Chinese tech giant Tencent Holdings has acknowledged that Facebook's proposed cryptocurrency Libra could pose a serious threat to existing digital payment systems, including its own WeChat Pay as well as Alipay from rival Alibaba Group Holding.
"Libra, if launched successfully ... would not only impact traditional financial institutions but also undermine internet firms, including Tencent and Alibaba, which have their own relatively mature payment systems, hindering their global expansion," Tencent said in a blockchain whitepaper released this week.
Facebook unveiled its Libra cryptocurrency in June, aiming to peg it to a basket of currencies backed by reserves, subject to regulatory approval. Facebook has 2.7 billion users on its social media platform as well as the backing of global payment, technology, telecommunication, blockchain and venture capital firms for the plan.
The potential global user base for Libra and wide-ranging services offered by its backers would affect the global expansion of digital payment companies who are not part of the Libra club, the white paper states.
Tencent operates China's dominant social media and do-everything app WeChat with over 1 billion daily active users, and its WeChat Pay is one of the biggest digital payment services alongside Alibaba's Alipay.
Alibaba is the parent company of the South China Morning Post.
Describing the plan as "radical and bold" but actually "clear-headed and prudent", Tencent said Libra's strategy is to start with developing countries with weak financial infrastructure, especially those without easy access to credit money, and then gradually penetrate developed markets.
Libra could reset the global payments and financial landscape by bringing innovations in user experience, technology and business models, Tencent said in the whitepaper.
The white paper from Tencent comes amid a backlash from global regulators to Libra's possible disruption of the global financial system. Meanwhile China is developing plans for its own digital currency.
"While we debate these issues, the rest of the world isn't waiting," Facebook CEO Mark Zuckerberg said to US Congress in a hearing on Wednesday. "China is moving quickly to launch similar ideas in the coming months."
China has been developing its own digital currency for some time, and was "almost ready" to launch according to the People's Bank of China (PBOC) in August. However, central bank governor Yi Gang poured cold water on prospects for an imminent launch last month, saying the central bank did not "have a timetable".
The PBOC plans to make digital coins available through four state-owned banks, as well as online payment platforms operated by Tencent, China UnionPay and Alibaba affiliate Ant Financial.
China is the first major economy to explore launching its own digital currency and established a PBOC-backed research institute to study the field in 2016, yet it has banned all cryptocurrency trading activities and initial coin offerings since 2017.
Both Alipay and WeChat Pay have issued statements separately earlier this month making clear their current policies which forbid transactions related to cryptocurrency trading on their payment platforms.
"To reiterate, Alipay closely monitors over-the-counter transactions to identify irregular behaviour and ensure compliance with relevant regulations," Alipay wrote on Twitter earlier this month. "If any transactions are identified as being related to bitcoin or other virtual currencies, Alipay immediately stops the relevant payment services."
