Mu Changchun, deputy director of the People’s Bank of China’s payment department, said in an article in Caixin Weekly that Facebook’s cryptocurrency Libra must be included in the central bank’s supervision. This can avoid monopolistic and winner-take-all situations due to network effects.
Mu Changchun pointed out in the article that Facebook has always avoided applying for a license and believes that it should be obtained by a partner institution. Even though the operating agency Calibra can obtain e-money licenses, but it absorbs deposits and can be used for payment, it is like a shadow bank, so the license has not met the regulatory requirements.
He also questioned Libra’s efforts to promote inclusive finance for emerging markets. Stating that Libra could replace local currency when Libra is more stable than the legal currency in these places. This situation will lead to the depreciation of the local currency. For places where the value of the legal currency is unstable, there is an opportunity to trigger exchange rate risks and make the economy more unstable.
As for Libra, which is issued in the form of stablecoin, will be bound with a basket of treasury bonds, legal tender, and other assets. Mu Changchun believes that if it is managed by the central bank, these assets will be interest-free or have low-interest rates. Therefore, Libra is managed by a financial institution at a low level of profitability, but it is not easy to manage funds with an active strategy and there is an opportunity for asset impairment, which will lead to a drop in Libra prices.