IMF custody would make Facebook’s Libra “work better”, says ex-PBoC boss

Prominent Chinese economist and former governor of the People’s Bank of China (PBoC) Zhou Xiaochuan has said that Facebook’s Libra will “work better” under IMF custody.

In a conference speech in China on Thursday, Xiaochuan remarked:

“People will question the motive of Libra as it’s initiated by a private company. It works better if it’s in the IMF’s custody.”

The IMF was established over 70 years ago to promote worldwide financial stability, enable international trade, and reduce poverty.

Xiaochuan believes that the organisation, which oversees monetary policy in multiple member states, would be well placed to take custody of Facebook’s new digital currency.

Including Libra within the IMF’s remit would be an unprecedented move, as the organisation has historically only overseen matters concerned with national monetary policy and fiat currencies.

Xiaochuan is the longest-serving governor of the PBoC having served from 2002 to 2018. During his career, he was responsible for multiple influential policy decisions which helped China become the world’s second-largest economy. As a result, many global economists hold Xiaochuan’s advice in high regard.

Dovey Wan, founding partner of Primitive Crypto, tweeted Xiaochuan’s speech and remarked that his comments on Libra were “to the point” and “wise”.

Facebook officials have yet to comment on Xiaochuan’s remarks, and it’s unclear what effect Libra’s incorporation into the IMF would have on Facebook’s business plans.

Libra controversy

Since it was first announced earlier this year, Facebook’s Libra has caused rippling controversy among international politicians and financial professionals. Many see the social media giant’s move into currency as a way to further consolidate the company’s influence across the globe.

Xiaochuan is highly aware of the effect that Libra may have on the global economy, remarking in July that Facebook’s currency “has introduced a concept that will impact the traditional cross-border business and payment system”.

In response, Xiaochuan cautions that Beijing should make preparations to expedite the development of the country’s digital yuan and take steps to ensure the Chinese yuan becomes a stronger currency.

Other nations have criticised Facebook’s plans, including Romanian money chief Daniel Daianu, who warned that Libra will “fracture the monetary system”.

Likewise, European Union policy makers have also drafted plans to create their own digital currency in response to Libra through fears it would affect the stability of the euro.