Babbitt Column | Cai Weide: Only Digital Gold Can Fight Digital Dollars

preface

We are in the midst of a huge historical change. This change is not only a technological change, but also a financial change, a monetary change, and a legal change. From January 2015, the Wall Street Journal believed that the blockchain was the biggest financial innovation in 500 years. By 2015 and 2016, the Bank of England announced that it would issue digital legal currency, which is supported by the French currency, which is the largest legal currency change in the world in 320 years; In July 2018, with the support of the US government, IBM issued stable currency is the digital dollar; by 2019, a series of foreign stable coins appeared, such as JP Morgan Chase Bank, Facebook, VISA, 14 international banks to issue stable currency and cross-border Payment, these are historical events.

The times are progressing, history will not roll back, and when these things happen, many people are still asleep. When Facebook white papers shake the world, I still think that this is not a serious matter, and that China is ahead of other countries in this respect. In fact, China is far from being recognized abroad in this respect. It has been known since the white paper of Facebook that it is a serious proof of cognitive backwardness. In the past, foreign analysts have repeatedly warned that this matter is serious and has a major impact on the world economy, legal currency, and commercial banks. Even the US local banks are very anxious because it affects not only the world's commercial banks, but also their own banks.

After the baptism of thoughts from June 18th, many ideas emerged. But because this is a comprehensive discipline, it is not easy to understand, and some incorrect interpretations appear, for example:

Facebook stable currency is not important (other stable coins are not important), because it is not a legal currency, and Facebook is only a company, can not compete with national and national currency; (In fact, Facebook stable currency is the 2nd army of digital currency, the United States The government supports it later, it is the pioneer of the dollar that can attack, and the moat can protect it. Facebook is also a weapon for the world's new currency competition. Unlike the previous currency competition, many countries in the world worry that their currency is squeezed by Facebook. Is a new currency hegemonic business activity)

Facebook will become the world's central bank, because Facebook currency will be the world's universal currency; (In fact, Facebook is unlikely to be the world's central bank, Facebook stable currency is the US dollar tool, is the dollar's "little brother", Facebook does not have the Fed Support cannot be successful)

Bitcoin is digital gold, leading the world's digital currency. In the future, it will replace the national currency and the central bank system. The country can use bitcoin to fight against Facebook's stable currency. (The Fed believes that bitcoin has no value and cannot compete with Facebook; gold is only Is the king of money, digital gold will be the king of digital currency, digital gold can compete with Facebook coins)

Digital currency is only digital cash. There is only a small market for cash. Digital legal currency will not change the world financial system. It is not important to the national economy and market. This is just a small science and technology project. (In fact, digital currency has greatly changed the world financial system. Market, process, this face book currency shock world central bank and commercial bank is proof that now is not just the British support for this theory, the United States or other countries also support)

  There is no big difference between digital legal currency and current electronic money (now the currency in the banking system). China already has the world's most advanced and largest mobile electronic money system including Alipay and WeChat payment, and does not need to play this new technology abroad (digital currency and electronic The currencies are very different. Based on the consensus, the world financial system, market, and process flow are greatly changed. For example, clearing and settlement are very different. In the new technology, there is no need to reconcile after multi-party consensus, and it is no longer a unit decision. In the end, which method is more competitive for a pluralistic society? According to the Facebook hearing, one of the purposes of the Facebook Stabilization Coin is to prepare for competition with the Chinese payment system and to deal with “old technology” with “new technology”.

   With these stable currencies, the world's financial risks have greatly increased, and money laundering is as rampant as bitcoin; (in fact, this is misunderstood blockchain is bitcoin, misunderstanding these stable coins is bitcoin. These stable coins are money-laundering nemesis, use After the stabilization of the currency, the supervision is greatly increased, and the financial risk is greatly reduced. If many countries use blockchain finance, the national financial risk of not using the blockchain will rise)

● The World Bank, including the US central bank's Fed against Facebook, will give trouble to Facebook; (The Fed supports the "little brother", "pioneer" and "moat" because Facebook is a stable dollar. With these younger brothers, the US dollar more stable)

  The United States will not give up SWIFT because it is a tool for the United States to handle international affairs. (In fact, blockchain is more stringent than SWIFT regulation. The US abandoning the traditional SWIFT approach and adopting the blockchain is the right route. Now the Stabilizationcoin project can replace SWIFT, and SWIFT is changing the way it is)

Many people started to discuss how to deal with Facebook's Libra, but we need to keep our minds clear, and when we think clearly, we can have a correct response.

Wal-Mart Stabilization Coin continues to shake the world
When the white paper of the stable currency was issued on June 18, 2019, the world was shaken. Some people haven't woken up yet. On August 2, Wal-Mart announced the issuance of stable coins, shaking the world again. In the past, the author described the explosion of stable coins with five tigers [1], but now there are 6 tigers (6 important stable coins) [2, 3]. Wal-Mart's stable currency should be the world's largest supply chain financial system. Do cross-border payments and engage in commercial banking business. Wal-Mart is the world's largest company by market capitalization. Last year, its revenue exceeded US$500 billion. It controls the world's largest supply chain system and is involved in all aspects of the client and the B-end. Wal-Mart can receive payment settlement without commercial banks. Commercial banks receive Strike.

Wal-Mart Stabilization Coin Becomes World Supply Chain Currency

Wal-Mart learned Libra's pain at the hearing, directly linked to the US dollar, and registered in the United States. In this way, the stronger the Wal-Mart stable currency, the stronger the US dollar, and the ability to enter the C- and B-ends of the world, which is very powerful. Wal-Mart Stabilization Coin is a digital dollar younger brother, not a digital dollar boss (the boss is the national dollar of the national central bank), if the Wal-Mart stable currency is decoupled from the US dollar, the next day will be the US market [4]. Wal-Mart is a large multinational company with a large number of suppliers and markets around the world. If you use Wal-Mart stable coins when trading internationally, this will rewrite the history of money and will squeeze the legal currency of many countries in the world.

From finance: (non-bank) companies become digital banks

When the banking business is transferred to a stable (non-bank) company, the company is equivalent to becoming a bank without a banking license. This is an important concept that I mentioned in 2017. “From finance”, the era of blockchain has produced self-finance. Many people think that Bitcoin and Ethereum are self-financed. I don’t think so. Libra or Wal-Mart is the financial company.

Self-finance organization

“Self-finance” represents an important concept. Companies selling rice, cinemas, ceramics, art companies, oil, etc. can all become digital banks, because such banking systems can also provide loans, payments, clearing, settlement, taxation, Credit information and other work. So US President Trump said that if Facebook wants to become a bank, apply for a banking license! Such a self-financing company has become a digital bank without a banking license, or a digital bank that is not a bank, which has changed the structure of the financial market.

New economic theory needs to come out

Traditional macroeconomics is to study GDP, supply, income, finance, price, government management, and monetary policy. These problems still exist, but these are not the issues discussed now. The question now being discussed is in the blockchain or the digital legal currency (stable currency). What is the new economic structure? What process? What theory? What currency policy? We need new economics, and such a theory is different from traditional economics. Even if there was a similar theory before, but what happened now is something that has not been experienced before, because we are taking a path that humans have never walked.

Those theories did not come out:

The theoretical foundation of the "Boss with the younger brother" has not yet come out. In this model, the stable currency can be a pioneer or a moat. The pioneer can enter other countries' markets (and the legal currency is not necessarily accessible), and the moat protects the national currency.

New regulatory technologies have not yet emerged. Without these technologies, new economic activities cannot be regulated.

Theories of national currency, economy, financial market, and cross-border trade based on digital currency have not yet come out.

So now it is an explosion of new economics, and many new theories can come out.

Don't think that these stable coins are not important. It is not important to say that these three weeks ago. Recently, international bankers and authors discussed that they are very disgusted with Libra's ability to enter the world's markets, and consider it a new "colonial policy" or a new economic hegemonism.

Digital currency affects the overall financial system

Let's take a look at the digital legal currency, the influence of an army. For example, when the Bank of England proposed digital legal currency in 2015, they directly thought that it would change the market structure of the monetary policy, and the Bank of England proposed the big central bank model. The digital legal currency and the traditional legal currency exist at the same time, different uses and different monetary policies. The Bank of England’s big central bank model is not through commercial banks. The central bank directly connects with financial institutions and provides the whole society’s digital currency issuance and circulation maintenance. And other services. This is actually an impact on commercial banks.

When the central bank discussed this matter in 2016, it was considered to be the most significant national currency reform in more than 300 years, in which everyone discussed how digital currency would affect the economy. Some economists at the Bank of England believe that if the issue of digital currency will increase the UK's economic GDP by 3%, the other is to help the country's economic development, interest rates, and later include other countries such as the United States, Canada, South Korea also published papers.

Some studies in the United States believe that digital currency will change the entire financial sector and the market, saying that the entire currency market will change, and the entire money market will be more transparent, and that this cost is very low. There are also some negative reports, but most of the reports are positive.

US research believes that digital currency brings big disruption in financial markets

Look at the digital law currency of the Second Army, such as Libra, which is a non-central bank. Now the army has not yet come out, but the Second Army has shaken the world (if there is an army, what impact will it have?), and for the first time almost all central banks have responded, the US central bank supports, other central banks object, that this is currency hegemony Or the new economic colonial policy. This is a new type of currency competition, not an old-style currency competition. The new type of currency competition is speed, second, security, third, regulation, and fourth, monetary policy [5].

Will commercial banks agree to "big central bankism"?

The Bank of England said that it is necessary to say that central bankers, commercial banks are willing to agree? It will drive the structure of a new central bank and commercial banks. Now only the Second Army comes out, but many commercial banks at home and abroad are collectively anxious, including banks in the United States. In fact, the bank I am most worried about is the US domestic bank.
The arrival of stable currency, change monetary regulatory policies, business models, national monetary policy, people's lives, corporate planning policies, such as companies to issue their own stable coins or accept stable coins issued by other companies? These will make great changes in all aspects. There are more than one hundred stable coins planned in the world, and foreign central banks that have always insisted on not allowing institutions to issue currency support the commercial banks or technology companies to issue stable coins. Counter Libra's stable currency.

Orphans in 2018 shocked history in 2019

In 2018, the author often said that stabilizing coins is a very important initiative, and I have been writing about it. But in 2018 this concept is an orphan! Because every time, people think that the stable currency has no value and is not willing to invest or study. However, in 2019, this orphan shocked the entire world central bank and commercial banks.

From 2016 onwards, the author described the importance, urgency, necessity, and explosiveness of the matter with "the battlefield of the military," "ten aircraft carriers," "Zhuge Liang's street pavilion," and "five tigers." .

How to counter Libra stable coins?

Many people ask how to compete against a digital currency like Libra. First, you need to know one thing. First of all, what is the power behind these stable coins? If you know the power behind you, you have to find out how to counter the power behind. It has been said that the gold of digital currency is bitcoin, because it has a number of deflation, can be distinguished, can not be traced, etc., but the US President and the Federal Reserve directly said that Bitcoin has no value, the Fed also said in June 2019 that Bitcoin is a big deal. The US currency has no effect at all [6]. The Fed said that the bitcoin market is too small to be worthy of attention. The power behind Bitcoin is the market scam, speculators, can they fight Libra with legal currency support?

The long-term opponent of the dollar is factual gold

Looking at another thing, and what happened recently is that the US president now chooses the Fed’s commissioner, and the commissioner has proposed to return to the “gold-based currency”. The true contender for the dollar over the years is not other legal currency but gold! The Fed is mostly hitting gold.
The US President recommended the gold standard to enter the Fed. Some people say that gold has no value. Bitcoin has value. This is the view of the currency circle. How should the value be determined? Some people say that the price is fixed, the author thinks it is not, the price will always change. If you look at the price, the value of Bitcoin should be determined by the price 10 years ago, or the price of 5 years ago, or the price of yesterday, or the price after 10 years?

American gold is protected by the military

The Federal Reserve is protected by the police

The author believes that value is determined by a protection mechanism. Let's take a look at the photos of the Fed, which is guarded by police, including plainclothes police. Let's take a look at Fort Knox, the place where the US government saves gold. So what protection does Fort Knox protect? Protected by US troops, tanks, and airplanes! Looking at Bitcoin, what protection is Bitcoin used? Protected with a cold wallet.

protection mechanism discuss
Dollar Policemen The Fed’s release is the US’s
gold Army, tank, aircraft to protect The basis of the gold standard, the dollar
Bitcoin Cold wallet The Fed and the US government believe that there is no value

In the end, is that the king of money? If the dollar is the king of money, the tank should be placed in front of the Fed and the police on Fort Knox. If Bitcoin is the king of money, American tanks should be protected outside the cold wallet. So the real value is also the king of money is gold!

If Bitcoin disappears in the world today, will the US still be there? Yes, and the United States has not changed. But what if the US gold is gone? The dollar has fallen sharply, the United States is no longer a world power, and the economy is regressing! This is why the United States is protecting the gold in Fort Knox by the military. Don't believe that the Fed says that "gold is not the basis of the dollar." If so, gold should be completely open and free to trade like an item. It does not require tank protection or restrictions on exit. Many countries now restrict gold trading and exit.

Only "Digital Gold" can fight against Libra

If gold is the king of money, then the "digital gold" based on gold is the king of digital currency. Only "digital gold" can compete with "digital dollar". When foreign bankers discussed with me, they also believed that they could only fight Libra with "digital gold."

Three major elements of the new economy

These thoughts are the first thing we need to know, what is the most important factor in the new economic environment? There are three major elements in the new economic system. If these three elements are right, the thinking will be correct. The three elements are technology, currency, and law.

Technology is the foundation of the new economy

The first is technology. New technology leads new financial technology, and new technology is the mother of the new economy. For example, blockchain, the Internet, big data, artificial intelligence, the Internet of Things and other new technologies. New network and computer infrastructure. Some people say that Bitcoin is the infrastructure of the new economy. I don't think it is any. Digital tokens are not financial infrastructure. Only new sections such as the new network are truly new infrastructure.

Therefore, if China says to fight against Libra, it needs a long-term plan. The plan is first and foremost based on technology. To develop new technologies, it is not always to "learn" foreign technology. Know what is real technology and what is false technology.

Business plan that integrates currency

This first human business event can not only have traditional business activities, but also integrate the (self-issued) currency into a part of the overall business activities! For example, Facebook's Libra is a business activity, but with Libra support! This currency can be tapped into a market that was previously inaccessible (this is the "pioneer" model)! This changes the world financial market. Digital banking, digital equities, cross-border payments, trade finance, supply chain finance, insurance, smart finance, etc. have all changed.

In addition, the capital of all currencies is ultimately gold. Some people say that the dollar has long been decoupled from gold, and gold is not important! If this theory is correct, the army at Fort Knox can be used. Today is not to see how the country announces her monetary policy, but to see actual actions. If gold is not the dollar, Fort Knox is just a police protection.

The US dollar is the foundation of the US stable currency such as Libra, and gold is the capital of the US dollar, so gold is the capital of the US digital currency and the book of all the world's digital currencies! Without gold, there is no value. Bitcoin is because there is no gold behind it, and the Fed believes that it has no value.

New technology promotes legal reform

This is not mentioned in the previous textbooks, and this will even affect the government's currency issuing policy, affecting the company, which is different from the previous, because it affects the law, enforceable laws, and automatically executed smart contracts, Digital society, digital courts, digital arbitration, digital government, digital companies, etc. are all new directions [7, 8].

Regulatory regulations are now seriously behind the impact of technology

The following are the regulatory principles of the US regulatory authorities for the exchanges. It can be found that the above rules are actually in the Internet era. After the Internet era, there is no change. It is completely determined by the system and the traditional legal point of view!

  • SEC states that entities operated by Alternative Trading System (ATS) are subject to regulatory constraints
  • The exchange should be registered with the SEC as a broker and become a member of the self-regulatory organization.
  • Develop sound policies and procedures to prevent misuse of information, books and records requirements, and financial liability rules
  • Includes applicable requirements for the protection and retention of client funds and securities. The SEC is adopting such regulatory measures to “protect investors, prevent fraud, and manipulate transactions”
US regulatory law is also a product of the Internet era. We interviewed US regulators (such as the SEC) and found that they have internal differences. Some people believe that the existing law is sufficient, and only need to expand the interpretation of the existing law to respond to new questions raised by science and technology. However, some regulators have realized that many existing laws and specific regulations are not enough, and they need more sound laws and regulations. The problem is that the regulators are unable to provide timely feedback on issues raised by the rapid development of technology – such as changing laws and regulations or having new legislation. One of the reasons is that it takes a long time to change the regulations and the process is complicated, and the supervisory unit is not willing to take responsibility. They are worried about being too radical, such as introducing too much "innovative" legislation, and if they have problems, they will be criticized by society, so their behavior tends to be conservative. This has led to the failure to introduce new laws and regulations to respond to new problems brought about by technology, but to expand and explain existing laws and regulations, but this is not enough.

Everyone can think about it. These "old grandmother" regulations are enough to solve the current problems? These regulations, which have not caught up with the Internet era, are still applicable in today's blockchain era? When the relevant regulatory conferences were held in the United States, many well-known practitioners expressed their strong willingness to change the regulations for US regulators.

You can look at the development of law. In the past, from the time of Moses to Rome, several major changes in Chinese history, modern British, American legal systems, finally in 2018, both Eastern and Western have proposed new legal concepts, and the Law Commission in the United Kingdom began to study Smart contracts and blockchains are put into the laws of the United Kingdom, and China has proposed to put "enforceable laws." Today, technology has not only changed the currency, changed finance, but also changed the law, including legislation, justice, and law enforcement [9, 10].

The big change in the world is today, we are writing history

One thing we can see is that we are now at a historic moment. We are at the right time. We have experienced a major event that the world has not experienced, that is, in technology and money, finance and law. At the same time, it was a huge development.

The largest monetary reform in 320 years

Currency is one of the most significant developments in 320 years. It is changed from banknotes or electronic money to digital currency. The concept is proposed by the Bank of England. Another financial change is the first new billing law in 520 years. This new accounting method will enter the world into a digital finance.

The biggest legal reform in the millennium

This legal change is a jurisprudence that leads the whole world into a new era and a major change in law enforcement and justice in particular. This is why humans have not had three relationships with human life, society and the state for three years. There is a revolution in change, so we are in one. It is often said that if we live in what era, we don’t have to envy, because we are undergoing major changes, a major change that has not happened in the history of the world.

The big reform will take a long time to digest

Such a big change is definitely not completed in 10 years. I believe that it will not be completed in 20 years. I believe that it will not be completed in 30 years. It is a human evolution and social evolution that is 100 years or even hundreds of years. A huge change in the evolution of technology. This change will surpass the imagination of many people, and the various aspects it brings are never encountered in human history.

references:

[1]. Cai Weide, He Juan, “The application of blockchain is not a wolf but a tiger is coming”, 2019.06.17, https://mp.weixin.qq.com/s/dFmVzO8hiDT5i_-s3c8PVQ

[2]. Cai Weide, Jiang Xiaofang, “What should I do if Facebook has a big storm?”, 2010.07.12, https://mp.weixin.qq.com/s/69W6eb5CGwf1gYmLgTKYbg

[3]. Cai Weide, "The world is taking a road that has not been passed: the US president does not support Facebook Libra, is it true?", 2011.0.27, https://mp.weixin.qq.com/s/qpgE4GQOKXyJYj9xY2o6MA

[4]. Yuan Shang, "Cai Weide: Wal-Mart issued a stable currency destructive power, Libra will make the US dollar pervasive", 2011.08, https://mp.weixin.qq.com/s/Uw4Y4zIn_nORgOsDcB94-w

[5]. Cai Weide, Jiang Xiaofang, "The new currency competition is coming? Yes!", 2011.06.21, https://mp.weixin.qq.com/s/xqO0MDZiET4zqsnljAfWTQ

[6]. Lin Jiayi, “Countries supervise the siege of Facebook's coinage, the Fed’s solidarity! What kind of war will this be?”,2019.06.20, https://mp.weixin.qq.com/s/uRV3Qi_fk54nmaLWHyE69Q

[7]. Cai Weide, Jiang Xiaofang, “The Chinese Dream of Blockchain: Building the Digital Society with the World”, https://mp.weixin.qq.com/s/WCIMDUSrCueJyNAMpAn8hA

[8]. Cai Weide et al., “The Blockchain Chinese Dream III: The automatic implementation of the law will subvert the legal research, legal system and legal practice”, https://mp.weixin.qq.com/s/LpBO3jzhf2aXPhmj0u8dsw

[9]. Cai Weide et al., “The Chinese Dream of Blockchain: RegTech Weaves a Comprehensive Security Dream”, https://mp.weixin.qq.com/s/YY7oZj4u-oc3vRUIk9z3rg

[10]. Cai Weide, "Taishan Sandbox tells you: Facebook stable currency technology may become the mainstream of blockchain in the future",2019.07.08, https://mp.weixin.qq.com/s/NS6f0yuTwfRDl4pcSQ75fA

Author: Cai Weide Northern digital society and the block chain laboratories, day-Tech, National Data (Guizhou) Integrated Block Chaining Internet lab test area, the day the people (Qingdao) International Institute for sand box, CCID (Qingdao) block Chain Institute

Jiang Jiaying, Ph.D., School of Law, Emory University, USA

The original title "Three Key Elements of the Macro-World New Economy: Technology, Currency, and Law (Only Digital Gold Can Fight Digital Dollars)"