Four misunderstandings about digital currency

On June 18th, the digital currency Libra test network led by global social networking giant Facebook was launched on GitHub and released a white paper. "The core of the monetary economy is demand. Going outside is the supply, and the outward is the indispensable technology. The unity of money, in form, is often embedded under external power. In fact, it is still Libra reflects Facebook's position choice and gives a certain answer to the relationship between demand, supply and technology.” In order to deeply think about digital currency and judge the trend, Zhou Zi, chairman of Zhejiang Modern Digital Finance Technology Research Institute Taking Libra as an example, Heng explained to the reporter the four misunderstandings common in the current digital currency field.

One of the misunderstandings: the digital community determines the demand for digital money

"Financial Times" reporter: Face Book has a huge user base of 2.7 billion, will Libra release the digital currency of global currency in a flash? Zhou Ziheng: Digital currency is the product of the digital economy and has developed and developed to meet the needs of the digital economy. This seemingly simple truth, in practice, is often distorted, making digital currency a product of the digital network community and serving it. In this way, community activities are equated with economic activities, and the digital community itself is equated with the digital economy; in turn, the community can issue digital currency regardless of size; if there is no community, it can also be issued through a new community. As a result of development, everyone can issue coins, and community coins have become popular and popular: those oversized communities have been sought after to pursue the issuance of large digital currencies.

As we all know, the positioning of the digital community is different, there are social platforms, there are shopping platforms, Amazon is the online shopping giant, ant gold is a digital payment giant, Didi is a car travel giant, and of course, ticketing giant There is no hegemony, distance education giant, so many things. However, to this day, not only have there been no all-encompassing super-communities, but there has also been no economic community. It is true that the economic society has not appeared, and it is not expected to emerge. A digital economy community in the whole industry is a giant. Since the representatives of the digital communities are different from each other and feature different community activities, it is difficult for the community digital coins to naturally flow to other communities and develop into digital currency. Therefore, even if a certain community currency has achieved cross-border circulation, it is still difficult to cross-community circulation. Libra has arranged more than a hundred nodes, and many online communities and payment giants have joined. It seems that cross-community is no longer a problem, but why is Amazon not speaking and not joining? Is Libra implementing the so-called dimensionality reduction on Amazon? Technically, a digital community seems to be infinitely large; in reality, it must have a clear boundary; logically, the community that lost its borders should itself disappear…

If you insist that the super community with 2.7 billion people must have the power of the gods, and there is no hard core that cannot be broken, then it must be said that it is not as big as it seems, not even as imagined. hard. The reason is not complicated. There is no economy in the world with a population of 2.7 billion, no language is commonly used by 2.7 billion people, and no population in a time zone reaches 2.7 billion people…so this 2.7 billion is purely statistical On the simple addition, any economic scenario it achieves is not an order of magnitude compared to Alibaba or Tencent. A simple or inappropriate metaphor, a stack of 27-inch pizzas in diameter, is far from a single 27-inch pie. With the scale and willingness of a certain digital community, we can plan to unify the global currency. This is not only a misreading and misuse of statistics, but also a false proposition in fact and logic.

Digital currency is “digital currency” and it should not be limited by the community. The competitive cooperation and mutual penetration of various kinds of community coins eventually lead to an overwhelming digital currency. It is not the mass of the super community that determines the future direction of each community coin, but the demand power of the cross-community.

Misunderstanding 2: Digital technology determines the supply of digital money

"Financial Times" reporter: Face Book has enough advanced technical capabilities, will Libra fundamentally subvert currency language and currency logic?

Zhou Ziheng: As long as the digital technology of issuing currency is "advanced", building a community and issuing money are all done overnight. So that the existence, size, maturity of the digital economy is secondary or even negligible. This kind of understanding or position has inflated, and even declared that "there is no theoretical problem that digital technology cannot solve, and there is no practical task that digital technology cannot accomplish." As long as digital technology is in place, the digital economy will bear fruit, and digital currency will Will be popular. "Digital technology first, technology overwhelming and dominating everything" has developed, and digital technology has been shaped into a dominant force that determines the digital currency and the digital economy. After all, the technical language began to replace the currency language, and the technical logic began to ignore the logic of money. Not only did "technical first" replace "community first", but technology also determined supply and planning needs.

Such a cult of technology to reach the "height" of faith, can not help but become a technical determinist, and then consciously and unconsciously regard the economic society as a blank piece of paper, can draw the latest and most beautiful currency pictures. However, the economic society has never been a blank piece of paper, and the currency has never been "the newest and most beautiful". For thousands of years, regardless of economic decline or prosperity, the economy and society have always been able to find a suitable fit – even if it is strange – the form of currency and its institutional arrangements. This often comes from the real needs of the social economy itself; external design or deliberate arrangements that leave or exceed real-world needs, no matter how grand the monetary concept or how its vouchers are pious, end up failing. The so-called monetary prophet has not only been in the form of money, but also in the amount of money. In theory, this is highly abstracted as "the money supply is an endogenous variable determined by money demand." It is this iron law that has repeatedly been manifested in the changes in the history of money, that is, demand is the first, supply is the second, and technology is the supply. This is why banknotes are later than papermaking for nearly a thousand years.

Misunderstanding 3: Digital assets are equivalent to digital currencies

Financial Times reporter: As a community coin, Libra is a digital asset. What is the essential difference between it and digital currency?

Zhou Ziheng: Community currency is a community digital asset. After cross-regional listing and trading, it becomes a general digital asset; therefore, it is favored as a tradable “digital currency”, but its essence is still digital assets, and cannot be converged into numbers. currency. The reason,

First of all, digital assets often fail to meet the needs of digital currencies, and there is no substantive intersection between the two. This has nothing to do with whether the issuer's monetary concept has a short-term or not, and it has nothing to do with whether its currency vision is grand and complete. Basically, this is not determined by the will of the issuer, but by the specific and realistic needs of the digital currency. of. What is this "reality demand"? In short, what time and space do you meet, what kind of, what is the specific, micro, digital retail or wholesale demand? If you make a guarantee or force the meeting to make a ambition, you can’t cross the sea and pretend to be a currency.

Secondly, the instability of the price of digital assets is the norm, and it should not act as a currency of denomination or bookkeeping; its liquidity is also poor, and it cannot be used as a payment instrument, but it is often reduced to risky assets, and even more degraded to cut amaranth. Means or pyramid schemes. Bitcoin – the total amount of the issue is locked, the transaction price must cover the incremental production cost (that is, the cost of mining). However, the market trading volume and price are not regulated and regulated, and there is violent fluctuation; stable currency – the transaction price Stable target control, circulation and trading volume must be adjusted accordingly. These are nominal digital coins. In fact, the price-volume relationship is the basic trait of digital assets. As for the digital payment instruments that have successfully locked the bank's legal currency, the regulatory authorities simply do not recognize their "digital currency" status, and they themselves try to clarify and intentionally blur the essence of their "digital assets" so as not to fall into the accounting dilemma.

Third, digital asset issuers cannot follow the central bank's financial process and regulatory compliance to achieve stable prices. Specifically, first, what is the setting of the initial circulation and its basis? This will determine whether the initial price has benchmarking properties; second, how to determine the approved standard for new circulation? Will it be random dynamic, camera-selective, or constant? Third, after issuing and selling digital assets and obtaining bank legal currency income, can the issuer's accounting procedures and accounting rules be flexible, comprehensive and independent, without strong intervention from relevant regulatory authorities? For example, the income tax payment of the issue income, if calculated according to the sale of digital assets, is not sustainable in accounting operations. Even if the issuer tries to imitate and even copy the accounting process of the central bank, it will not be recognized in the company law, and will not be accepted in the fiscal law.

Fourth, if digital assets are completely deviated from the central bank model and decentralized blockchain technology is used to promote their digital currency form, this means that digital currency issuance is one-way – the issuance is completed and the issuer withdraws The currency recovery mechanism has not happened. Without the arrangement of currency recovery, there is no consensus mechanism between the issuer and the user. The issuer withdraws from the monetary consensus and is fully entrusted to the consensus among the users. In fact, this is the type of an asset, not the type of currency. In short, assets only need to be sold, money must be recycled; only sold, not recycled, this is an asset, not a currency, the two phases must not be mixed, nor can they converge.

Misunderstanding 4: Digital Forex means global currency unification

"Financial Times" reporter: At present, the digital economy is in the ascendant, and international exchanges are also facing huge opportunities for digitization. Does this mean that sovereign currency will achieve digital unification?

Zhou Ziheng: Bridging the sovereign currencies with digital technology and realizing international exchanges is becoming more mature in technology. There are two main risks: on the one hand, regulatory compliance. The legal risks arising from it and its extended financial risks are very high, especially after the inclusion of sovereign currencies into a unified, non-bank digital international exchange system, the structural impact of local compliance risks It will also be difficult to resist. Considering that international exchange supervision is basically based on banking supervision, the regulatory tolerance for digital international exchange will be very limited, and any partial regulatory policy adjustments will occur frequently on the timeline, which is what makes The international digital exchange system is very fragile; on the other hand, if the international digital exchange system is very strong and successful, it will induce a large number of bank exchange activities to turn to the digital exchange system, pass on risks and usurp revenue, which will intensify the two major exchanges and bank exchanges. Friction and conflict between systems. Undoubtedly, the risk pressure of the digital exchange system will increase sharply, and its risk management and control capabilities will face serious challenges. The digital exchange system intends to delay or resolve this challenge, forcing it to choose and adopt a strategy similar to bank exchange, and the homogenization strategy weakens its competitiveness. Even so, the impact and pressure on the digital exchange system will undoubtedly be greater when faced with common risks.

At present, the global economic development is far from mature to the stage of seeking integration or even currency integration; and economic globalization is undergoing severe challenges and facing major adjustments. At this stage, the international exchange digitalization drives foreign exchange digitization, seeks the digitization of sovereign currency, or even establishes a global single digital currency system. It is not an innovation problem that dares to advance, but is completely out of practice and forced to launch, not only very fragile, but also The risk of a fundamental imbalance.

It should be emphasized that the Facebook book will be published by the Facebook book. The advantage is in the cross-border, but the disadvantage is in the cross-community; it is the digital money supply under the technology lead, and it meets the specific and realistic needs of the digital currency. It is very narrow, and it is very open in the digital unification of digital forex and international currency; it is initially a community-based digital asset, which will greatly change the revenue structure of Face Book itself, but in the next revenue accounting operation, it needs More secure policy arrangements and a more flexible compliance strategy; with digital foreign exchange as the main strategic direction, the risk pressure and regulatory pressure will not be less than just more than bank competitors. Therefore, more strategic partners are needed to jump out of the misunderstanding or even trap of digital currency.

Original: China Financial News Network (http://www.financialnews.com.cn/ll/sx/201906/t20190628_162804.html)