On June 16, 2019, Facebook-led Libra Association released a white paper announcing the launch of the world's largest digital currency project. Based on Libra's vision and meaning, we recommend that its Chinese translation be defined as “Libra Coin”. In the following text, we will refer to Libra as “Libra Coin”.
Libra is a digital currency based on blockchain technology and secured by sovereign currency or bonds. There is no more conclusive public information between Libra Coin, and the introduction of Libra Coin is detailed enough, so we pay more attention to the impact of Libra.
The Libra coin white paper is open to the definition of “building a simple, borderless currency and financial infrastructure for billions of people.” This is a global monetary system and ecosystem that builds sovereignty, and its impact far exceeds the blockchain. And the scope of financial technology .
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Therefore, this report starts with the influence of Libra Co., and judges the feasible countermeasures of the Chinese government and enterprises, with a view to providing reference for supervision and peers.
First, the world influence that Libra Coin may bring
(1) Libra coin was born in the powerful innovation system of the United States, which is conducive to consolidating the global influence of the United States.
The Libra coin white paper lists more than 20 founding members, most of which are American companies that emerged after the 21st century, including representative enterprises of various periods, such as third-party payment originator paypal, net-born car originator Uber, social networking giant Facebook And the licensed digital asset exchange Coinbase.
These companies have been controversial due to innovation. Uber sparked a collective protest by taxi drivers, and Facebook raised questions about infringement of user privacy and monopoly. Coinbase is believed to be indulging in money laundering and criminal activities.
However, these companies have found a living space in the United States, gradually and supervised symbiosis, slowly and profoundly changing the world, reflecting the strong and inclusive innovation system of the United States.
Today, these innovative companies are launching Libra coins. As the central bank of the United States, the Fed’s attitude is pragmatic and positive. Fed Chairman Powell said earlier that Facebook has communicated with the Fed and other countries. He "has high expectations for Libra, but Facebook must solve other problems before it is globally distributed."
Although Libra is sponsored by the private sector, its white paper clearly states that it will work together with various industries to regulate, rather than circumvent regulation. Since most of the founding members of Libra Coin are American companies, if Libra Coin wants to finally land, it must be approved by the US, and its plan must be in the interests of the United States.
Libra coins are not on paper, but an operational system that actually cooperates with institutions such as the Federal Reserve. Whether other countries or enterprises join or not is a trade-off for network globalization.
The inclusive innovation system of the United States has fostered an innovative business group with global influence. These companies also represent the United States and enhance and consolidate US influence on a global scale.
(2) The sovereign boundaries of networks and finance are blurred, and traditional sovereignty is further eroded by the network.
The current founding company of Libra Currency Association covers high-frequency consumption scenes such as clothing, housing and travel. These members are regional and even global Internet giants, covering more than 3 billion Internet users, close to 40% of the world's population, accounting for about 80% of Internet users worldwide, and Internet users outside China are basically included .
Internet companies have always been committed to opening up the connection between people and information flow and logistics. They are subject to the traditional financial system, and there is always a gap between the Internet and capital flows. Even third-party payments such as paypal are only based on payment instruments based on traditional financial infrastructure, and do not change the nature of funds flowing through banks.
Ten years after the birth and application of blockchain technology, the “money internet” became possible. Libra coins use blockchain technology to open up people and information flow, logistics and capital flow, and everyone becomes a “digital resident” beyond sovereignty. When the mass of users and encryption assets are merged, the concept of traditional sovereignty tends to be blurred , and traditional sovereignty will be further eroded by the network.
In small and weak countries, Libra coins will preempt the local government to build financial infrastructure. The country’s financial sovereignty tends to be lost, and it may be “network colonization” by the Libra Currency Association.
According to World Bank data for 2019, 1.7 billion adults worldwide are not exposed to the financial system. Of the 1.7 billion people, 1 billion have mobile phones and nearly 500 million have access to the Internet. These 500 million Internet users will become the earliest seed users of Libra.
In Latin America, the Middle East, Africa and other regions, a large number of countries have poor financial infrastructure, but the number of netizens is quite large. Once the balance of the payment technology of the Libra currency is closed, the citizens of a large number of low-credit countries will become the standard of the Libra. The legal currency of these countries will be Soon was expelled by Libra.
Despite the Libracoin Association’s claim, “the Association encourages the public trading of Librae coins in multiple regulated electronic exchanges around the world”. However, this does not prevent Libra coins from forming an over-the-counter market. If the rules cannot be set, Librae will bring huge risks to the weak sovereign countries.
(3) Among the reserve assets of the Libracoin, it is expected that there will be no RMB assets, which is not conducive to the internationalization of the RMB.
Libra coins involve more than 3 billion Internet users and have stronger coinage rights than many single-state central banks. Therefore, this Libracoin Association, which is composed of enterprises, will become a super-sovereign financial force. As Chinese companies and users are almost out of touch, Libra coins will become an obstacle to the internationalization of the RMB.
Libra's reserve basket consists of multi-country legal currency and short-term national bonds. At present, most of the founding members of Libracoin are American companies, and the proportion of Chinese users is very low. Therefore, in the reserve basket of Libra, the proportion of RMB assets is expected to be very low. If you do not actively intervene, there will be no RMB assets. After some countries complete the Libra currency standard, the capital flow will be counterproductive to logistics, and priority will be traded with the users of the local currency, which will have a potential impact on China's import and export enterprises.
At the regulatory level, due to the strictness of the Chinese government's digital and monetary policy, although it will make it difficult for Libra to be popular in China, it is difficult for the Chinese government to intervene. At the same time, on the second day of the release of the Libra coin white paper, the G7 Group plans to issue an evaluation report on Libra Coin in July, and finally achieve joint supervision. At present, China is temporarily outside the scope of joint regulatory discussions .
At the industry level, although China has a world-class Internet company, the users of Chinese Internet companies are basically in China, and the proportion of overseas users is very low. As a result, Chinese companies are temporarily lacking the possibility to start another in the digital currency sector .
Second, the Chinese countermeasures against Libra
(1) Re-examining the experience and lessons of financial technology and inclusive finance, and giving market space for financial technology innovation
Libracoin is a product of financial technology innovation in the field of inclusive finance. The aim is to serve at least 500 million Internet users not covered by the financial system, and to promote a wider range of Internet users.
From the perspective of technological evolution, the production of Libra coins is inevitable, which is an inevitable attempt after the blockchain technology is maturing. The production of Libra coins has benefited from the active role of American private companies on the one hand and the prudent inclusion of the US government on the other.
The financial technology industry represented by blockchain technology has sprouted in China not later than the United States, and even China has led the world in blockchain technology and applications. Due to the tightening of post-regulatory policies, China's blockchain ecology is shrinking and it is now lagging behind the United States.
From a global perspective, whether it is a world organization such as the IMF, or a developed country such as Europe and the United States, the research and cautious application of digital currency has become a trend. The one-size-fits-all or open-hand approach to governance has not been able to adapt to the fast-growing financial technology industry.
For the “one size fits all” of financial technology innovation, it is not only not conducive to financial stability and defuse financial risks, but also causes innovation to stagnate, and then lags behind other countries, causing asymmetry risk.
Therefore, it is imperative for China to establish a prudent and inclusive financial technology regulatory system, which will promote the healthy and orderly development of financial technology innovation. In order to achieve inclusive and prudent supervision, it is necessary to achieve “supervised technology plus negative list” to achieve a prudent and bottom-line inclusive basis.
(2) Open digital currency and assets discussion and innovation test restricted area, the central bank digital currency system should allow the full participation of state-owned enterprises and private enterprises,
Since the 9.4 ban, public discussion and experimentation of digital assets and digital currencies has become a restricted area in the country. At the same time, developed countries in Europe and the United States have held hearings and seminars to allow digital currency projects to be tested in the sandbox of supervision. Whether in the practice of digital currency or at the theoretical level, China is currently lagging behind developed countries.
According to public information, even in the G20 countries, there is no consensus on digital currency, so the ban is not conducive to international exchange or industry development.
In November 2018, Zhou Xiaochuan, the former president of the People's Bank of China, also publicly stated that "the digital currency can be the central bank, the private sector, or both."
Regarding the conditions for the private sector to participate in digital currency, Zhou Xiaochuan pointed out that “the private sector can participate in the construction of such financial infrastructure, but must be publicly guided by government guidance, considering publicity, stability and currency. Conduction mechanism."
Based on this, China can combine the achievements of the central bank digital currency research institute and industry practices to encourage enterprises to fully participate in the technology accumulation and application of digital currency and digital assets, and gradually build a complete digital currency ecology. Regarding the digital currency test, it is possible to consider trial operation outside the country, and then set up a regulatory sandbox in Hainan and other domestic regions.
(3) Chinese institutions and enterprises should be allowed to join the Libra currency system.
Libracoin is the first digital currency initiated by the Internet giants and has a huge exemplary role. Therefore, China should allow Chinese companies to participate in the Libra Coin Association, represent China's opinions in the Libra Coin Association, and rely on the Libra Coin platform, Chinese Internet companies can also go abroad and become global applications. This will not only conform to China's digital currency regulatory policies, but will also not lose the voice of cyberspace.
(4) Support other giant hairs to start digital currency and differentiate the influence of Libra
The reason why Libra coins appear is that the Internet giants use the social test of market dominance after the blockchain technology solves the problem of strangers' trust. Despite the innovation of Libra coins, in any country, the giants that abuse market dominance are not welcome.
In 2019, IMF Managing Director Lagarde warned that “large technology companies may have a major disruption to the financial landscape. These companies use deep customer base and huge consumption potential to provide financial products based on big data and artificial intelligence”, “ These developments have brought hope for accelerating financial inclusion and modernizing financial markets, but have also raised concerns about competition and market concentration in addition to privacy issues, which has led to the fragility of the financial system."
For the abuse of dominance by giants, in addition to the rigid means of regulation, encouraging competition is also a desirable strategy.
As the infrastructure of the Internet, cloud computing is naturally suitable for settlement in digital currency. Moreover, Chinese cloud computing companies tend to lead the world, and they can join forces with well-known cloud computing companies such as Microsoft, Amazon, and Google to try to issue digital currencies and take legal currency mortgages or cloud computing power as a value reserve.
In addition, with the advent of the 5G era, traffic bills can also be paid in digital currency.
Cloud computing and traffic are the immediate needs of the information age. They are the foundation of the information world. They have better isolation from the physical world. If you can test digital currency in these areas, it may form a situation of resistance to Libra.
China Blockchain Application Research Center
June 25, 2019
Attachment 1: Introduction to the founding members of Libra Coin
|Founding member||country||industry||User number|
|United States||Social Network & Communication Software||Facebbook23.8 billion monthly users (2019Q1)|
Facebook message 1.3 billion monthly users (2018)
WhatsApp 16 billion monthly users (2018)
Appendix 2: Introduction to China Blockchain Application Research Center (CBAC)
The China Blockchain Application Research Center was established in Beijing in November 2015 by the Internet Finance Museum and some of the leading organizations in the blockchain industry. It was later established in Beijing (2016), Shanghai (2017), Silicon Valley (2018), and Dubai, United Arab Emirates. (2018) and Shenzhen (2018), New York (2018), Hong Kong (2018) and other places have successively established regional centers initiated by executive directors. In July 2018, the center joined the National Federation of Industry and Commerce System and created the China M&A Association Blockchain Professional Committee.
By May 2019, 48 governing bodies had joined. The chairman of the board of directors is elected by the standing director. The current chairman is Guo Yuhang, the secretary-general fisherman, and the rotating secretary-general Ye Jian. The founding chairman was Xu Xing, and the second chairman was Dundee.
The center is a charity organization whose purpose is to work closely with regulators to jointly promote training certification and standard development in the blockchain industry, encourage the application of blockchains in the real economy, prevent financial risks, and promote the Chinese blockchain industry. Exchange of global peers and establish industry rules. The former deputy governor of the People's Bank of China, Suning, the former vice chairman of the China Insurance Regulatory Commission Wei Yingning, the Chinese Academy of Engineering academician Chen Xiaohong and the chairman of the China Finance Museum Wang Wei served as the center consultant.