China’s SAFE Says Libra Must Comply with Foreign Exchange Settlements Regulation to Use RMB

Sun Tianqi, chief accountant of the China Foreign Exchange Administration, said that a cryptocurrency such as Facebook’s cryptocurrency Libra, if used in China, needs to comply fully with foreign exchange management rules. At the same time, Libra is also required to settle in RMB, otherwise, it will be forbidden to use.

Sun Tianqi pointed out that cryptocurrencies can be freely circulated across borders, but the renminbi is still not freely convertible, so the cryptocurrency should be treated as a foreign currency. He also suggested that other emerging countries that are more open to Libra need to consider whether they will change their foreign exchange management rules for this purpose, or allow another currency to replace the country’s legal currency.

He also estimated that cryptocurrencies may be concentrated on small cross-border transfers at the beginning of cross-border transactions, due to the higher cost of related transactions. With the advancement of financial technology, cross-border illegal financial activities have also become more active, and as of the end of September this year, China’s State Administration of Foreign Exchange (SAFE) handled more than 2,000 related companies through penalties and closures. These companies offer bitcoin, ICO trading, or speculation in futures and precious metals.

Sun Tianqi suggested that in terms of supervision, cross-border financial services must obtain financial licenses, followed by a license that cannot be used in different countries, in case a company uses foreign licenses to drive in China without a license. Finally, it is an international regulatory agency. Cooperation to combat cross-border illegal integration activities. He reiterated that he should not speculate on the concept of blockchain, nor can he package illegal financial activities by blockchain, and should use technology to solve the problems encountered in the current market.

Currently, Libra is rumored to be linked to the US dollar, the euro, the yen and the pound, and project leader David Marcus has said that he is open to all currencies. However, it is widely believed that it is quite difficult for Libra to enter the Chinese market as Facebook is also blocked in the country. According to Sun Tianqi, even if Libra is released, it needs to be closely regulated by Chinese foreign exchange control.