“Literature Coin” has some new features, but from the current point of view, the possibility that “Libra Coin” becomes a legal digital currency is negligible, and it is even more difficult to become a super-sovereign digital currency. In the absence of a sovereign state, virtual currency that has not been approved by central banks and incorporated into regulation is difficult to transcend national borders into a world currency. For “Literature Coins”, international organizations such as the Global Financial Stability Board and multinational central banks generally adopt a wait-and-see attitude and a cautious attitude.
Recently, social networking giant Facebook (Facebook) released its virtual currency "Libra" project white paper, which has received global attention. At the Dalian Summer Davos Forum held not long ago, “Libra Coin” also sparked heated discussions. Although Libra Coin has some distinctive features, it is not a legal digital currency and it is difficult to become a truly super-sovereign world currency.
In recent years, various monetary concepts have emerged in an endless stream, and it is necessary for people to distinguish between "electronic money", "digital currency" and "virtual currency". Electronic money mainly refers to the electronic legal currency, which is essentially legal tender. For example, the balance in a bank account e-wallet can be used for online payments, which emphasizes that the currency form is different from the real currency. Digital currency generally refers to a digital currency issued by the central bank and paralleled with banknotes. It has the same status as banknotes and is the legal currency that can be used for daily payment. At present, China's central bank is studying issues such as the issuance and operation framework of digital currency. The form of virtual currency is generally electronic or digital, but virtual currency is not a currency in nature, but a virtual commodity that completes transactions through channels such as the Internet. However, because there is not enough credit support, the virtual currency cannot assume the function of legal tender. Of course, we must also pay close attention to the changes in the virtual currency market and the development of blockchain technology, and timely strengthen risk warnings to protect the legitimate rights and interests of consumers.
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Take Libra Coin, Facebook believes that there are still 1.7 billion adults in the world who are not exposed to the financial system, unable to enjoy formal financial services, and the current financial transaction costs are too high, so it is necessary to break this pattern. According to its vision, Libra is a stable currency and a super-sovereign digital currency. Through the release of Libra, explore the establishment of a simple, borderless currency and financial infrastructure for billions of people.
Indeed, Libra has some new features. First, Libra anchors a basket of currencies and promises to exchange it with the fiat currency 1:1. This is not only better than the network “cryptocurrency” that is not linked to fiat money, but also looks more stable than the stable currency linked to a single currency. It is an upgraded version of the digital stable currency. Second, Libra is intended to be issued by Facebook with 2.7 billion users. International card giant Visa will support it. It is said that the payment will reach nearly 700 billion US dollars. It seems that it has greater influence and strong credibility on a global scale. Third, the Libra governance mechanism is relatively complete in form. Facebook's founding subsidiary, Calibra, builds and operates the Libra network on its behalf; Libra will be managed by the non-profit Libra Association, gradually reducing its reliance on founders and ensuring that social data is separated from financial data. In short, Libra is very different from some "cryptocurrencies", and many people think that Libra will subvert the global monetary system and even the financial system.
But from the moment, Libra is unlikely to become a legal digital currency, and it is even more difficult to become a super-sovereign digital currency. From the basic attributes, this digital stable currency linked to the legal currency equivalent is still a kind of “token”, and its value is difficult to be truly stable. The most important essence of money is the value scale. It is difficult to maintain the value of the value scale when it is difficult to maintain the currency value. From the scope of use, Libra can only be run and used on specific network platforms and network communities, and the application scenarios and specific uses are not clear. It is not only difficult to really improve cross-border payment efficiency, but also become an accomplice to money laundering and terrorist organization financing. From the perspective of governance mechanism, Libra Association is only a currency and management organization. Calibra is only responsible for specific operations and does not have the regulatory functions of central banks. In the absence of central bank approval, the relevant agencies do not have credibility. From a technical perspective, Libra relies on blockchain technology, which has the problem of “impossible triangle”, that is, “decentralization, high efficiency, and security” are difficult to achieve. In addition, Libra's practice of linking to a basket of French currency has increased its design difficulty and operational challenges, and it faces greater exchange rate risk and liquidity risk. Therefore, these so-called virtual currencies, because they are not issued by the monetary authorities, do not have monetary attributes such as legal and mandatory, and are not really money.
Furthermore, in the absence of a sovereign state, virtual currency that has not been approved by central banks and incorporated into regulation is difficult to transcend national borders into a world currency. Therefore, for the "Literature Coin", the International Financial Stability Council and other international organizations and central banks generally adopt a wait-and-see attitude and a cautious attitude.
Author: Dong Ximiao, Chong, vice president of Renmin University of China Financial Research.
Source: Economic Daily