GettyFacebook's Libra might be the best chance the US has to beat China to become the dominant digital cryptocurrency for emerging markets, according to RBC Capital Markets.If US policymakers fail to draft legislation to encourage crypto innovation, China's upcoming digital token is well-positioned to expand through Alipay, WeChat, and other Chinese apps, RBC said.The social media giant's crypto initiative has been under a microscope in a recent weeks, and several of its early backers including Visa and MasterCard have abandoned the project. Visit the Business Insider homepage for more stories.
Facebook's Libra could be key to the US's ability to compete with China in developing a digital currency for emerging markets, according to RBC Capital Markets.
Following a series of meetings and conferences in China, RBC analysts said they believe China has expedited its development of the yuan-backed Central Bank Digital Currency (CBDC) after Facebook's revealed its crypto plans in June.
If US regulators ultimately dismiss Libra and decide not to draft regulation to encourage crypto innovation in the US, China's CBDC may be strategically positioned to become the de facto global digital currency in emerging economies, RBC said in a note to clients on Tuesday.
China has the advantage of spreading the potential token through messaging and payment apps like Alipay, WeChat, and UnionPay, the analysts added.
Facebook said in the past it planned to do something similar by allowing users to send Libra within Messenger and WhatsApp. The currency will also be available through a standalone app Calibra.
We believe that messaging apps represent the greatest opportunity to onboard consumers to digital wallets which could lead to a greater consumer adoption of digital currencies, RBC said.
Libra has come under intense scrutiny since its announcement and several of the initiative's largest backers including Visa, MasterCard, and eBay have backed out of the project. The company announced on Monday an updated list of 21 firms that are still committed to backing and overseeing Libra.
David Marcus, the chief executive behind Libra, attempted to soothe regulators concerns about the currency during a Senate hearing in July. Facebook CEO Mark Zuckerberg is also scheduled to testify in front of Congress on October 23 to further address concerns about Libra.
RBC believes many companies are still very interested in joining Libra and the firm's that left may return given the right circumstances.
If a clear regulatory roadmap is developed and Libra launches successfully, we would not be surprised to see these firms reapply to the association, RBC said.
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