Media: Encrypted currencies reshape the global financial order?

Bitcoin is hard to show glory, Libra's brilliance is even worse: the stability and credibility of the digital legal currency, as well as the great convenience and penetration, so that many central banks are on the verge of enemies. Regulatory warnings have been issued. Analysts predict that the currencies of some small and weak countries may accelerate their depreciation or disappear, and even some governments may accept Libra to pay taxes and expenses.

Ten years ago, Bitcoin was dubbed as a decentralized cryptocurrency by a geek named Nakamoto. Since then, the cryptocurrency boom represented by Bitcoin has swept the world.

2017 is the hottest year for investors. Bitcoin prices once rose to nearly 20,000 US dollars, reaching a historical peak. Also in this year, the world's largest options trading platform, the Chicago Board Options Exchange (CBOE) became the first exchange in the United States to list bitcoin futures. For a time, the cryptocurrency will be legalized and the rhetorical growth will continue in the future.

Today, Bitcoin has fallen to the altar and has fallen to around $3,000 by December 2018. Although it began to pick up after April this year, it has long since disappeared. On June 19, local time, CBOE suspended the 18-month Bitcoin derivatives transaction as the last contract expired.

And this is not the end of the cryptocurrency. With the emergence of "Libra", not only did the bitcoin-based encrypted digital currency market rise, but it also attracted the attention of global central banks and regulators.

On June 18th, Facebook, the world's largest social platform, released a white paper on digital currency projects called Libra, and plans to officially launch it next year. Libra is used for “peer-to-peer payments” in applications, and unlike bitcoin, which is completely decentralized and has significant currency fluctuations, Libra currency is linked to a basket of bank deposits and short-term government bonds, and the currency remains relatively stable.

In view of its stability, convenience and penetration, the Fed chairman even issued a sigh of Libra “may replace the more traditional currency”, and central banks have issued regulatory warnings.

Libra with flying bitcoin?

With the last bitcoin futures contract on the Chicago Board Options Exchange, the world's largest options trading platform, expire on June 19, the Bitcoin derivatives transaction officially ends in CBOE, and the exchange will no longer follow any cryptocurrency futures products. .

When CBOE announced the launch of Bitcoin futures in December 2017, Chris Concannon, then president and chief operating officer of CBOE Global Markets, said that these derivatives are true game changers and will revolutionize traditional finance. Domain, increasing the acceptance of cryptocurrencies. "We believe that in the next 10 years, the cryptocurrency market will explode in terms of assets and currencies involved."

However, a year and a half later, the exchange spokesman Suzanne Cosgrove said that the Chicago Board Options Exchange does not intend to add new bitcoin futures contracts, "CBOE is assessing that it continues to provide digital assets for trading. Derivatives plan, but there is currently no new news to announce."

Wang Hao, president of Frost & Sullivan Greater China, told the International Finance News that Bitcoin futures trading can provide investors with a way to buy and sell cryptocurrencies in regulated markets, which can increase cryptocurrency. Market liquidity and transparency help manage investment risks and attract more investors into the cryptocurrency market. Therefore, the cessation of Bitcoin futures trading may have a certain negative impact on the development of the cryptocurrency market, which may be a bitcoin market. The signal of investment enthusiasm cooling.

In an interview with the reporter of International Finance News, digital currency analyst Xiao Lei also said that CBOE stopped bitcoin futures trading, mainly because the trading volume was too small, indicating that Bitcoin has a market advantage in strict supervision, which is not obvious, reducing investment. As expected, this is not good for the short-term trend of Bitcoin.

However, Wang Hao also admitted that it is only CBOE to stop the impact of bitcoin futures trading on cryptocurrency may be limited. Because CBOE's competitor, the Chicago Mercantile Exchange, also operates a cash-settled bitcoin futures business, and the Chicago Mercantile Exchange's bitcoin futures contracts trade more.

It is worth noting that Bitcoin once broke through $9,000 at the end of May and quickly fell back. It has stabilized at more than $9,000 in recent days. Some analysts believe that this is mainly due to Facebook's recent release of the Libra encrypted digital currency white paper.

More stringent cryptocurrency regulation

At present, countries have different degrees of supervision over cryptocurrencies, but they are gradually cautious.

On June 9, a document on the Japanese Ministry of Finance website stated that the G20 leaders asked international regulators to monitor the risk of cryptocurrencies and called for a multilateral approach to the proper functioning of cryptocurrencies. According to the document, technological innovations such as blockchain can significantly improve the financial system and economy. However, while crypto assets do not pose a threat to global financial stability at this time, they still need to be vigilant about risks, including consumer and investor protection. Anti-money laundering and other related risks.

At present, Asian countries are more cautious about treating digital currencies than European and American countries. According to the statistics of the think tank, as of December 31, 2018, 98 countries and regions (or 43.75%) in the 224 countries and regions in the world have put forward corresponding policies for the regulation of digital currency. There are 62 (or 27.68%) clear transactions, and gradually establish anti-money laundering, taxation and other laws into compliance regulation; 5 (or 2.23%) clear transactions illegally, strictly control digital currency transactions; 7 (or 3.13%) limit some transactions; 24 (or 10.71%) remain neutral, and the remaining 110 countries and regions (or 56.25%) did not make a clear statement.

India is one of the countries with the strictest cryptocurrency regulation in the world. According to India’s “Coinage Newspaper”, the Indian government is currently discussing the “Prohibition of Cryptographic Currency and Officially Regulated Digital Currency 2019 Act”. Once the bill is passed, it is a criminal act to hold, buy, sell, and other cryptocurrencies such as bitcoin. Will be sentenced to 1 to 10 years in prison.

Xiao Lei said that the question about India actually reflects the policies and views of different countries on cryptocurrencies. India needs to curb transactions other than legal currency and strengthen capital controls. However, if the Indian rupee’s exchange rate cannot be stabilized, then The regulation of cryptocurrencies will be more difficult.

Central bank pushes digital currency

In fact, in recent years, with the development of blockchain technology, multinational central banks have begun to pay attention to digital cryptocurrency. Many central banks have also established specialized digital currency research institutions or departments to issue relevant research reports, initiate technology research and development, and explore the regulatory framework or central bank digital currency needed.

It is worth noting that, unlike most people understand the digital currency, the digital currency issued by the central bank is actually “digital legal currency”, which is essentially the same as cash, and belongs to the central bank’s liabilities and has national credit.

At present, China, Thailand, Singapore and other countries have already taken the lead in research and use of digital currency.

Wang Wei previously told the International Finance News that the central bank’s digital currency will make inter-bank transactions more convenient, thus speeding up transactions, reducing transaction costs, helping to maintain the security of financial payment systems and improving the operational efficiency of financial markets. . In terms of cross-border payments, the introduction of the central bank's digital currency will replace the current channel of cross-border payments through correspondent banks, reducing the complexity of intermediaries' participation.

According to Bloomberg, if the central bank issues its own digital currency, the value of bitcoin and other cryptocurrencies may be worthless.

Xiao Lei told the International Finance News that the digital currency issued by the central bank will adopt some blockchain technology technically, and more to achieve the dual improvement of the security and efficiency of the legal currency, but it is still a purchasing power. Relatively stable French currency will not have much value-added expectations. The high volatility of Bitcoin is completely different from the two asset forms. Therefore, the issuance of digital currency by the central bank may weaken some functions of Bitcoin so that it will have a short-term Certain negatives exist.

"In the medium and long term, the value of Bitcoin is actually very uncertain. If other assets such as stocks, gold, and French coins are more trusted by investors and users, the value of Bitcoin will be greatly reduced, so if the central bank issues The digital currency also has a certain number of restrictions, which actually has a big impact on Bitcoin."

Wang Wei said that the central bank's digital currency will be endorsed by the state's credit, and the supply amount will be issued 1:1 with the legal currency, which will be decided by the central bank. "Money legality and currency stability are higher than cryptocurrencies such as Bitcoin, and there is a national credit to endorse, and its future credibility and value will be far better than cryptocurrencies such as Bitcoin."

Will the US achieve indirect jurisdiction over digital currency?

However, the emergence of Libra or the advantage of the central bank's digitized legal currency no longer exists.

According to the Libra Digital Money Project White Paper, Libra Currency linked a basket of bank deposits to short-term government bonds. In addition, it also has all the advantages and special features of mobile payment.

According to Xiao Lei, first of all, Libra's transfer transactions do not need to go through the bank, without third-party settlement system, and because Libra is anonymous, users can quickly establish one or more addresses that are not related to their true identity; secondly, Libra provides services to international financial institutions, including MasterCard, PayPal, PayU, Visa; third, users can exchange between Libra and French currency at the exchange rate; fourth, transfer between users using Libra, just like sending one to the other party Photos are as convenient as information; fifth, Libra's non-profit operations are located in Neutral Switzerland (Geneva).

The Economist also reported that "Libra has great potential. If Facebook's more than 2 billion users exchange some of their savings for Libra preservation, it will immediately become one of the most currency in the world. If it is widely used, it also It will give publishers unprecedented power. Libra not only has a profound impact on Facebook business, but also on the global financial system."

More analysts believe that Libra will establish the status of "digital hegemony" in the United States.

Xiao Lei pointed out that since Libra's founding members are all-American Anglo-American companies, the launch of the cryptocurrency may be a behavior that is completely controlled by Wall Street in the United States and is aimed at upgrading the international status of the US dollar in the international market.

Although Libra currently corresponds to a basket of currencies, Xiao Lei believes that the dollar is likely to still dominate the market. He said that this will invisibly stimulate the "exchange tide" of global users. And if Libra develops more rapidly, the currencies of some small and weak countries may accelerate depreciation or disappear. “Even some governments are likely to accept taxes and expenses with Libra, which may be several times the dollar.”

Wang Decei, chief economist at Foca think tank, also believes that although Facebook's current details of discussions with US regulators have not been disclosed, it also implies that Libra will first meet the requirements of US regulatory authorities, and these requirements will be used as rules of the game. Incorporated into the Foundation Governance Rules in Geneva and written into the blockchain code. US regulators will achieve “indirect jurisdiction” of digital currencies.

Source: International Finance News Front page, June 24, 2019