Digital currency can only succeed if it is included in regulation.

Digital currency can only succeed if it is included in regulation.

Facebook, the social media giant, has released a long-awaited white paper on cryptocurrency and blockchain-based financial infrastructure projects. According to this white paper, the global stable currency “libra” will run on the blockchain of Libra. Libra is a digital currency based on blockchain technology and secured by sovereign currency or bonds.

The ideal of Xiaomi is to make science and technology popular for the people. The ideal of Libra is to use technology to make financial benefits to the people.

Money is generated by the division of labor because the division of labor generates transactions. Money solves the "double coincidence" problem of commodity trading, but the currency itself is divided by the existence of sovereign states. Currency reduces transaction costs, but currency segmentation increases the transaction cost of money. One is because there is arbitrage space between the two currencies. Because of the extremely unstable value of some sovereign currencies, the demand for transactions between currencies has been expanding. This is the pain point Libra has to solve.

To answer whether Libra Coin can succeed, first of all, to review why Bitcoin fails. From the perspective of becoming a world currency, Bitcoin has four problems, and each problem can be said to be fatal. First, the value of the currency is unstable, and there is no mechanism to stabilize the currency, making it difficult to play any monetary function, so it is still speculative. Secondly, the 21 million ceiling is imitating the design of the gold standard, but as Sir Keynes said, This is the "remains of the barbaric era", and as Eiken Green said, it is the "golden shackles" of economic development. Third, “decentralization” is incompatible with the existing regulatory system and monetary system. In 2008, the financial crisis was partly due to the lack of financial supervision. After the crisis, supervision continued to strengthen, and Bitcoin had little room for survival. Fourth, Bitcoin does not build its own ecology.

Libra coins have attracted the author's interest because it has corresponding solutions at the above several levels. It can be said that Libra coins are created on the shoulders of Bitcoin.

First , in the white paper, Libracoin has been described as a “stable digital cryptocurrency”. The designer has built a physical asset reserve for this, including a basket of bank deposits and short-term securities with low volatility and good reputation. In its column). Each newly created Libra coin has a corresponding reserve and can be exchanged for any currency. Of course, this is not guaranteed to be “100% reserve”.

Secondly , in theory, Libra Coin has no scale restrictions. Its mechanism of creation and destruction is similar to that of an all-weather open-end money fund. It can be purchased at any time and exchanged at any time into any sovereign currency, but there is no Libra currency. Interest income. Interest income from the reserve currency will be used to “pay for system costs, ensure low transaction costs, and pay dividends to investors”.

Third , the development of Libra coins is based on blockchain technology, which has certain decentralized features in data storage and transmission, but it is not deregulated. The white paper states: “Cooperation and innovation with the financial sector, including regulators and experts from all walks of life, is the only way to ensure a sustainable, secure and trustworthy framework to support this new system.”

Fourth , the key to anyone can create money is whether it can be accepted. The stability of the currency is not enough to make it widely accepted, but also in the ecosystem it builds. According to the white paper, when the Libra coin is issued in 2020, it is hoped that the Libra Coin Association will include 100 members, and the existing members include the giants MasterCard, PayPal and VISA in the payment field. For cross-border payments, credit cards are already very convenient, but for the 500 million people who own a smartphone but don't enjoy financial services, Libra may fill the gap.

For most people, Libra is the icing on the cake, but for the other part, it is a gift in the snow. The author suspects that if the non-sovereign digital currency represented by the Libra coin acquires the status of legitimacy as a new monetary level, if it can coexist with the sovereign digital currency, then in the field of non-sovereign digital currency, Hayek’s “currency” The ideal of “non-nationalization” may be partially realized, and the ideal of Sir Cairns’ super-sovereign currency may also be partially realized.

Of course, everything is still unknown!