Source: Nanfeng Window Original title: Is digital currency a substitute for sovereign currency? Author: Shanghai International Economic Exchange Center and vice president Xu chess
On August 27, 2019, Carney, Governor of the Bank of England and Chairman of the International Financial Stability Council, proposed at the Global Central Bank Governors Meeting held by the Federal Reserve Bank of Jackson Hole in the United States to replace the digital currency issued by the central government with a "complex hegemonic currency" to replace The "hegemony" of the dollar. This aroused the renewed attention of the international community to the reform of the international monetary system and sparked extensive discussions.
An important factor related to this is that the US social media giant Facebook previously planned to issue the Libra digital currency, believing that this may be an important breakthrough to replace the sovereign currency. The United States Congress and the Federal Reserve have expressed opposition to this potential global payment method and clearing network, while European countries believe that the inevitable development trend of digital cryptocurrencies can be used to advance the reform of the international monetary system.
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With the development of digital currencies by many central banks, using the central bank's "composite digital currency" to replace the US dollar, instead of replacing the US dollar with a new sovereign currency, will not cause direct pressure on the United States morally and theoretically. Therefore, discussions surrounding the replacement of sovereign currencies by digital cryptocurrencies and the replacement of the United States as a key international currency have become hot topics.
However, according to our research, it is difficult for digital cryptocurrencies to replace sovereign currencies in the foreseeable future.
The so-called "encryption algorithm digital currency" that appears in the mode of Bitcoin is accepted in a small range because its issuance quantity is fixed. It is a virtual unit generated by a complex encryption algorithm. There is no A center can control its issuance volume, and its issuance and trading model is based on blockchain technology, which has a natural appeal for hidden economic activists to use as a transaction medium.
But this kind of "encrypted digital currency", which is limited to a certain range, does not have any value basis itself, nor does any capable entity guarantee its value with its own credit. Once the basis of its transaction is impacted, its value will be lost instantly.
After the relevant countries strengthened the supervision of digital currency platforms, the significant decline in the value of digital currency markets such as Bitcoin illustrates this point. This is also the basic negative attitude of official authorities of various countries towards Bitcoin. Even if it is allowed to exist, it is only treated as a virtual asset, and the corresponding supervision is implemented accordingly.
Even from the point of view of payment and settlement, this type of encrypted digital currency cannot assume all the functions of a sovereign currency, cannot be held convincingly and widely circulated by all economic entities, and it cannot provide convenient and effective promotion of commodity production and commodity circulation. Payment service. Sovereign currency is a credit currency that is supported by the sovereignty of a sovereign country and is exclusively and compulsorily circulated through the statutory rights of a sovereign country. Behind it is the credit based on a country's tax revenue and even the entire production capacity and national wealth. No other organization, no matter what method is used, can not start a new stove to produce a transaction medium with the same credit rating, let alone become a carrier with a wide range of value storage functions.
In order to avoid the above-mentioned shortcomings of Bitcoin, Facebook tried to launch Libra, and tried to use the asset package of the sovereign currency assets of major countries as a guarantee of the value of Libra units. In this way, the original blockchain-based distributed accounting and decentralization The characteristics disappeared.
More importantly, the basis of its issuance is the sovereign currency assets issued by the central bank of a sovereign country, which is equivalent in nature to the representatives of these sovereign currency assets. It is simply not true that Libra can replace sovereign currencies.
At best, Libra will become a cross-border payment system that does not rely on the banking system, similar to Alipay and WeChat Pay. Its value protection will still be the currency assets of sovereign countries behind it. Once the holder feels that it is over-issued, requires the value of the assets contained in it to be exchanged, or is sold on a large scale, Libra will face depreciation or even bankruptcy, unable to maintain its declared stability at all.
In this sense, Libra is a symbol representing the circulation of sovereign currency within a certain range.