent; at the same time, Facebook has said that Libra may never launch. For now, it seems that China may have beat the tech giant at its own game.
But the rules have changed: now, several other tech giants are eyeing the stablecoin space. In particular, malta-based cryptocurrency exchange Binance has announced the launch of the Venus project, which will create regional stablecoins backed by local currencies, and seems to have given the Chinese market a lot of special attention.
Could the launch of the DCEP eventually open the doors for privately-issued stablecoins backed by Chinese Yuan to operate in China? And what could China’s real intentions behind issuing this stablecoin be?
China’s stablecoin initiative: a history in brief:
Here’s what we know: China began working on the development of a digital currency roughly five years ago. The country’s decision to suddenly push forward with the launch appears to have been motivated by Facebook’s efforts to launch Libra, its global stablecoin initiative.
In July, PBoC director Wang Xin said that Libra could “could create a scenario under which sovereign currencies would coexist with U.S. dollar-centric digital currencies. But there would be in essence one boss, that is the U.S. dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”
Although Facebook publicly stated later in the month that Libra may never see the light of day, it was already too late–China’s quest to create a competing coin was on.