>On October 18th, the Group of Seven ( G7, composed of the United States, Britain, Germany, France, Japan, Italy and Canada ) Stabilization Coin Working Group issued a final report on the global stable currency. The working group that wrote this report is made up of senior officials from multinational central banks, the International Monetary Fund (IMF) and the Financial Stability Board (FSB). The G7 report will build on existing (large and/or cross-border) customer segments with a rapidly expanding potential to achieve global or other substantial coverage of the Stabilization Coin program, known as Global Stablecoins (GSCs). . From the definition of G7, Libra, led by Facebook, is committed to building a simple global currency and financial infrastructure. Libra, a cryptocurrency project for billions of people, is clearly located in the global stable currency.
The G7 report believes that the current global payment systems and services still have huge challenges, mainly reflected in two aspects: a large proportion of the world's people cannot enjoy financial services or financial services, and inefficient cross-border payment systems . More than 1.7 billion adults worldwide are currently unable to use trading accounts with financial institutions such as banks, even though 1.1 billion of them already own mobile phones. Today, domestic payment systems are becoming more and more convenient, and cross-border payment transactions are still slow, expensive and opaque, especially for retail payments such as remittances.
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Recent global stabilization coins such as Libra have highlighted these shortcomings and have repeatedly stressed the importance of getting more people to access financial services and improving cross-border payments.
It is undeniable that technological innovation is changing financial services and products. The G7 Stabilization Coin Working Group confirmed the existence value of the global stable currency to a certain extent in the report. It indicates that although the stable currency has many characteristics of encrypted assets, it tries to stabilize the “coin” by linking its value with the value of the asset pool. "s price. As a result, stable currencies may be better used as a tool for payment and value storage, and may contribute to the development of a global payment system, building a faster, cheaper, and more inclusive system .
The report also pointed out that stable currency is only one of the many initiatives currently attempting to solve the challenges of the payment system, and has largely been untested . At present, regardless of the size of the stable currency, there will be challenges and risks such as supervision, governance, network security, and data protection. G7 believes that the global stable currency may have a significant adverse impact on monetary policy transmission and financial stability at home and internationally, and even has a wide-ranging impact on the international monetary system, including currency substitution, and poses a challenge to the monetary sovereignty of each country. Therefore , before the legal regulations and regulatory challenges and risks of stable currency design are fully resolved, in order to avoid amplifying certain risks, the global stable currency project should not begin to operate.
The report of the G7 Stabilization Coin Working Group Although Libra is not mentioned in the full text, everyone knows that Libra is at the forefront of the global stable currency project that can cause G7 Group to pay such attention at this stage.
Subsequently, the Libra Association responded more comprehensively to the issues mentioned in the G7 Global Stabilization Coin Report and the focus areas of its own focus.
G7 and Libra's "conversation"
Note: The following content has been deleted according to the G7 report and Libra response documents.
G7: The significance and value of the existence of a global stable currency, and its impact on sovereign currencies.
Libra: Libra's goal is to make more people aware of the long-term potential of Internet technology, helping billions of people improve financial services and reduce the cost of accessing financial services. Global Stabilization Coins eliminates the volatility of cryptocurrencies and increases payment security, speed and reliability. Libra can coexist with national digital currencies issued by the central bank, and China has innovated in this area through dedicated mobile networks.
G7: The Stabilizingcoin program must ensure open and transparent pricing in the primary and secondary markets. However, in some designs, agents (such as designated market makers) may have significant market power and pricing power and may abuse the market for profit.
Libra: The Libra network is open, allowing free competition from the service providers allowed in the system. The Libra Association hopes that the project's open source capabilities will motivate start-ups, institutions, developers and financial services companies in the Libra blockchain to form a global ecosystem for responsible innovation. By partnering with responsible financial institutions such as banks, Libra can provide financial services to clients who do not have a bank account.
G7: In the absence of effective regulation, encrypted assets, including stable currencies, pose significant financial integrity risks that may increase the likelihood of money laundering, terrorist financing and other illegal financing activities. Libra: The Libra Association will set appropriate anti-money laundering (AML), understanding of your clients (KYC) and anti-fraud standards, combat terrorist financing and other forms of financial crimes, and will also cooperate with law enforcement agencies in compliance with law enforcement investigations. Information on potential suspicious activity on the blockchain ensures that regulators and public stakeholders are assured.
G7: Given the complexity and novelty of the Stabilizingcoin program, users may not understand the risks involved. As is the case in the crypto-asset market, inductive marketing and sales can exacerbate threats to consumer rights. Libra: Libra token holders will enjoy the same status as current financial product protection and legal rights. The Libra Association does not sell tokens directly to users, but through competitive markets, authorized dealers will enable consumers to effectively convert between Libra and other currencies.
G7: Stabilizing coins pose two types of challenges to tax authorities. One is that the legal status of stable currencies is not clear, and the tax standards for trading with stable currencies are uncertain; the second is that stable currencies increase the possibility of tax evasion.
Libra: Individuals and entities holding Libra tokens will be taxed under local law, and the Libra Association hopes to provide consumers with tools to manage tax returns based on Libra blockchain wallets and financial services .
G7: The global stable currency may have a significant adverse impact on monetary policy transmission and financial stability at home and abroad, and may even have a wide-ranging impact on the international monetary system, including currency substitution, and pose a challenge to the monetary sovereignty of each country. Libra: Libra's purpose is not to replace the US dollar or any other currency, it will not weaken the government's sovereignty over monetary policy, but hopes to expand monetary functions by making cheap and fast payments. Libra has no intention of changing the role and influence of the central bank in the global financial system. Wallets and other financial services running on the Libra network will comply with regulations, such as capital controls at the location, allowing the central bank to make adequate adjustments to prevent large amounts of domestic currency in emerging markets from being converted into Libra tokens.
The fiat currency in Libra's reserves will be subject to the monetary policy of their respective governments. Each Libra token will be fully supported in the form of bank deposits and cash equivalents, as well as short-term government securities, which will reduce the risk of bank runs. Because Libra tokens are fully supported by cash and other liquid assets, they are not supported by partial reserves like bank deposits.
G7: As more and more data is collected and used to provide technologies such as financial services and artificial intelligence, issues surrounding personal financial data protection and privacy become more important. In the stable currency system, how the user's personal data is collected and used in the ecosystem, and how the data is shared among participants or with third parties is not clear, and it poses a threat to the user's data security and privacy protection.
Libra: The Libra blockchain only collects, stores, and processes public wallet addresses and the number of tokens transferred. Members of the Libra Association who are node certifiers will not be able to access, use or share end user personal data. Companies that interact directly with customers, such as wallets and exchanges, will comply with data protection regulations to ensure Libra activities are carried out within the legal framework of data protection, including GDPR.
G7: Although distributed ledgers are more resistant to certain operational and cyber risks, their network structure can be compromised, which can damage the entire system. Moreover, new technologies may face certain operational risks that have not yet been determined.
Libra: The Libra Association will build a strong secure network for node operators, implementing protocols designed to ensure that the network is properly allowed, even if some authentication nodes are compromised, leaving the network unaffected and ensuring the flexibility of the payment network. At the same time, unlike some other payment networks, Libra will operate transparently and work with regulators. Through collaboration with the public and private sectors, the Libra Association has developed many of the latest technology infrastructure systems.
G7's "love and hate" to Libra
The story of G7 and Libra begins with June 18. On the same day that Facebook published the Libra white paper, the French Finance Minister urged the G7 member states to understand and study the Libra cryptocurrency.
Subsequently, the then French leader of the G7 presidency set up a Stabilization Coin Task Force within the G7 Group to study how the central bank effectively regulates cryptocurrencies such as Libra to avoid money laundering and other problems.
In July, Libra became an important topic for the G7 finance ministers meeting on the 17th of the month. At the meeting, all countries expressed their concerns about Libra and discussed Libra's promotion, financial supervision and operational supervision in various ways. The draft meeting proposed that the stable currency must meet the highest standards of financial regulatory requirements and must address the regulatory divide. The conference also plans to establish common rules for international digital taxation to prevent tax evasion by large IT companies including Facebook.
The G7 Stabilization Coin Working Group handed over work on regulatory issues to the FSB. The FSB is assessing how the existing regulatory framework applies to global stable currencies and whether there are regulatory gaps that need to be filled. The FSB also established a dedicated working group to review and study regulatory issues related to global stability.
On October 13, FSB Chairman Randal K. Quarles published an open letter to the G20 Finance Minister and the Governor of the Central Bank. The letter repeatedly mentioned the threat of global stability to financial stability and a series of possible challenges. The FSB will submit relevant advisory reports to the G20 finance ministers and central bank governors in April 2020, and submit the final stable currency report in July 2020.
Libra actively seeking change in a difficult situation
Faced with regulatory pressure from G7, G20 and FSB, Libra began to seek change and hopes to meet regulatory compliance requirements before the FSB submits a stable currency regulatory report to the G20 in 2020. According to Reuters, on October 20, local time, Libra project leader and CEO of CalLibra, David Marcus, said at a seminar to consider linking Libra to a single legal currency, replacing the original proposal. A plan linked to a basket of currencies . “We can take a different approach and create a series of stable currencies, such as the stable currency linked to the US dollar, the stable currency linked to the euro, and the stable currency linked to the pound, rather than the stability of the original design linked to a basket of currencies. The coin, Marcus said.
Libra's initial anchoring of a basket of currencies has been controversial, and Libra has become a target for a certain degree.
On the one hand, there are concerns that the overweight of the dollar in the Libra currency basket has led to the continuation of dollar hegemony. Monetary and financial researcher Long Baiyi once said that the highest weight of the US dollar in the Libra reserve pool, and the high possibility of using the US dollar as its pricing unit, will fully safeguard the dollar's currency hegemony and extend it to the digital world. . He believes that Libra is a "pseudo-innovation" based on the legal currency system, which fundamentally protects the interests of the traditional legal currency system. The best interests behind it are the US dollar .
On the other hand, the United States and its allies have strong opposition to Libra, who believe that Libra is striking the dominance of the dollar.
At the US Congress hearing attended by Marcus, US lawmakers repeatedly bombarded Libra and Facebook, arguing that Libra’s injury and threat to the United States was comparable to the 9/11 terrorist attacks. Financial Services Committee Chairman Maxine Waters also publicly stated that Facebook seems to be seeking to establish a new global financial system to counter the dollar .
Libra is caught in the dilemma of being attacked by the enemy. Now, after experiencing the storm of the six giants including PayPal and Visa, the Libra Association seems to be no longer willing to deal with it, so it chose a more open and more probable way to respond to outside concerns.
This shift does not mean that Libra's mission of “establishing a simple, borderless currency and financial infrastructure for billions of people” has changed, but has left more room for civil servant. After all, even in the United States, which has the strongest reaction to Libra, there has already been a compliance-stabilized dollar-stabilized currency project. Who can guarantee that Libra will not be the next one?
In the regulatory chase, the Libra Association, which is “soft”, may turn Libra Stabilized Coins, which anchors a basket of currencies, into a basket of stable currencies anchoring legal tenders, thereby seeking greater compliance expectations. But another result of "soft service" is that it may be sensational. After all, there is no shortage of stable currency projects that anchor legal currency. How to choose is another problem facing the Libra Association.
On the 23rd, Facebook CEO Zuckerberg will be the only witness to attend a hearing on the topic "Inquiring Facebook and its impact on the financial services and real estate industry", and more news will be heard.