Facebook legal counsel, Libra author, cryptocurrency screaming Libra dilemma

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Operating a hundred small stones

On October 15th, Shenzhen Chain (ID: deepchainvip) new online salon brand "Non-Consensus Dialogue", the first issue, invited Facebook legal counsel, Shimu Capital CEO Dr. Ouyang Mo, RenrenBit founder Zhao Dong, economist Zhu Jiaming's academic assistant, Dr. Long Bailu, one of China's first Libra authors, discussed the topic "PayPal and other six giant allies 'rebellion', Libra and drama?"

"Core view"

1. Libra should be simplified, and now it is like a basket containing a complex currency reserve. Facebook's change of structure to dollar-denominated form helps to be approved.

2. With regard to Libra, a member of Parliament can express his opinion or write a letter asking for “prohibition” of many things, but it is a distance of 100,000 miles from legal documents.

3. Libra fundamentally represents the interests of the traditional legal currency system because they use legal currency and/or legal currency assets as reserves.

4. The EU's leading country, Germany and France, is a real opposition to Libra. The fundamental reason is that Libra represents the US dollar interest and has eroded the monetary sovereignty of the euro zone.

5. Although there are seven organizations that have withdrawn from the Libra Association, there are still 1,600 organizations that are applying to become nodes.

6. Libra is not a cryptocurrency, but it increases the number of people who use cryptocurrency.

7. Libra is difficult to issue without the permission of the US government. Libra distribution requires a lot of legal structure, it is like a "reverse VIE structure."

"The underlying reasons for the seven giants to withdraw from the Libra Association"

Deep Chain Finance: Seven important partners led by PayPal (especially five of them are important payment companies) have gradually withdrawn from the Libra project, causing a sensation. Anthony Pompliano, founder of Morgan Creek, said that Visa and MasterCard have just withdrawn from the Libra Association because of the political pressure and the difficulty of companies.

According to Bloomberg, two US Senate Democrats, Sherrod Brown and Brian Schatz, wrote to Mastercard, VISA and Stripe to rethink their collaboration with the Facebook Libra cryptocurrency project. Two lawmakers believe that Libra will not only bring risks to the global financial system, but also bring risks to the company's broader payment business. This letter even threatens that if participating in the Libra project, these companies may be subject to regulation. The agency conducts a high-level review of all payment activities, not just Libra.

I would like to ask the distinguished guests how to see the deep reasons for the withdrawal of the seven companies from the Libra Association. Is it really a political threat, and is there any consideration of competitive factors? Why are US lawmakers so difficult to Facebook?

Ouyang Mo: First of all, the US Congress does not believe in Facebook because of the scandal of Cambridge Analytical. A former whistleblower named Brittany Kaiser reported to the US government that he had a British AI company called Cambridge Analytics, which used the user information on Facebook to influence the election results.

Cambridge analysis has influenced many elections in this way, including the most notable Brexit and US elections. In the UK, political groups supporting Brexit hired Cambridge analysts to influence the citizens who voted to support the Brexit. Trump also invited Cambridge to analyze the US election and he was elected president. The US government is very angry about the privacy leaks that Facebook involves and the collection of personal information about users and the manipulation of users.

The US government imposed a fine of $5 billion on Facebook. This is the biggest ticket for technology companies in the history of the United States. Two Democratic senators wrote letters to members of the Libra Association, including Mastercard, Visa and Stripe, to put pressure on them. These letters are equivalent to the pressure of the government. So it is political pressure to worry and quit these members.

Zhao Dong: Libra was dancing with a shackle from birth, because Facebook and Libra's nodes are difficult to make a difference in the US regulatory system. Everyone was forced to withdraw from the regulatory pressure.

Long Bailu: There are several reasons why six companies may withdraw:

First, it is possible to embrace the attitude of learning or stealing a teacher. From the perspective of an insider, we can see how the Libra project is structured, governed, and operated. There is no specific actual cost before the formal signing of the agreement. The association does not require “intentionality”. Members have any commitment, so before choosing to become the first member candidate, it is a not bad choice.

Second, as many media reports said, these are mainly traditional payment companies. In the process of communication between the association and global supervision, they find great resistance and need to face the "highest regulatory standards". They worry that the regulatory requirements for Libra may be Affecting its traditional payment business.

Third, exiting now does not mean that you can't come back in the future, because with the existing user base and the influence of traditional payment services, you will not face difficulties when you come back at the right time (such as Libra's prospects are clearer).

Fourth, it is not excluded that some of the six companies have the possibility of starting a new stove. Through this internal observation during this time, I was familiar with the Libra governance structure, which is essentially similar to the decentralized governance structure formed by VISA/MasterCard's traditional members. The Facebook team's preparation for the Libra project (money and financial theory business, and regulatory preparation) is also Insufficient, and may not fully wish to obey Facebook's authoritative ideas in the Libra project, so it is better to do it yourself (Amazon, JPM, etc.) in the face of huge regulatory uncertainty.

The "difficulty" of the members of Congress is strictly a natural result of American power democracy. A new thing must have different opinions. The understanding and understanding of different interest groups must be different and need to be debated. A member of Parliament can express his opinions or write a letter asking for "prohibition" of many things, but it is a distance of 100,000 miles from legally valid documents.

"Why is the United States and the European Union actively opposed Libra?"

Deep Chain Finance: Libra is generally considered to have an impact on third-party weak countries. According to Libra's blueprint, the US dollar is the main currency supporting the digital currency Libra, accounting for 50%, and the euro is only 18%. 14%, sterling 11%, and Singapore 7%, but what we see is that the United States and the European Union are actively opposing Libra. What is the logic?

Last week, Andreessen Horowitz encryption risk partner Chris Dickson suggested that Libra could be a dollar-denominated digital currency, which means that Libra is only pegged to the US dollar, rather than “peg” a basket of international currencies as it is now. According to this design, will the US government give Libra a green light?

Ouyang Mo: Libra should be simplified, and now it is like a basket containing complex currency reserves. Facebook's change of structure to dollar-denominated form helps to be approved. The greatness of American law is that it is based on common law, that is, the legal system is based on precedent. In September 2018, the New York State Government approved two 1:1 anchored US dollar stable currencies: PAX and Gemini. Because there are precedents that have been approved, Facebook can use the precedent to get approval.

Zhao Dong: Is the reason for the US opposition because Libra chose Switzerland as a place of registration and is not in the direct supervision of the United States?

Ouyang Mo: Yes, this is the main concern of the Congress. But the main reason for the anger of Congress is the distrust of Facebook because of privacy issues.

Long Bailu: Regarding the attitude of various countries towards Libra, everyone should not be confused by all kinds of complicated and complicated appearances.

First of all, to clarify a basic fact: Libra does not actually subvert the interests of the traditional monetary and financial system, because he uses French or French currency assets as a reserve pool. He is a "pseudo-innovation" based on the traditional legal currency system. . Most people interpret Libra's subversion of the traditional system, so they misread Libra's relationship with the Fed, or misread the relationship between Silicon Valley geeks and Wall Street capital.

Today, I emphasize once again that Libra fundamentally represents the interests of the traditional legal currency system because they use French and/or French currency assets as reserves. If Libra announces the use of bitcoin or other native digital assets as a reserve, it is a real subversion, and it will be pressed to the ground by the Fed on the first day.

I understand that the current real thinking of national regulatory authorities is this:

In the United States, the Fed that holds the fate of Libra is only the Fed, which represents the interests of Wall Street. I believe that Facebook has been fully recognized by the Fed before its white paper was released. The Fed has never actually expressed a clear objection. The fundamental reason why the Federal Reserve supports Libra in the “dark world” is that it represents the dollar interest and is an extension of the dollar hegemony in the digital world. This fact is still more controversial a few months ago. I believe that it should be the basic consensus now (the weight of the dollar in the basket currency is 50%, and the president of the National Finance Research Institute, Zhu Min, represents the official statement).

The current obstacles encountered in the US Congress can be understood as rationalizing this matter from a legislative perspective, so Facebook needs to communicate and coordinate with the Congress on behalf of the broader interests of all (outside Wall Street). Although there are many different voices in Congress, the core idea is actually to figure out how to supervise.

Congress seems to have a strong influence, but on the one hand the lack of real professionals can effectively stop such projects (for example, the Fed is theoretically responsible to Congress, but Congress has never had enough expertise to effectively hold account of Fed officials. Including the 2008 financial crisis, Bernanke and Paulson lie in the public in order to protect the interests of Wall Street banks, speak contradictory, Congress is not a method, and on the other hand, it is greatly influenced by lobbying forces.

The biggest lobbying power in the US Congress comes from two industries, military and financial. British regulation follows the US opinion. From the beginning to the end, it is very clear that "the highest standard of supervision" is not like the Fed's repeater?

The EU's leading country, Germany and France, is a real opposition to Libra. The fundamental reason is that Libra represents the US dollar interest and has eroded the monetary sovereignty of the euro zone.

Of course, Facebook's stain on data privacy is also a target of focused attacks, but I understand that this is more an excuse. The main reason is that Germany and France believe that Libra has eroded the sovereignty of the euro currency. In fact, since the day the euro was born, the euro and the dollar have been competing.

Although Libra includes five kinds of legal currency, it does have a high probability of being denominated in US dollars. Many people misunderstand or misuse the term "anchor".

In the current context, sometimes “anchoring” means that Libra’s reserve assets are “anchored” to a group of legal or national debts. The “anchor” here is actually the meaning of reserve support; sometimes “ "Anchor" refers to the unit of currency currency; when you talk about Libra, you usually say "anchor" to a basket of legal coins, and then many people take it for granted that they are "anchored" to Libra's unique pricing unit. In fact, Libra White Paper Only the first type of "anchoring" was explicitly stated, that is, a basket of legal or national debt was used to support its issuance, and the unit of pricing was not clearly stated.

I think Libra has a considerable probability of being denominated in dollars, for several reasons:

First, Libra represents a dollar interest. This is basically a consensus. How to maintain the authority of the dollar? The first is the weight of the US dollar in the basket currency, which is now 50%. In fact, it exceeds the current 40% of the US dollar in global trade pricing and settlement. Considering that Libra was originally used primarily as a payment instrument, this 50% ratio actually strengthens the dollar position. .

Second, Libra and the US dollar are required to be forced to redeem, which allows the US dollar monetary policy to be effectively transmitted to the Libra Ecosystem (or the currency zone), but in fact Libra will exchange with the basket currency instead of the US dollar, taking into account the weight in the basket. It is possible to change, the exchange rate of various legal currencies will also change, so there is considerable volatility/uncertainty between Libra and the mandatory exchange of US dollars. In addition, this exchange commitment is not necessarily legally binding, so Libra and the US dollar are mandatory. The exchange is not established.

Third, in dollar terms, the account unit is the most important attribute of a currency (different payment instruments are connected to an independent currency through its account unit rather than other attributes such as exchange media and value storage), as long as the dollar is used, the Fed It guarantees its currency authority. I told my friends at the end of June this year that Libra will eventually be denominated in US dollars, otherwise it will not be online. I still insist on this point of view.

Ouyang Mo: Libra is good for cryptocurrencies, because Libra will greatly increase the number of people using cryptocurrencies. There are now about 40 million people with digital currency, and there are fewer actual users. But Libra will make the whole world start using cryptocurrencies, not just for investment, speculation or holding. This will increase the market for cryptocurrencies by 10 times and 20 times now. Of course, Libra is not yet a cryptocurrency, and it is still too central.

"1600 organizations are applying to become Libra nodes"

Deep Chain Finance: After several companies have withdrawn, Libra officially began to express its position. Project leader David Marcus issued a statement that respecting Visa and MasterCard decisions, companies can choose to join or withdraw, but he is based on several companies. The news of Libra's exit from the Libra project is cautious and skeptical. The implication is that "Don't deny Libra's future because of the withdrawal of several companies."

How do the guests view the impact of the withdrawal of the seven important partners from the Libra Association, especially considering that most of them are payment giants?

Ouyang Mo: First of all, one of the most important signals of Libra's future is that this is an international group project, not Facebook's own project. You will see this signal more and more in the media in the future. Other Libra Association members will work together to start promoting Libra.

Second, five Libra Association directors were appointed.

Third, 21 members of the Libra Association will decide to screen the conditions of other nodes.

Fourth, although there are seven organizations that have withdrawn, there are still 1,600 organizations that are applying to become nodes . We think that about 180 of these applicants can meet the public requirements. However, only about 40-80 can meet internal requirements. In the next month, we will continue to discuss and determine these internal requirements.

Zhao Dong: If Libra succeeds, it will undoubtedly directly challenge the status of the payment giant. Then, the withdrawal of these payment giants is on the one hand forced by regulatory pressure, on the other hand, they are not afraid to really "reinvent their own lives."

Dragon White: There is no real impact. To really say the impact is to vacate the position of the six founding members to others, so that other institutions have greater influence on the Libra Association. Other possible impacts, the six payment-based companies are starting to make a Libra-like alliance, and Libra may face competition in the future. There is also the case that Dr. Ouyang Mo said that he can choose a more "like-minded person", which is a good thing for Libra's success.

Ouyang Mo: In fact, Libra also wants a more reliable partner. For example, like Vodafone, and Andreessen Horowitz. Ms. Katie Haun of Andreessen Horowitz will take the lead role in the association. She was also one of the five directors elected at the meeting yesterday. Now Libra's strategy is to make this project a common project for an international group, not for Facebook's own projects.

At the last Facebook hearing in Congress and the Senate, I told the US Congress that they should support companies like Fire Co. to work with regulators.

Zhao Dong: Dr. Ouyang Mo, which country do you think is the most open country for cryptocurrency? China? Japan? Europe? Singapore?

Ouyang Mo: Singapore, Switzerland, and Japan are in order because they all want to get rid of the dollar.

"Libra will not be issued in 2020"

Deep Chain Finance: In addition to the withdrawal of partners, whether it is the G7 Group's report and statement, or on October 23, Facebook CEO Mark Zuckerberg's attendance at the House hearings has brought Libra a regulatory shadow. Ripple CEO Brad Garlinghouse, who had been looking forward to Libra, said in an interview with Fortune magazine that Libra would be willing to start betting before the end of 2022 because Libra faced strong opposition from regulators.

Dear guests, what do you think of Libra's future prospects, will the Ripple CEO be successful?

Ouyang Mo: Libra will not be issued in 2020, mainly because the government has given it a lot of pressure. But Libra's new strategy has prompted the entire Libra Association to do this, not just Facebook's own business.

Due to these political factors, Facebook has recently done a very smart thing. Facebook’s general counsel, formerly Collin Stretch, but this summer they hired a new legal counsel named Jennifer Newstead. She was hired as a government official by President Trump. This will help Facebook solve their political problems.

Zhao Dong: Dr. Ouyang Mo, can Libra be issued without the permission of the US government?

Ouyang Mo: Libra is difficult to issue without the permission of the US government. Libra distribution requires a lot of legal structure, it is like a "reverse VIE structure."

"Now it is to watch the "thief" being beaten, and the future is to see "thief" eating meat."

Deep Chain Finance: Zhao Dong, may you ask if you are not optimistic about Libra's attitude and position, such as the relationship between USDT?

Zhao Dong: It doesn't matter. The reason why I support USDT is very simple: I can make money by trading USDT. If I can legally make money by trading Libra or CNHT transactions, I will support it as well. The reason we don't currently trade other stable currencies is that there are no customer needs. Our customers don't need it, so we can't make money. Everything has to return to the essence of business: useful, making money. Useful for customers, companies can make money.

Dragon White: I don't think his bet will succeed. Although I firmly believe that Libra will erode the sovereign currency of the renminbi and hinder the internationalization of the renminbi, I firmly believe that Libra can succeed. The question is how the Chinese government/people respond.

The Ripple CEO is only a bit right, that is, Facebook's streaks have affected Libra's acceptance. But this is not the decisive factor in Libra's fate. The decisive factor is how the traditional monetary system (including regulation) views the challenges of stable currencies.

Although Libra faces the situation of “screaming” by various regulators around the world, guests are welcome to watch this issue.

First of all, Libra is indeed a new phenomenon. It has been a challenge that the monetary authorities have not encountered in the past. Therefore, it is necessary to allow them to figure out the risks inside and solve the problem of related financial stability risks before they go online (note the differentiation).

Second, Libra does bring subversive things, such as the digital currency zone, which allows a currency to cross the boundaries of geography and judicial sovereignty, connect all economic activities and 2.8 billion users in the Libra network, and his economy is much larger than many economies. The volume may be much larger (Alibaba's transaction volume in the first quarter reached 700 million US dollars, Alipay network users 860 million, you can make a comparison).

Third, Libra's success requires supervision and cross-border coordination to form a regulatory consensus, prevent regulatory arbitrage and bring financial stability risks.

Regardless of the G7 Working Group’s preliminary assessment of the global stability currency, this work has now been handed over to the Financial Stability Board FSB.

The mission of the FSB is to provide forward-looking working methods for G20 government finance ministers and central bankers to submit any policy recommendations regarding the stability of the global financial system.

If you still don't understand the meaning of this sentence, I will make it clearer. After the financial crisis, the reform policy recommendations and implementation supervision of the global banking and financial system are under the responsibility of the FSB, such as the Basel III agreement, shadow banking supervision, Issues such as the regulation of financial derivatives and OTC, of ​​course, the issue of global stability currency project supervision is a new task for FSB.

The FSB takeover of this matter means that global regulation has formed a consensus to incorporate the development of global stable currency regulation into the formal workflow, and the FSB plan submitted a formal report in July 2020. The official report of the FSB is a recommendation for regulatory policy details for a specific issue. The chairman of the FSB is the vice chairman of the Fed responsible for supervision.

What does this mean? Don't watch Libra being supervised so badly. Now that it's awesome, it means working with policy makers to solve the regulatory gap from the very beginning, then can we expect Libra's compliance in July 2020? State geometry?

At that time, the global stable currency regulatory rules were introduced (which formed a global consensus). Who can do the most compliant? Is Libra the only stable currency that can be regulated by “certification” (“certification” for global regulatory consensus)? Now it is to watch the "thief" being beaten. In the future, it is to watch the "thief" eating meat.

Ouyang Mo: We will be successful in starting Libra and Facebook. Even if Facebook can't successfully launch Libra, others will do the same. I predict that if Facebook is unsuccessful, different major groups in major industries will also issue a stable coin. For example, Shell Oil or PetroChina can develop its own stable currency to facilitate cross-border payments. Vodafone, a member of Libra, can also issue their own stable currency.

"Libra may have the biggest advantage in the future is compliance."

Deep Chain Finance: The important news related to recent cryptocurrencies is almost related to regulation, especially the SEC's existence: Block.one agreed to settle with the US Securities and Exchange Commission (SEC) by paying a $24 million civil penalty; the SEC's subsidiary of Telegram The two offshore entities of TON ICO issued a temporary restraining order.

From now on, what role will regulation play in the cryptocurrency industry, will it make the development of the whole industry better or will it hinder the development of the industry to some extent?

Ouyang Mo: Supervision is the biggest technical obstacle in the cryptocurrency industry. This is what we predicted two years ago, and it will become a reality today, and it will become more important in the future, especially in the next 2-3 years from now. For example, EOS Block, whose legal counsel is my friend, told me that they hired 18 internal lawyers and legal staff to deal with regulatory issues, including the SEC.

As a result, they were fined $24 million, but they received a $4 billion appreciation, with a fine of only 0.6%, a very small percentage. This is a very, very good result for the cryptocurrency field.

Zhao Dong: I think digital money companies should focus on innovation and try to avoid the dead end of supervision. Especially in the initial stage, try to do business that does not require a license or does not need to deal with too much supervision, otherwise the startup can not afford the cost of supervision. After the volume is bigger, communicate with the supervisors, embrace supervision, and promote regulatory development.

Long Baiyi: Successful cross-border policy coordination and regulatory consensus will lay the foundation for the rise of a truly global private digital currency. Libra may have the biggest advantage in the future is compliance.

"Libra is good for Bitcoin.

Deep Chain Finance: Recently, Forbes issued a document saying that Libra launched by Facebook is actually a "other" payment system, which can be seen as a better enhanced version of PayPal, but it is not a better cryptocurrency, neither Free money also lacks the "moral concept" of the blockchain.

How do you view this view? If Libra succeeds, will it pose a threat to the mainstream cryptocurrency, such as Bitcoin or USDT?

Dragon White: For this view, agree and disagree.

The part that agrees is, "It's not a better cryptocurrency." Indeed, it may not even be a cryptocurrency.

Disagree is that Libra is a monetary system first, and payment is only one of the incidental functions. Libra is compared with PayPal, which is dwarfed by the former and raised by the latter. Secondly, Libra is to some extent a "free currency", "freedom." "There are relatives. Bitcoin fundamentalists seem to be free except for Bitcoin. But compared with traditional French currency, Libra is much more free, at least allowing non-bank private institutions to participate in currency creation and distribution. tax.

But this freedom is indeed limited, because even if the non-bank private sector participates in the currency creation process, we know that this threshold is actually quite high, and it can become one percent of the Libra Association. It is not a simple person or institution. Libra strictly comes. It is said that only the coin-making right is redistributed at the top of the rich group. The rich group always has old money and upstart, but there is never a shortage of bankers, right?

If Libra truly represents the ideals of Nakamoto, he has been killed by Wall Street for a long time; he has come out to live with the Wall Street, indicating that he has formed a consensus with Wall Street, saying that complicity is also possible.

I have a sentence in my June article, I can say it again today, Libra is the most evil business model I have ever seen, so I say "lack of blockchain morality", I agree. Why are you evil? Libra is essentially a coin-making business for everyone, but everyone gives the Libra Association a business model of coinage tax.

Libra succeeded, and it would not be a threat to mainstream cryptocurrencies unless it could form a stable currency, such as Bitcoin. The USDT is a disaster, so Uncle Dong may be unhappy. As a stable currency, Libra is superior to USDT in all aspects, in addition to the current market acceptance. However, the current market acceptance is not counted, because now the financial market for digital currency is mainly speculative trading, and USDT is successful as a “currency” under this environment.

But we have to see that the future pattern is to stabilize the currency to support real economic activities (not just trading speculation). Under this premise, Libra is bundled with a payment service and is bundled with complete social, e-commerce and content economic activities and ecology. It also binds a digital network of 2.8 billion users, which will generate strong network externalities. With strong competitiveness and regulatory blessing (protected by the Fed), Libra will kill USDT and of course various other stable currency, and RMB DC/EP will not be able to stop it.

For the cryptocurrency that can't be a stable currency, such as Bitcoin, I think it's good, because the latter's positioning is "asset" rather than "currency". Libra's success will give the world's leeks brainwashing again to cryptocurrencies/assets. Cognition, a larger user base, a larger scale of capital, a wider range of economic activities into the encryption economy, which is a good benefit.

"The new Libra Association standard will be developed in two to four weeks."

Deep Chain Finance: Why is the Ripple CEO so strongly opposed or not optimistic about Libra? It will be because he has the same position as Dong Shu, is he a vested interest?

Dragon White: Because Ripple is the biggest altcoin, Libra's success means the Ripple's extinction of the air currency. You said he can't worry. Ripple is a 100% centralized system.

Deep Chain Finance: What is the standard for auditing when the Exchange applies to become a Libra node? In addition to fire coins, OKEx, all other small and medium-sized transactions have become Libra's nodes?

Ouyang Mo: During my talks with members of the Libra Association today, I was told that the Libra Association will develop new internal standards, although there are already standards on the website. However, due to the recent withdrawals from Congress, the Senate, the French government, and Visa and MasterCard, there will be new standards internally, and these new standards will be developed in the next two to four weeks.

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