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According to a report by the South China Morning Post yesterday, Zhou Xiaochuan, former governor of the People’s Bank of China, said China may entrust the issuance of digital currency to commercial entities.
According to Zhou Xiaochuan, China may draw inspiration from Hong Kong's monetary system and Facebook's Libra to issue central bank digital currency in a new way .
Hong Kong is one of the few places in the world where commercial banks issue currency. Hong Kong does not have a central bank. The note-issuing institutions are HSBC, Standard Chartered and Bank of China. Foreign exchange is used as a reserve, and it is used as a margin to exchange for an interest-free "Certificate of Indebtedness" from the foreign exchange fund as the basis for issuing currency. To put it bluntly, the bank must hold 100% of the same value of US dollars for the amount of Hong Kong dollars it wants to issue. The full reserve system is adopted. The Hong Kong Monetary Authority ensures the exchange rate of 7.8 Hong Kong dollars to 1 US dollar.
According to Zhou Xiaochuan, this approach would allow the central bank's digital currency to avoid volatility risks as much as possible.
China already has digital payment platforms including Alipay and WeChat, which have accumulated hundreds of millions of users.
Zhou Xiaochuan said in a previous speech that "Facebook's Libra introduces a concept that will impact traditional cross-border business and payment systems."
China has previously established an institute to explore launching its own sovereign digital currency , but progress has reportedly been slow.
Although Facebook's Libra white paper lacks sufficient technical highlights, as a business giant with nearly 2.7 billion users worldwide, Facebook's launch of its own cryptocurrency project has attracted widespread attention and heated discussions around the world.
According to Bloomberg, Mark Carney, Governor of the Bank of England, said that Facebook's cryptocurrency Libra must be absolutely reliable from day one, otherwise don't start, it's not something you can learn on the job. If it succeeds, it will become systemic because it will involve a large number of users. Mark Carney said that Libra raises "very broad issues" and that G7 central banks, including the Bank of England, are seeking to understand Facebook's proposal and consider its risks and opportunities.
Federal Reserve Chairman Jerome Powell said at a U.S. Senate hearing that the Fed is communicating with other regulators and global central banks about Facebook's cryptocurrency Libra. He said that the process of evaluating Libra requires patience. No one institution can regulate Libra, including Facebook.
He believes that the Federal Reserve does not have the power to regulate Facebook. He also said that the regulation of the cryptocurrency Libra involves many different countries and international institutions. The most important issue with Libra is privacy, including financial data, and the potential scale of Libra means it may have "immediate systemic importance." Powell also said that the cryptocurrency Libra will be an issue at the G7 finance ministers' meeting next week.
In addition, during the hearing, Jerome Powell also said, "Although Bitcoin has not yet been seen as a payment method, in the global economy, Bitcoin, as a value reserve, is constantly replacing the role of gold in the global economy. In the long run, Bitcoin has the potential to replace the dollar's status as the world's reserve currency."
In fact, the senators also mentioned that they were concerned about the possibility that Bitcoin could replace the U.S. dollar as the world’s reserve currency in the long run.
However, Peter Schiff, CEO of Euro Pacific Capital and a staunch supporter of gold, said: "Powell is wrong. The world does not need another reserve currency to replace the dollar. Gold is a better reserve asset than any fiat currency. In fact, gold reserves legitimize the currencies they support. The dollar became a reserve currency because of the support of gold."
In Europe, Burkhard Balz, a member of the executive board of the German Central Bank, said in a speech to the European Parliament that cryptocurrencies do not pose a threat to financial stability. However, Balz also warned that the increase in the popularity of crypto assets needs to be closely monitored.
Moreover, he also has high hopes for the digital transformation brought about by artificial intelligence, blockchain technology and cloud services.
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