China had a couple of kind words for Facebook’s Libra this week, placing it next to Alipay and WeChat Pay; and that could change the game for major cryptocurrencies.
That’s according to a Globaltimes editorial, which sees Libra as an “independent,” “stable,” “convenient,” and “safe.”
“Libra, unlike other cryptocurrencies, has a stable currency value and is convenient and safe to use in cross-border transactions,” writes Li Daokui, author of the op-ed. “In fact, Libra is in many ways the same as Alipay and WeChat Pay. The difference is that Alipay and WeChat Pay are directly pegged with the yuan – 1 yuan in an Alipay or WeChat Pay account equals 1 yuan of fiat money – while Libra is pegged with a basket of currencies. This difference indicates Libra is an independent currency, and one that could very well grow into an important super-sovereign currency.”
Daokui doesn’t mention other cryptocurrencies, like Bitcoin, but he sees the rise of “super-sovereign” currencies as “inevitable.”
“China should take advantage of WeChat Pay and Alipay, among other technological innovations, to increase the cross-border use of the yuan and accelerate the yuan’s internationalization,” he says. “The nation should also take an active role in the operation and management of Libra, to establish a foothold in the future international currency battlefield.”
“China must consider permitting its major firms to join Libra’s governing body,” says Daokui. “Instead of rejecting Libra’s potential, China might as well join it and participate in its rule setting.”
The Globaltimes op-ed comes at a time when American policymakers are skeptical about Libra, Bitcoin and other major cryptocurrencies. They are concerned about the prospect of these super-sovereign currencies undermining sovereign currencies, as discussed in previous pieces here.
Mark Homeier, CEO at Maxonrow, doesn’t see it that way.
“The relationship between sovereign and super sovereign currencies is not a zero-sum game,” he says. “Both can and should exist, and their adoption in countries with a large unbaked population will be a boon for the global economy. There is ample room for a myriad of super sovereign currencies to thrive alongside fiat and we should all focus on the huge opportunity brought by this technology. The economic benefit that fast adoption of mobile payments brought to China can be duplicated all over the world.”
China’s “endorsement” of Libra seems to be doing exactly that. It recognizes that the relationship between cryptocurrencies and national currencies isn’t a zero-sum game. And that could help other governments warm up, not just to Libra, but to major cryptocurrencies, like Bitcoin, ETH, XRP, and LTC. They can come up with the sound regulations to help cryptocurrency markets operate fairly and efficiently rather than killing them altogether.
Meanwhile, sound regulations can only help increase user trust, a key factor for any cryptocurrency to reach the “tipping point.”