Babbitt column | Libra coin myth: Can you achieve a precise balance?

On June 18, 2019, Facebook published "Libra: Encrypted Electronic Money White Paper", a stone that stirred up a thousand waves, and the Libra project unexpectedly caused widespread concern in various fields of international politics, finance, economy and society. . The blockchain community is most concerned about the Libra project, although the initial focus is on whether the Libra project is a true blockchain project. Libra Investment Token is not a true sense of encrypted electronics. Currency; but in any case, the world's largest social media is embracing the blockchain, which is significant for the blockchain industry.

The original 28 founding members of the Libra project (in the future hope to expand to 100), the founding members will invest in the start of the French currency reserve, with the expansion of the Libra network, the reserve will maintain and protect the balance of the currency of the Libra. Since October 5, seven companies have launched a team of founding companies. On October 15, the remaining 21 companies signed a foundation agreement in Geneva, Switzerland, officially launched the project and appointed a board of directors.

With more than 2.7 billion online users using Facebook social networking, founding members can immediately connect with such a large potential user base. At present, most of the blockchain projects, the most urgent need and lack of is the active user community. Expanding the external business opportunities that Facebook's huge user base can generate is enough to ensure that Libra Co., Ltd. is rapidly emerging as a real Internet currency. Facebook and eco-brands, such as Whatsapp and Instagram, have built a sophisticated ecosystem of globalization. Libra's Calibra e-wallet, once integrated with various applications, will allow Libra to quickly achieve economies of scale in a very short period of time. Professor Li Guoquan pointed out that the successful Internet LASIC model has Low Margin, A sset-Light, S calable, Innovative and Easy compliance The characteristics of the Libra project fully comply with this business model, especially on the scale of the scale, it is simply nuclear fission.

Libra may become the first global inclusive financial project in the true sense of the word. It can provide inclusive services to nearly 2 billion people who have not fully accessed financial services through mobile terminals such as smartphones. Once promoted globally, the Libra network can accommodate users with a wealth of financial activity information and data. The founding member node of the Libra project becomes the hub of these data. This creates a variety of application scenario innovations and future development opportunities for organizations that want to learn more about their customers.

Although China's e-wallet and third-party payment users and transaction volume are far ahead of other countries, once Libra coins are widely accepted by Facebook users, this situation will soon change. China's e-wallet applications, such as WeChat and Alipay, are currently facing the challenges of international development due to government policy restrictions, cultural and linguistic differences. They are aggressively expanding into the European market and have made some gains, but once Libra coins join the competition, for many related Internet companies, especially Chinese companies, they will either join the Libra project or may be excluded from the 27 The dilemma beyond the mobile users.

Libra's 2.7 million users docked Facebook, of which only about 190 million users in the United States, which means that Libra has more than 2.5 billion global users. The users of China's electronic payment companies are highly coincident. Even if the users of Alipay, WeChat and major telecom operators are integrated, the total number will be about 1 billion, and almost all of them are Chinese. For international users, once the Libra coin starts, China It is impossible for enterprises to compete with them in the short term. In addition, in mainland China, Facebook and its Whatsapp and Instagram are subject to policy restrictions and cannot be used normally. The compatibility of these two user groups is extremely low. Therefore, Chinese companies and governments recognize that measures must be taken as soon as possible, otherwise the advantages accumulated over the years in this field will soon be lost.

Since July, the Chinese government has taken a series of measures to actively develop and accelerate the preparation and distribution of the central bank's digital currency (CBDC) [1] . Shao Fujun, chairman of UnionPay, pointed out that the central bank's legal digital currency will have a great economic impact; on August 2, the People's Bank of China convened a working meeting to accelerate the pace of research and development of China's legal digital currency; on August 10, the People's Bank of China paid Simu The Director of Changchun announced that the central bank's digital currency has adopted a two-tier operating system. Recently, the State Council issued the "Shenzhen Socialist Pilot Demonstration Zone" document to emphasize: support Shenzhen to accelerate the development of digital currency research and mobile payment. Under the competitive pressure of the Libra project, the Chinese central bank’s digital currency is on the horizon. On September 30, the Chinese government approved the US PayPal to enter the Chinese third-party payment market and unexpectedly allowed it to hold a third-party payment company.

However, the seemingly promising Libra project does not seem to be going well. On August 21, the EU antitrust regulator announced that it has started an antitrust investigation on the Libra project. On September 3, the ECB Chief Executive Yvesmel Yves Mersch said: The Libra project is “tempting but dangerous” and the Bank of England, Germany and Switzerland have expressed concerns and doubts about the Libra project. Due to repeated data abuse and leakage accidents in recent years, Facebook should pay special attention to the privacy data protection of users in the Libra project. Privacy protection and data security must not be over and must be part of the project design. However, looking at the Libra White Paper, the term privacy protection has only appeared once.

At present, governments around the world are strengthening personal privacy protection. The European Union has introduced the General Data Protection Regulations (GDPR), and Singapore has also promulgated the Personal Data Protection Act (PDPA). However, most of the founding members of the Libra project are pursuing profits. To maximize commercial enterprises, inclusive finance is just a way for them to penetrate low-level markets or developing countries. Developing countries have been expecting low-cost capital financing, and Libracoin will likely become a central bank in these markets or countries. However, if it is not handled properly, this approach can easily cause negligence in privacy protection and data security, contrary to the wishes of customers.

In the event of a financial transaction, most regulators will require a customer background check (KYC), and the regulator will certainly want to be able to track each transaction, which is contrary to the privacy and autonomy of the blockchain. On the decentralized platform of the blockchain, the identity on the network and the identity in the real world are not related to provide privacy protection. Numerous research efforts have provided a variety of different approaches to privacy protection in a decentralized blockchain environment. For example, zero-knowledge proofs derived from Zcash's private cryptocurrency are now being adopted by large organizations such as Ernst & Young (EY).

Of course, in a safe operating environment, the data can be analyzed and processed in a “black box”. At the same time, the specific content of the data cannot be directly obtained or understood. MIT Media Lab ( MIT Media Lab's "Myth" project (Enigma) is making an effort to use the secure operating environment provided by Intel's SGX processor. There are also some useful attempts in Singapore. For example, Nanyang Technological University in Singapore and Acronis, a data security company, collaborate to research a multi-party data analysis platform that allows untrusted parties to securely share data and trade. The JedTrade blockchain company in Singapore is also trying to get their customers to securely share highly privately encrypted data in this way on the Jupiter Chain.

This is the beauty of cryptography, which can be used to analyze the original big data in detail, but it is impossible to understand the specific content of the data. It is unclear how the Libra project will take advantage of these most important features of the blockchain, many of which have not even been mentioned by the Libra project. If this is the case, then the Libra White Paper should be overlooked. Imperfect privacy protection will make the massive data fall into the hands of profit-driven enterprises after the scale, which is not only the network geeks. The prevention of privacy violations and data security should not only be a prerequisite for the scale operation of Libra, but also the first prerequisite.

The comprehensive use of blockchain technology can provide a very solid technical tool to create a civilian development and secure big data platform, data owners can fully control their own data, ensuring privacy and security. In an era of increasing regulation, this is a viable way to deepen the development of data-driven technology. This platform of course also allows for fair competition, and all parties can safely analyze the data, but can not get the specific content of the data. Regardless of size, the parties are completely equal, which is conducive to long-term sustainable innovation, while at the same time avoiding the unequal or even unfair competition caused by market forces.

The vision of Libraco may be to use blockchain technology to promote an independent, decentralized network for people who do not have access to financial services. It may help financial institutions in emerging countries to meet international standards and achieve compliance transactions. . However, for the time being, the linked currency may be the “soft rib” and “seven inches” of the design of the Libra project. This seems to make the value of the Libra coin stable; in fact, it greatly increases the uncertainty of the future of Libra. Because every time a new partner joins, the legal currency from the new jurisdiction, and the injection of reserves, Libra will face a huge regulatory and compliance challenge.

1.CBDC: Central Bank Digital Currency

Author:

Li Guoquan, Professor of Financial Technology and Blockchain, Singapore New Social Science University (SUSS)

Zhang Jinrui Senior Lecturer, National University of Singapore (NUS) Business School

Yan Li Senior Lecturer, Department of Strategy, Business School, Nanyang Technological University (NTU), Singapore, and Director of Education Department, Huawen Executive