Mu Changchun, the deputy director of the People’s Bank of China’s payments department, said the currency would protect China’s “digital sovereignty and legal currency status”. He added: “We need to plan ahead for a rainy day.” A form of digital cash, cryptocurrency uses encryption to secure transactions and control the creation of new units. It uses cryptography, a form of coding originating from the Second World War, to process transactions securely.

Its major appeal is it is independence from established financial systems and it is usually traded through specialist online ‘exchanges’. 

But China’s cryptocurrency would be pegged to the Chinese yuan and would also likely be under surveillance by the Chinese government and be used to bypass US trade sanctions.

Libra is a blockchain digital currency planned to be launched in 2020.

China and Iran are the only countries where access to Facebook is restricted. 

A cryptocurrency backed by the social media titan represents a threat to Beijing as it could offer Chinese citizens access to a largely unregulated financial market.

Earlier this year a thinktank warned that the rise of cryptocurrency could lead to the end of western economic might.

For decades the power wielded by the US and its allies in the form of sanctions has been a key weapon against hostile regimes like Iran, Russia and Venezuela.

But cryptocurrency operates outside the US-led financial system – so these nations can operate entire economies underneath the radar.

A report by cybercrime experts Yaya Fanusie and Trevor Logan for the US Foundation for Defense of Democracies Center (FDD) outlines how these states “envision a world in which cryptocurrency technology helps them eclipse US financial power”.

It adds: “Washington must understand the benefits and threats posed by new financial technologies, maintain the integrity of global finance, and cultivate the expertise and influence to lead in what is becoming an international crypto race.”

• Coin Rivet is a website bringing news, information, analysis, opinion and insight from the fast-moving blockchain world.

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