From the troubled USDT to Libra, how to stabilize the currency on the road to compliance

First, the troubled USDT and Libra

In the stable currency, the most influential now is USDT and Libra, and these two stable coins have been considered “difficult and difficult” in the recent period.

The problem of over-centralization of the USDT and the lack of openness and transparency of the financial system has been criticized by everyone. This rickety and sniper has been going on for a long time, and the visual inspection will last longer:

Since last year's Tether's first "man-made collapse", the USDT has been violent. In April this year, the company was accused of secretly misappropriating $850 million in funds to fill the gap. In May, not only was the court dismissed the protest, but it was also reported that it was over 50% likely to engage in securities fraud. In June, it was the case of New York. The state prosecutors are fully encircled…

The two parties just ended last night, in addition to arguing over the issue of jurisdiction, did not make any substantive progress on the case, and finally ended the 90-day ruling with the approval of New York Supreme Court Justice Joel M. Cohen. And Libra, his hard-won brother, is not so good. It took only a few months to introduce the concept. It has been under siege by the US government and the media, and the head of Libra keeps talking softly:

Libra will not be launched until regulatory concerns are resolved.

Recently, I even said that Libra may never be released.

Libra has been scrutinized by a number of jurisdictional governments and regulators, and we expect this review to continue. In addition, the market's acceptance of this currency is also very uncertain. Therefore, we cannot guarantee that Libra or our related products and services will be available in a timely manner or not at all.

Why are the two largest centralized stable currencies facing such great resistance? Are these resistances temporary? What is the root cause of these resistances? What is the result of waiting for them in the future? What can they do to achieve compliance development?

2. Whose cheese is stable in the currency?

Let me directly tell you my conclusion: USDT and Libra will continue to face supervision from the government in the future, and various kinds of regulatory measures such as hearings will not be interrupted. In the end, many centralized stable coins will either accept “received” or It may disappear.

Not only in the United States, but also in China in the future if there is a problem with stable currencies. For China, if you want to launch the Chinese version of Libra, the technical difficulty is not big, mainly the policy issues and regulatory issues. If a “Shantouqing” company or organization wants to get a Chinese version of Libra, I believe it will also be The "close care" of the central government.

why? The fundamental reason is that the centralized stable currency robs the country's coinage, that is, the power of currency issuance . The power of currency is the core of the country's normal operation, the core of state power, and something that is extremely important. It can only be enjoyed by the government, and it must not be allowed by other institutions. This is the real reason why USDT and Libra are now facing so much regulation and will continue to face endless regulation in the future.

The so-called "privacy", "security", "information disclosure", and "jurisdiction" are just excuses. Even without these problems, the government will find other problems to supervise you.

Therefore, regarding the issuance of stable coins, there will still be fierce struggles between the two sides in the future. In fact, it is not strictly a struggle, but a unilateral supervision and restriction of the centralized organization by the state.

Of course, from a certain perspective, the more strict the government regulates and restricts the stable currency issued by the private sector, the more the value of bitcoin's resistance to censorship and decentralization .

Third, the stable living space of stable coins

Although regulation and restrictions will last for a long time, there will be a result in the end, and this result seems to me to be a high probability: on the one hand, the private stable currency issuance organization will eventually have to admit defeat and obey the supervision; The centralized stabilization currency will not suffer a fatal blow, which means that there will still be a narrow living space.

It is well understood that the private stable currency issue organization will eventually obey the supervision, because the power of the two does not belong to one level compared with the government. A strong central organization can't fight the country. Facebook is already a very strong enterprise organization. It can cover one billion users. The company's capital and scale are very strong, but the government has not yet shot. Facebook has already I began to ask for mercy and admit defeat.

But why does the centralized organization have a narrow living space? Because enterprises are always innovative, and supervision is always lagging. No matter how the regulations are formulated, innovation can always find loopholes. In the period of policy keeping up, innovation can always exist for some time; and enterprises also have various delays. Tactics, can find ways to continue the introduction of government regulations, such as the establishment of business completely abroad, the establishment of a complex organizational structure to evade supervision, and even political lobbying.

However, these are not the most critical reasons. The most important reason is that the legal digital currency era is coming sooner or later. Even if you completely supervise the centralized stable currency, there will still be decentralized stable currency issuance in the market. Program, and this is something you can't supervise.

Digital currency is the general trend of the future. If the rhythm cannot be kept up, even the hegemony of the dollar may be lost. Even among the US lawmakers, many people realize this:

"I do think blockchain technology is the future, and it has great potential. We should pay attention to it. If the United States does not lead, then China will contend." At the much-watched US Senate cryptocurrency hearing, Cortex Masto Members said.

However, the introduction of legal digital currency is a very big reform, and it must be very cautious. If you take the wrong step, it may have irreversible consequences and great influence. Therefore, they also need civil organizations to help them fight the front station, do the pilot, and test the market reaction, which is why these centralized stable coins have a narrow living space.

The only requirement for the government to centralize these institutions and centralize stable coins is that they must be fully controllable and must be done in full accordance with national requirements.

That is to say, every centralized institution that issues stable currency must be under the strong supervision of the state, and the state will formulate many rules for them. These institutions must be fully compliant in order to continue to operate.

Fourth, the road to compliance

We can also try to guess the compliance conditions that may need to be met. I personally think these compliance conditions may include:

1. 100% deposit reserve.

100% deposit reserve is very important, and can only be 100%, not 90%, 80%. Because if it is 80% or 90% of the deposit reserve, there is a magnifying effect of the money multiplier, making these private currency institutions become the Fed and the bank in the sense of the fact, leading to the consequences of losing control.

In fact, 100% deposit reserve is not difficult to do. There are many stable currencies in the market. This is the case: USDT claims to be 100% mortgage, TUSD or USDC is 100% deposit reserve, Zhao Dong's RRB The foreign statement fully fulfills the 100% deposit reserve. Libra claims to be a kind of foreign exchange reserve that converts the corresponding legal currency into a basket and the national debts with sovereign risks. It is also basically similar to the 100% deposit reserve.

2. The quota system will be implemented in the number of issues.

This time the USDT was investigated because the issue of the USDT issuance has been stalked by the currency circle: every time the bitcoin rises, the reason for the media explanation must be due to the increase of the USDT; every bitcoin price falls. At the time, the reason for the media explanation must be because the USDT was investigated.

In the future, private stable currency issuers will not have the power to decide on the number of issuances. This power must belong to the central government. The central government will implement a quota system in terms of the number of issuances. That is to say, according to the size and qualification of different centralized organizations, different distribution quotas will be given, for example, 10 billion, 2 billion, and 5 billion. Under these quotas, you can issue them at will, as long as you do the appropriate reporting, but the portion that exceeds the quota cannot be added at will.

On the one hand, the market demand for stable currencies such as USDT is limited. Everyone needs to use stable coins such as USDT to enter the market instead of using them to store value, so the number of issued shares of several billion can already be preliminary. To meet the needs of the currency circle, on the other hand, the implementation of the quota system can ensure that the risk is controllable for the US government.

3. Designate a third-party custody, accept third-party audits, and publicly disclose audit results.

If the funds are managed by the stable currency issuer, there is room for fraud, and if the funds are custody in a third party, then there will be more protection for the funds. In the securities investment industry in modern finance, third parties are adopted. Hosting.

As for the third-party audit, the USDT was criticized by the whole market because it did not do this before. It was also the reason why the old cat described it as "the castle on the sand dunes". Jiang Zhuoer said more directly: "A combination of brokers and central banks has spent a lot of effort to get the USDT, not to audit publicly, and then to receive 1USD for 1USDT like a white rabbit, never to control the market with its unlimited printing capacity. Are you a silly * when Tether/Bitfinex's BOSS?"

It can be said that if the USDT insists on not performing the custody and auditing for a long time, even if the government does not find the trouble of the USDT, other competitors who are new competitors will do this, and then use this advantage to find opportunities to surpass the USDT. .

4. Strictly implement KYC.

It is often asked, will Libra have KYC when it comes time? Others say that if you have KYC, then does Libra not have the blockchain feature at all?

What I want to say is that KYC is definitely there! This is basically ok!

Not only will KYC, but also AML, all the compliance procedures in modern banks, these non-governmental stable currency issuers will not be less, the government does not care if you have blockchain features.

5. Foreign exchange control, taxation and other issues.

The issue of taxation and capital controls has always been the focus of the US government. The government has been dissatisfied with Bitcoin being used for various criminal activities and money laundering to disrupt the financial order. But for Bitcoin, it is difficult for the US government to regulate and levy taxes because of Bitcoin’s anonymity. It is still very strong.

However, the stable coins issued by these private institutions are different. It is still very easy to supervise. Especially according to what we said earlier, these stable coins will undergo strict KYC, AML, etc. during the process of distribution and use. On the other hand, the number of issuances is strictly controlled. If the US government is carrying out capital control and taxation, it is already almost the same as the ordinary dollar. It is not difficult.

V. Conclusion

Through these compliance methods, on the one hand, the government has realized the digitization of the US dollar through disguised civil institutions, which is equivalent to doing a pilot work in advance. If it succeeds, then the digitization of the US dollar can be promoted on a large scale. If it is unsuccessful, the impact will be affected. It is also very limited.

On the other hand, we can also see that if these compliance conditions are met, then these centralized stable coins are basically no different from the US dollar, and basically there is no blockchain element. This is also normal, because the stable currency pursues the connection between the physical world and the digital world, rather than the so-called blockchain elements.

Again, the stricter regulation of the government on stable currencies, the greater the living space of BTC and BCH. If you are pursuing decentralization and anti-censorship, then the digital currencies BTC and BCH are just right for you.