Huang Qifan, vice chairman of CCIEE (China Center for International Economic Exchanges), has expressly stated that he does not believe Facebook‘s digital currency Libra will be successful. He firmly holds that China’s central bank is close to developing its blockchain-based financial technology and will be the first in the world to officially roll out a usable digital currency.
Huang spoke at the Inaugural Bund Financial Summit of 2019 in Shanghai where financial leaders across the world gathered between October 27 – 29 and discussed a wide variety of issues focused on financial inclusion, fintech and wealth management.
Huang pointed out in his speech that in the current digital age, the payment and settlement methods between enterprises and countries need to be reshaped.
He stressed that the cross-border liquidation of China’s renminbi (RMB) is highly dependent on the US SWIFT (Society for Worldwide Interbank Financial Telecommunication) system and CHIPS (Clearing House Interbank Payments System). He added that the two financial instruments that are gradually becoming effective tools for the US to exercise global hegemony and carry out widespread jurisdiction control.
“SWIFT is an outdated, inefficient and costly payment system. Since the establishment of SWIFT 46 years ago, the technology has been updated slowly and the efficiency has been relatively low. International wire transfers usually take 3-5 business days to arrive. Large remittances usually require paper documents, which presents additional difficulty for processing large-scale transactions effectively,” Huang expressed throughout his speech. “At the same time, SWIFT usually charges a fee of one ten-thousandth of the settlement amount, and has obtained huge profits by virtue of the monopoly platform.”
Huang has also stated that he is not optimistic about Facebook’s Libra project, saying, “In the digital age, some companies tried to challenge sovereign currency by establishing financial products such as Bitcoin and Libra. This decentralized currency based on blockchain is out of sovereign money. The basis of the issuance cannot be guaranteed, the value of the currency cannot be stabilized and it is difficult to truly form social wealth. I do not believe that Libra will succeed.”
Huang believes that for sovereign states, the best way to reinforce the monetary distribution rights of countries is for the government and central bank to issue sovereign digital currencies. An objective within the process of issuing sovereign digital currency by the global central bank, in addition to improving convenience and security, is to formulate a new rule that enables digital currency to be linked to sovereign credit, with national GDP, fiscal revenue, and gold.
“The People’s Bank of China has been studying DCEP (digital currency electronic payment) for five or six years, and I think the technology has matured. PBOC is probably the first central bank to introduce digital currency in the world,” Huang said.