People’s Bank of China President Says Global Stable Currency Brings Multiple Risks to Policy and Regulation

Mu Changchun, director of the Research Institute of the People’s Bank of China, attended the 10th Caixin Summit yesterday, pointing to the expansion of stable currencies such as Libra to the global scale, which will bring new challenges to public policy and supervision. He believes that it is not suitable to launch a global stable currency until legal, regulatory, and risk control issues are resolved.

Mu Changchun believes that global stability of the currency, in many aspects such as law, anti-money laundering, terrorist financing, as well as payment system security and personal privacy, will bring more risks. He said that after talking with the Libra team, it was considered the whole stable currency was still in the early stage, the design framework was not determined, and the information was not sufficient. Therefore, it is impossible to assess whether the current legal and regulatory framework is applicable.

He also used the “one behemoth” as a metaphor for global stability, indicating that even the people holding the behemoth could not explain clearly. In the end, the animal of this giant beast must be dismantled with the same business, risk, and regulatory principles. At the same time, this process must also strike a balance between regulation and innovation. 

Libra plans to expand into the global market with a stable currency model, especially for emerging markets where financial services are still lagging behind. The number of its platform users exceeds 2 billion. As early as the plan was announced in June this year, it has attracted many central banks and regulators to watch, fearing that it will affect the stability of the existing financial system.

Mu Changchun showed that in the national of a weak currency if the global stable currency becomes a payment and value storage tool in a wide range, even if the interest is not paid, it will seriously affect the monetary policy and the coinage tax. If the global currency can be exchanged freely with the national currency, it will also affect the country’s deposit and loan interest rates and weaken the effectiveness of the monetary policy.