Babbitt Watch | Libra Reserve has 2 major doubts, holding a new round of hearing next week

In the morning news, Facebook announced the composition of the Libra reserve currency, which accounted for 50% of the US dollar, followed by the euro (18%), the Japanese yen (14%), the British pound (11%) and the Singapore dollar (7%).

“Libra is progressing faster than we think.” My colleagues sent out emotions.

Indeed, reviewing Babbitt's news since September, Libra has a total of 65 related, although there are many external reviews, but its density is another small peak since the launch of the Libra white paper in June.

After careful browsing, the author found that the hidden context is thought-provoking.

• Zhu Jiaming: Digital currency may completely change the aggregate demand supply framework of money
• These data analysis results are quite interesting about stable coins.
• Facebook did not start Libra, but launched a currency war

First, the reserve accounted for 2 major doubts

Five days before the release of the reserve, Libra met with 26 central bank officials. Libra representatives were alleged to meet with 26 central bank officials in Basel, Switzerland on September 17, including the Federal Reserve and the Bank of England.

There is currently no way to know who the 26 central banks actually have, but after that, Libra seems to be more confident. Does this mean that Libra has already secured at least one national regulatory authority?

Doubt 1: No RMB, but Singapore Dollar

In terms of normal thinking, if Libra has reached a consensus with a country's regulation, then the country's legal currency will most likely appear in Libra's reserves, so we need to revisit this news.

In a letter replied to German lawmaker Fabio De Masi, Facebook said that the dollar will become the main currency supporting the digital currency Libra, which will account for 50%, and the rest will be from the euro (18%), the yen (14%), and the pound. (11%) and Singapore dollar (7%).

Seeing this news, many people’s first reaction is that the dollar is so high and there is no renminbi. Is it in the tense atmosphere of the Sino-US trade war, deliberately showing US regulation?

Such doubts are grounded. According to the world currency payment list released in February 2019, the top five are the US dollar, the euro, the British pound, the Japanese yen and the famous currency. The Singapore dollar has not even entered the top 8 and is classified in the “other currencies” column. Why was the Singapore dollar selected? Is it policy friendly? The author did not see a clear signal, which will be explained below.

Doubt 2: Swiss franc is not selected

Another question is why is there a Swiss franc in a basket of currencies?

As we all know, Libra Networks was registered in Geneva, Switzerland on May 2. On September 17th Libra and 26 central banks met in Basel, Switzerland. Moreover, Switzerland is also the most active country for Libra regulation.

On September 11, the Swiss Financial Markets Regulatory Authority (FINMA) issued their official guide to Stabilizing Coins, clearly stating that they were responding to requests from Libra and covering a wider range of stable currencies. At the same time, Libra also said it is seeking to obtain a payment system license under the supervision of Swiss FINMA. Swiss regulators also said they would welcome international oversight of their way of regulating Facebook's cryptocurrency project Libra and are ready to work with other countries to ensure seamless regulation.

Therefore, there is no Swiss franc in the reserve currency, which makes people wonder.

Second, a basket of currencies, national regulatory attitudes

Although Libra's basket of currencies is announced today, its type is not new. As early as September 10, Facebook told US senators that the Libra basket of currencies may initially include the US dollar, the euro, the Japanese yen, the British pound and the Singapore dollar.

He also said one sentence at the time: "Any decision whether to add a new currency to the Libra reserve will be based on all facts and circumstances at the time, including any direct or indirect regulatory restrictions, before fully addressing regulatory concerns and obtaining appropriate approval, Libra The alliance will not provide this digital currency in any jurisdiction."

Libra certainly has no energy to convince all countries, and they don't need to do this. The national policies that are included in a basket of currencies are particularly worthy of attention.

The United States does not worry about sovereign currency, repeatedly stressing the risk of money laundering

First look at the United States. The United States seems to be the only country that does not worry that Libra will shake its sovereign currency status. US President Trump spoke on Libra on Twitter. He believes that Bitcoin and other encrypted digital currencies are "thin air." Libra has no status or reliability. The United States has only one currency. The US dollar is the world's strongest. The currency, past, present and future. Although the wording is its typical arrogant style, it is undeniable that he is telling the truth.

We can see that there is only one thing that the US regulatory authorities have consistently emphasized, that is, "anti-money laundering." US Treasury Secretary Steven Munuchin previously revealed that before the approval of Libra, the United States will ensure that very strict conditions are in place so that Libra will not be used for terrorist financing or money laundering. Mnuchin said: "They have not met these conditions, so I think there is still a long way to go."

The United States not only strictly demands itself, but also allows other countries to do the same. Sigal Mandelker, deputy secretary of the US Treasury for terrorism and financial intelligence, warned on September 10 that Libra, the proposed cryptocurrency of Facebook (FB.O), must comply with US anti-money laundering standards in order to survive, even if it is based in Switzerland. The next day, the U.S. Treasury Department reiterated to Swiss regulators that it hopes that Switzerland will strengthen its regulation of cryptocurrencies and adopt strict cryptocurrency regulations for Libra.

Europe calls for speeding up central bank digital currency, Germany and France strongly oppose Libra

Look at the European Central Bank. If Libra's launch would shake the status of sovereign currency, the first to bear the brunt of a weak currency country, such as Venezuela, but these countries obviously can't do anything about it. The EU seems to have already perceived the threat to the euro in advance.

Bernoit Clay, a member of the ECB's executive board, bluntly said: “This is too dangerous. We must act faster than we can do so far.” In the draft blockchain strategy published by Germany in June 2019, It is clearly stated that the government will not tolerate a stable currency such as Libra, which is dominated by Facebook, which poses a threat to the national finances. French Finance and Finance Minister Bruno Le Maire said, “I want to make sure that Facebook’s Libra project will not become a sovereign currency that can compete with national currencies. Because I will never accept a company as a private kingdom.”

Just stopping Libra is not enough, and the European Central Bank is calling for a legal digital currency. European Central Bank Executive Committee Cole said: "Libra is undoubtedly a wake-up call to remind central banks to make continuous efforts to improve existing payment systems. Global central banks will naturally unite to study the feasibility of the central bank's digital currency."

Luxembourg Finance Minister Pierre Gramegna said in an interview: "The finance ministers and central bankers have some degree of awakening on the Libra issue. The Chinese central bank is very smart, predicting this trend and continuing to work. Now doing it in Europe. A similar effort."

In contrast, the UK that has already left the EU seems to have a good mentality. Bank of England Governor Mark Carney said that Libra will be "open to the open mind" rather than completely open the door.

Singapore and Japan are vague and seem to have little understanding of Libra.

Finally, let's look at Singapore and Japan. The Singaporean regulatory authorities have not made any clear statement about Libra, and can even say that they don't know much. On September 20, the Singapore Monetary Authority (MAS) said there was not enough information to make a decision to ban Facebook's cryptocurrency Libra. Assistant Director of MAS Science and Technology, Li Richen, said recently that the HKMA is communicating with Facebook. It is too early to say that the regulation is clearly opposed to Libra. He said: "To manage risks, you must first know what risks there are. To know what risks there are, you must first understand enough about the products that generate the risks." So it seems that the Singapore dollar has entered a basket of currencies, and the relationship with regulatory policies does not seem to Big.

The situation in Japan is similar. On August 15, when the Japanese government responded to Libra’s question in the name of Prime Minister Shinzo Abe, Shinzo Abe said: “With regard to Libra, it is difficult to answer the impact on Japan because its details are not yet clear. In any case, we will pay close attention to the development of the situation in the future and make appropriate responses based on international public opinion."

A month later, when Japanese Finance Minister Taro Aso mentioned Libra at the Financial Hall meeting on September 5, he only said that the virtual currency Libra is attracting social attention. It is necessary for the new digital currency to check whether it complies with the existing rules and regulations. It is also necessary to check for new problems that cannot be imagined by existing rules and regulations, and will adopt a cautious attitude towards cryptographic assets in the future. In response to this, Japan’s previous rapid feedback on digital currencies such as Bitcoin should not be difficult for Libra to understand. It seems to be intentionally not showing attitude.

Third, Libra's new round of hearings is coming soon

On September 20th, Libra founder David Marcus said in an interview that he plans to launch Libra in 2020. Until then, they need to solve all the problems and create a proper regulatory environment. Earlier, Bertrand Perez, head of the Libra Association, said in an interview that the company is committed to launching Libra in the second half of 2020.

It is worth noting that David Marcus pointed out that when Libra is unlikely to become a means of payment in countries such as Switzerland, Germany or France, the reason given is not regulation, but “expected user acceptance will be a bigger problem than regulation.”

Perhaps we are still in the next stage when we are still worried about the regulatory crisis facing Libra.

Looking at the current policy situation, Libra is still dominated by the United States in terms of regulation. The EU is strongly resisting, the UK is sitting on the mountain, Singapore and Japan remain silent, and China is excluded.

So what deserves attention in the near future is the cryptocurrency hearing held again by the US Congress next Tuesday.

The US House Financial Services Committee plans to ask the US Securities and Exchange Commission (SEC) a series of questions on cryptocurrency and Facebook's Libra project next Tuesday (September 24).

Although the announcement did not specify which areas the committee might focus on, it stated that “will cover SEC actions around the cryptocurrency field, as well as private and public markets; information disclosed by listed companies; implementation; and fiduciary responsibility.”

This seems to imply that Libra may be affected by securities.

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