China’s internet giants appear unlikely to follow Facebook into the cryptocurrency space anytime soon – though you can be sure they’re paying attention.
Pony Ma, the CEO of Tencent, the parent company of social messaging and payments app WeChat, said Wednesday that he thinks regulation will be the deciding factor for the success of Facebook’s Libra initiative.
“The technology [of Facebook] is already mature enough so it’s not difficult [to implement]. Now it just depends on whether it can obtain regulatory approval,” Ma wrote on a private discussion on WeChat.
The comment was screen captured and subsequently circulated on the platform. Tencent confirmed its authenticity to CoinDesk.
Tencent did not have further comment on the issue but referred CoinDesk to a remark Ma made in March 2018 about the firm’s stance on cryptocurrency. Ma said at the time:
“The greatness of blockchain technology depends on how it’s used. Issuing initial coin offerings or digital currencies still bear too much risks … Tencent will not issue a coin and does not consider to be involved in that.”
Similarly, Eric Jing, CEO of Ant Financial, the payments affiliate of e-commerce retailer Alibaba, had already declared last year that the firm would stay away from digital currencies with no real value while focusing on the underlying blockchain technology.
“Our stance on this hasn’t changed,” a spokesperson for the company told CoinDesk Tuesday, hours before Facebook officially unveiled its vision for Libra.
While Ant Financial, which operates AliPay, is expanding to overseas markets, instead of issuing a cryptocurrency, it’s adopting a conventional strategy of partnering with regional payments providers one-by-one to offer services to local users.
No better choice?
The reasons as to why payment giants in China may not consider cryptocurrency useful could go beyond just regulatory issues as the country’s central bank banned cryptocurrency offerings in 2017.
Yan Meng, vice president of the Chinese Software Developer Network (CSDN), who focuses on token economic research for the country’s largest developer community, said Facebook’s fragmented user base across the world leaves it with no better choice but to borrow ideas from blockchain and cryptocurrency in order to avoid a traditional way for launching a global payments network.
“Facebook just can’t do a global payments network via traditional methods, which require applying for a license and preparing foreign exchange reserves with local banking, one market after another,” Meng said.
Such methods may not be even replicable for payments firms in China, he argued, given their users predominantly come from one single economy using one type of fiat currency.
Based on data from the People’s Bank of China, mobile payments volume in the country reached $41.51 trillion in 2018 alone, with Alipay and WeChat Pay accounting for more than 90% of the market. Currently, both firms have expanded payments service in several overseas markets including Japan, South Korea and Singapore.
“The advantage of WeChat and AliPay is they have already gained a significant number of users from just one giant economy that accounts for 20 percent of the world’s population,” Meng said. “China has already had a well-established payments settlement network so there may not be real demand for having a crypto stablecoin now.”
To be sure, Facebook’s services are still inaccessible under normal internet conditions for users based in China. It’s not clear whether or how Libra could be offered to users in the country.
Further, Meng wrote in an article published June 16 that Facebook’s long-term ambition could be even looking at becoming a stateless central bank that uses Libra as a base currency.
“With sufficient incentives, nodes of Facebook’s Libra network would represent Facebook to push for utility in various countries for its 2.7 billion users in business, investment, trade and financial services,” he wrote, going as far as arguing “these would help complete a full digital economy empire.”
But the move may not come easy in the views of regulators in different jurisdictions.
Indeed, immediately after Facebook released its Libra cryptocurrency plan, financial regulators in Europe have already voiced concerns over the potential of Facebook running a “shadow bank.”
Meanwhile, a lawmaker who heads the House of Representatives Financial Services Committee in Facebook’s home country has also asked the firm to halt its development on Libra at least for now before hearings can be held.