From the perspective of currency creation, many people will understand the Libra Alliance as Libra's “central bank” – indeed, a “distributed central bank” seems to be shocking enough. However, the author believes that the alliance is Libra's “government” and asserts that this is the root of Libra's great influence – it not only creates the supply of this currency, but also creates the demand for this currency. This analysis is also evaluated. Whether Libra can be called "a big change in the millennium" provides a new perspective.
1. Is Libra a "new bottle of old wine"?
When many people analyze Libra, they will find two characteristics: First, from the blockchain/digital currency level, Libra is equivalent to a stable chain based on the alliance chain. It is not known how to go to the public chain in the future. Compared to the stable currency, the difference is only to anchor a basket of currencies rather than a single national currency. Second, from a traditional financial perspective, Libra is much like a special drawing right (SDR) endorsed/accepted by members of the Libra Alliance. The difference is that the alliance is not a group of IMF-led, central banks, but a bunch of companies.
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It seems that Libra has not made any great innovations in the digital currency field or the traditional financial field. However, the countries of the world seem to be on the verge of enemies: the US Senate and the House of Representatives have taken turns to hear, and many scholars have suggested that the blockers have it. Participants have it, and it is recommended to introduce another Libra to counter the ones. Did you make a big fuss? Why is a "new bottle of old wine" something so influential? It seems necessary to analyze Libra's source of influence in depth, in order to see its essence, and to talk about it correctly.
Second, the deviant "modern currency theory (MMT)"
Before analyzing the influence of Libra, we must first mention a theory in the field of money: Modern Monetary Theory (MMT). This theory has existed for 30 years and has been controversial, mainly because some of its conclusions seem to be deviant, at least at present, it is difficult for governments or central banks to adopt. This article does not discuss in depth. On the other hand, MMT does have quite a lot of convincing theoretical foundations. The most important one is the concept of “tax money”. This concept is not difficult to understand and is more easily accepted. It is also MMT vitality and still has One of the important reasons for a big market.
The author summarizes the theory of “tax money” as follows: The legal currency of a country can occupy a dominant position, not because the government monopolizes the currency distribution rights through violent means and forces citizens and enterprises to use it, but by stipulating that the tax must be made by legal currency. Payment , so that citizens and businesses in the market consciously use legal tenders for market transactions – because doing so is economically a reasonable choice, otherwise it will need to be constantly exchanged between “market currency” and “tax currency”. Since citizens (and enterprises) can only avoid "life, death, and tax payment", and which currency is used to pay taxes, it is naturally within the public power of the government. Therefore, the final market will form a joint force to establish the circulation status of the legal currency within a country. . To put it simply: “The government created the demand for legal currency through taxation ”, which ultimately established the status of the legal currency.
Objectively speaking, the taxation currency theory is one of the many legal currency origin theories, and has no direct relationship with MMT, just because MMT must first demonstrate the rationality of the “government issuing currency” behavior, but must use the tax currency as the tax currency. One of its theoretical foundations. The later part of this paper draws on the ideas of taxation currency theory to analyze Libra's influence. It does not mean that these analyses are based on the correctness of modern monetary theory (MMT), or even completely based on the correctness of taxation monetary theory.
Third, Libra created new currency needs
The main point of this paper is that Libra lays the foundation for the existence of this currency by satisfying three needs and has a huge impact on the world. These three requirements are: the existence of the market as the means of payment, the ability to have free circulation across markets, and moderate privacy protection. Referring to the taxation currency theory, more precisely, the Libra Alliance has created a “ new demand for the Trinity ” through certain commitments and means, and Libra is the currency to meet this demand.
First of all, the Libra white paper has just been released soon after it has produced such a big response, apparently from Facebook's so-called 2.7 billion people's ecological environment, which means that people believe that Facebook will accept this currency to pay for the purchase in its ecological environment. products and services. Not only that, but from the nature and number of Libra alliance members, the first batch of 28 alliance members has the largest number of "Technology & Marketplace", a total of eight, and more importantly, Facebook puts itself Belong to this category . In other words, the other seven members are consistent with Facebook's role in the alliance – accepting Libra as a payment tool in the markets they operate.
This is enough to prove that the purpose of the Libra Alliance is very clear: to provide a market for this currency, thus creating the need to use this currency for payment . Using the tax-money theory as an analogy, the Libra Alliance is the “government” that issues Libra, and Libra is close to the “legal currency” within the consortium . This is also a significant difference between the author and most scholars in understanding the Libra alliance – most people will understand the alliance as Libra's "central bank", and the author asserts that he is Libra's "government" because the central bank is not responsible To create demand for a currency, the government can.
Second, the need for people to freely use payment methods across multiple business entities has not been effectively met. For example, some people once compared Libra to Facebook's "Q coins", but don't forget, don't say Q coins, which is basically the equivalent of the WeChat payment balance in the RMB, and can't buy things in Taobao. Everyone is interested in searching for the question "Can Taobao shop be able to pay with WeChat", the answer must be this: "Please withdraw the WeChat balance to the bank account, then recharge to Alipay, you can shop in Taobao." Simply put, such a payment system based on the traditional account model is simply not free to use across the subject, and must rely on traditional banks and interbank payment clearing networks, which also means high technical costs and Regulatory costs.
At this point, the significance of Libra's use of blockchain is obvious: the blockchain- based asset registration model is a holder-centric accounting model that naturally solves cross-subject asset registration and transfer. The problem naturally becomes the first choice for payment settlement across borders , which effectively meets the need for payment settlement across business entities and national borders. So, after the official launch of Libra, don't say what WeChat Alipay is ahead of the European and American payment methods, and don't worry about the difference between the alliance chain and the public chain. From the perspective of demand, Libra will find that he is about to pay. In the settlement of the track, the curve is overtaking, the public chain or the alliance chain is not so important.
Third, privacy protection can be said to be an important reflection after Facebook experienced the US election, so that Zuckerberg directly put forward the concept of "The future is private." Privacy protection in the consumer sector is indeed an important demand that consumers have been suppressed for a long time, and it is also a major obstacle to the implementation of new payment methods in the commercial sector. It is conceivable that a person chatting on Facebook can look at the news, and the data may be systematically used for political purposes. When he makes a payment in a certain market, he must expose the personal information to the operator of the market. Then, if the payment method he uses can be used transparently across all markets, is personal information necessary to be shared by all market operators, and it becomes a transparent person in front of all businesses?
The blockchain is clearly a “savior” at this time, and the public/private key-based value registration and transfer model can be used to serve multiple commercial entity systems without exposing personal information to all operators. Because the payment action is done by digital signature, it does not need the validity of the user identity in a certain system to control its own assets, thus the effect of moderate isolation between payment and application scenarios . In terms of specific strategies, it is generally possible to match the information of the address with the real identity, to grasp the information of the Libra convertor and the holder during the Libra exchange phase, to meet certain KYC requirements, and to protect the privacy of the holder for the business scene in the circulation phase. This is basically the same as the US dollar stable currency regulated by the New York Financial Bureau.
Of course, privacy protection will indeed become the main challenge of the Libra Alliance in the future. “Excessive privacy protection” is often used by illegal funds and becomes an accomplice to certain criminal activities. Since the Libra Alliance is global and naturally has the ability to flow across borders, how to meet the KYC and AML requirements of national regulators, whether KYC information is shared with governments, how to share, and how alliance members can ensure that information is not leaked. They are all problems in front of the Libra Alliance. In general, it is believed that the Libra Alliance will reach consensus and compromise with regulators around the world to achieve “ appropriate privacy protection. ” Libra's end users will also accept relevant compromise results and strike a balance between convenience and privacy protection.
Summary: demand and supply
In general, understanding Libra from the perspective of money demand is a key factor in determining its impact and future success. In the past, there has been a lot of research to analyze Libra from the perspective of supply. For example, using Libra, it also needs to exchange currency, and then use it up and then exchange it for legal currency, which seems to be more troublesome than French currency. Another example: whether Libra can guarantee the exchange of a basket, whether there is any danger of additional issuance, whether there is credit creation or so. These analysis angles have their own reasons, but it is not the most critical factor for Libra's success. Can Libra Alliance members’ “market participants” always ensure that Libra is accepted and consumed in the market under its control, and can compromise with governments in anti-money laundering and privacy protection to meet the “proposed” The new requirements of the Trinity are the prerequisite for Libra's final success and the foundation of Libra's global influence.
Since the Libra Alliance is more similar to a “government”, simply looking at Libra from the perspective of a central bank and from the perspective of money supply cannot fully understand its essence and is not sufficient to produce an effective “response” strategy. The second half of this paper From the perspective of “government”, we will explain the reasonable solutions of Libra in the world. Stay tuned.
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