After the release of the Libra white paper, it shocked the world, and many central banks, as well as commercial banks and financial institutions, made very big adjustments, including China. Recently I have studied foreign countries to see China's response to Libra and the development of China's payment system.
China has always been ahead of the world in mobile payments because China has the largest payment market, especially the mobile payment market. Nearly 560 million people in China go online, and each person spends an average of 20 hours a week. This large amount is a big advantage for the Chinese payment market. Therefore, the cost of China's payment market is the lowest in the world, and the scale is the largest in the world. Because of the network effect (that is, "friends use, I also use"), many people use Alipay and WeChat to pay. Therefore, China has always been the world's number one in payment systems.
Some people put digital currency and electronic money together, and some think that digital currency is a kind of electronic money. In order to avoid misunderstanding, we now list four kinds of currency forms.
- Security Analysis: Libra lacks the basic components of encryption key security
- Interview with David Marcus: Bitcoin's failure in payment has spawned Libra
- Comment: Is Libra a paper tiger?
- Facebook holds high "Libra" Bitcoin market rises
- Forbes: Facebook or the issue of coins on June 18, may bring six major impacts
- Six key issues in front of Facebook and Libra
- The first is the bank or the electronic money in SWIFT, which records the funds in the bank book.
- The second is a third-party payment system, such as WeChat payment, Alipay and other electronic money.
- The third type is digital tokens, such as Bitcoin, Ethereum, etc. But their value is not recognized by many central banks or governments.
- The fourth is the so-called digital legal currency (CBDC) or stable currency. At the beginning, the stable currency was not linked to the digital currency, but since the stabilization of the company by IBM in July 2018, the stable currency was linked to the digital currency. In May 2019, the International Monetary Fund also believed that this stable currency was a digital legal currency. There were a variety of digital legal coins in the world to stabilize the currency, including JPMorgan Chase Bank, VISA, 14 international banks, and faces. book.
Foreign critics agree that China is far ahead of traditional electronic money, and foreign countries, including the United States, cannot compete.
The third-party payment system is very powerful and can be settled in real time on the mobile phone. It is easy to use, safe, fast, and reliable, and it is a “bank”. This is the success of the Chinese. However, there is still a gap between the electronic money on the third party payment system and the payment system of the blockchain:
3. Digital currency data cannot be changed, and electronic money data can still be changed.
4. There is a consensus mechanism for digital currency, and electronic money is a word.
There is a consensus mechanism for Facebook's stable currency. After consensus, there is almost no reconciliation. There is a consensus mechanism that has a consensus economy. The consensus economy is that you and I both agree to gradually put it on the ledger, with the following characteristics:
- I and you have reached a consensus at the same time, not that you agreed yesterday, I agreed today, we agreed at the same time.
- I know your data (and it is consistent with my data), and I know that you can't change the data that exists there.
- You know my data (and it is consistent with your data), you know that I can't change the data that exists here.
- Any unit joining this consensus mechanism also got the same result.
This is a "consensus economy." This means that although we are a distributed system, each person has its own ledger, but the ledger data is consistent, and the ledger cannot be changed, and no reconciliation is required in the future. In this environment, the transaction speed is fast, the two parties do not know each other, and they have not seen each other. They also have confidence that the transaction can be successfully completed.
Foreign countries believe that such a model can combat Alipay and WeChat payment systems. The systems of Alipay and WeChat are centralized, and there is no consensus mechanism. In today's diverse society, the competitiveness of such centralized systems is becoming weaker. But the most powerful is the unified currency.
The third party payment system still uses French currency as its unit and does not have its own currency. In the new economy, currency is one of the three major elements . Facebook publishes money, obtains funds, and uses the same currency for cross-border trade finance. Cross-border payment does not require two different legal currencies, and the process is greatly simplified. For example, a store is doing business in 10 countries, and a fund is transferred in 10 countries. It needs to be changed several times, and the conversion cost is amazing. However, if you only use Facebook to stabilize the currency, you can change it once. This merchant may use Facebook stable currency, pay 10 stable coins, and the other party will receive 10 stable coins; but if you use electronic money, pay 10 yuan, the other party gets 10 equal dollars, there is conversion Cost, change one more time.
The euro was established for this reason. Now the emergence of stable currency is to learn the euro of the year and to circulate the countries in a unified currency.
When there are six large stable currency plans in foreign countries, China has not yet introduced its own plans. The Bank of China recently stated that it would issue digital legal currency. Foreign analysts immediately said that this was a "black box" because there was no detail and could not be evaluated .
The digital legal currency should belong to the alliance chain, multi-center system. A multi-center system is not a fully centralized system, but it is not a fully distributed system. It is a multi-center system between the two. Foreign analysts admit that China is far ahead in mobile payments (Alipay and WeChat payment), so a few months ago, foreign bankers said that Alipay and UnionPay are the targets that foreign bankers or financial institutions are ready to target, ready to market. Competing with the two companies, the way they compete is to stabilize the currency.
David Marcus, the director of Facebook Stabilization Coin, was the former president of PayPal and has a good understanding of payment systems, markets, and regulations. One more thing, Facebook found that competitor Telegram had reached $5 billion in 2018. In fact, Telegram is not able to compete with Facebook in foreign countries. It is a long distance from Facebook, but Telegram has reached $5 billion with ICO. Facebook is very concerned about this matter and has been studying how to make a legally compliant global payment system that can compete with Alipay, WeChat, and Telegram. This is the stable coin of Facebook that came out later.
Speaking of the current bank cross-border payment system, foreign analysts have publicly accused them since 2018 . They believe that the current banking system, including SWIFT's slow payment system, should have been closed. The times have passed and they are still living in the past. Since 2015, Wall Street has recognized the importance of blockchain technology, and many countries (including Europe, Asia, and Africa) have also experimented with central banks [6, 7]. They think these old banking systems should be closed! People are willing to use stable currency rather than going to the bank to use a slow bank cross-border payment system.
The foreign analytical Facebook system talks about an important point of view . According to the Facebook white paper, Facebook has created a new Internet “money Internet” that has become the infrastructure of Libra. In the past, there was the Internet and the Internet of Things. The currency Internet is also the "Internet of value" . This concept is based on Facebook's white paper:
Our world really needs a solid digital currency and financial infrastructure, and the combination of the two must be able to deliver on the promise of the “money internet”. The world truly needs a reliable digital currency and infrastructure that together can deliver on the promise of "the internet of money."
Protecting financial assets on mobile devices should be simple and intuitive. Regardless of where you live, what you do or what your income is, transferring money globally should be as easy, cost-effective, and even safer as sending text messages or sharing photos. New product innovations and new players in the financial ecosystem will help reduce the difficulty of getting everyone's access to capital while providing a smoother and more seamless payment experience for more people. Securing your financial assets on your mobile device should be simple and intuitive. Moving money around globally should be as easy and cost-effective as—and even more safe and secure than—sending a text message or sharing a photo, no matter where you live New product innovation and additional entrants to the ecosystem will enable the lowering of barriers to access and cost of capital for everyone and facilitat frictionless payments for more people.
The value network is the concept that the author has been pushing. The author first proposed this concept from the Guiyang Digital Expo in May 2017, and proposed the Internet model of the Panda and Golden Monkey blockchain, which was presented in lectures in Shenzhen, Beijing, Tianjin, Shanghai, Fuzhou, etc., in 2018. Also wrote that this is the blockchain Chinese dream .
Carnegie Endowment is a famous think tank in the United States. Analyst Michael Pettis lives in China and first observes China's response to Libra. He supports Facebook's point of view and believes that the new value network era has arrived. His discussion is very long, and he points out his views on Facebook 2 :
- Complicating central bank monetary policy: Because the world now has legal currency in other countries, as well as these very stable stable currencies, these stable coins are followed by other countries’ legal currency, and they are also cross-border payments than current banks. The system is much faster. For example, ordinary people can receive the same information within an hour. The central bank has not yet met, and the people may have picked up their mobile phones to complete the action.
- A procyclical digital currency: The stability of these stable currencies will increase the economic cycle. For example, economic growth, digital currency will boost economic growth; but when the economic crisis comes, funds will quickly leave. This is a problem that the Bank of England is worried about. During the economic crisis, the state’s money is hiding in the central bank, causing more damage to the real economy. Digital currency is much faster than the current bank's electronic money, and it is one of the four important characteristics of the new currency competition.
In July 2019, Japan decided to develop a blockchain-based cross-border payment platform to replace SWIFT.
Why is Japan developing this technology? Because you have to fight against money laundering!  This is equivalent to Japan's agreement with the author that the money laundering on the digital currency is equivalent to committing crimes in the police station.
The purpose of the cross-border payment platform is to fight against money laundering
Of course SWIFT will not stop their work. In the past, SWIFT has always said that the blockchain will not replace SWIFT, but it is afraid that it will be replaced. Wherever there will be a unit saying "we will not be replaced", only the units that are likely to be replaced will come out to say this. SWIFT has been engaged in blockchain experiments over the past two years, which is to delay the time of replacement .
However, the layout of any stable currency is to ignore the SWIFT agreement and make a new agreement. For example, Facebook, do they use SWIFT's protocol (eg gpi)? Other stable currency projects, which announcement will use the SWIFT protocol? The SWIFT agreement is electronic money. Now is the era of digital currency. Who will return to the original agreement? Think about the use of cars today, where will return to the management of the carriage? Is it possible to prepare horse food at the car charging station?
This is a concept that the author has been talking about. “The blockchain subversion will be thorough and will not be a half-hanger”, which was mentioned in the speech of Beijing in January 2018 . For example, Facebook's payment system is a re-established payment system that does not use the design of the current banking system. SWIFT's past experiments used blockchains on existing systems. This would be “four unlike”, not the original system, and could not make good use of the blockchain characteristics. What they should do is re-create a new system outside, just using the original data definitions such as SWIFT code, but the system is completely new. SWIFT should study Japan this time.
JPMorgan Chase Bank of the United States began deploying digital banking. These are no longer news. Many of the big banks I have encountered, including the US, UK, Africa, and Asian banks, are saying that they are deploying digital banks. Now it should be said that which big bank is not envisioning digital banking? Now that the internals have not yet begun, the outside world is saying that it is going on. In January 2019, Asian banks said they wanted to establish a digital bank and cooperate with the international blockchain technology team.
Last year, the Hong Kong government approved virtual banks, but these virtual banks are not what we think of as digital banks, but rather as Internet banks without offices or in the form of traditional banks. However, the digital bank that is now considered is a blockchain-based bank. New digital banks are being deployed in banks in the US, Europe, Africa, the Middle East and Southeast Asia.
This time Libra storm, the impact is indeed huge .
 Charlie Osborne, “Japan to create SWIFT replacement for global cryptocurrncy trading,” July 19, 2019.
 Michael Pettis, “Facebook's Libra: does the world need frictionless Money.” June 27, 2019.
 Ben Yorke, “3 things that Western Media is Missing out China's new Digital Currency,” Aug. 12, 2019.
 Karla Friede, “PayThink: Bank led Cross-Border Payments are Fraught with Frictions,” July 31, 2018.
 Cai Weide, Jiang Jiaying, “The three major elements of the macro-world new economy: technology, currency, and law (only digital gold can fight against the dollar)”, 2011.08.13.
 Cai Weide, “Cai Weide: The Feasibility of Blockchain Application in the Financial Field”.
 Cai Weide et al., “The lessons of tens of millions of dollars – the difficulties and solutions SWIFT encountered”.
 Cai Weide et al., “Blockchain Internet”, 2017.6.3.
 Cai Weide et al., “One of the Chinese Dreams of Blockchain: Blockchain Internet leads China's scientific and technological progress”.
 Cai Weide, Jiang Xiaofang, “What should I do if Facebook has a big storm?”, 2010.07.12.
 Osato Avan-Nomayo, “Japan Wants to Develop Cross-Border Cryptocurrency Payments Network Similar to SWIFT”, July 19, 2019.
 Cai Weide, “Review | Struggle Lecture Hall: How to Reconstruct the New Pattern of Financial Technology in Blockchain”, 2018.10.29.