China Economic Weekly: Zuckerberg’s “Payment” Ambition

On June 18th, Facebook published a Libra cryptocurrency white paper (hereinafter referred to as “Libra White Paper”), which officially entered the currency circle. Libra is defined as “a new global currency designed for the digital world” and claims to provide financial services to billions of people around the world who cannot use traditional banking.

Previously, Zuckerberg’s Facebook was caught in a scandal of leaking user privacy and was questioned by many governments including the United States. In order to eliminate user concerns, Facebook officials responded in an interview recently, financial information will be treated separately from social network data, and Facebook will not be able to access any financial data within Libra.

According to the Libra white paper, Facebook does not have full control of the Libra cryptocurrency project. It is only a member of the Libra Association, which consists of 28 founding partners, including Visa PayPal and Spotify. The Libra cryptocurrency program was officially released in early 2020.

"Dollar Money Alipay" is coming?

According to the blockchain industry insiders, cryptocurrency is a digital or virtual currency that uses encryption technology for security. The distinguishing feature is that it is not issued by any central government. Therefore, it is theoretically free from government intervention or manipulation, and no organization has the right. Access the user's funds or personal information.

The first blockchain-based cryptocurrency is bitcoin. However, what is receiving increasing attention is another cryptocurrency stable currency. The stable currency is linked to other assets such as the US dollar or gold, which is more stable than the currency of the ordinary cryptocurrency. Stabilizing coins have the advantages of cryptocurrency such as transparency, security, digital wallet, fast trading and privacy protection, as well as the stability guarantee of legal currency (such as US dollar or Euro).

The Libra cryptocurrency that Facebook wants to send is considered a "stable currency."

The head of the financial account-to-block chain chain team told the China Economic Weekly that bitcoin is a digital asset created out of thin air. The value of itself is uncertain. The market’s value for it is expected to increase its price. Falling, drastically floating. Libra is called "stabilized currency" because it has an anchor relationship with a basket of currencies. There is basically no price fluctuation. It can be used as a payment tool. This is the biggest difference from Bitcoin.

“Libra just created a tool for payment. So some people commented that Facebook has made a 'currency Alipay',” said the head of the financial account-blocking blockchain team.

According to the Libra white paper, there are various drawbacks in the current digital currency: the price of cryptocurrency fluctuates wildly, destroys the existing system and bypasses supervision and becomes a black goods transaction and money laundering tool, and is not widely accepted by the market. Unlike most cryptocurrencies, for each newly created Libra cryptocurrency, there is a basket of bank deposits and short-term government bonds of relative value in the Libra reserve to build trust in their intrinsic value.

Libra's previous reserves were provided by the founding members of the Libra Association. "China Economic Weekly" reporter noted that in the first batch of the list of founding members, including the world-renowned e-commerce platform eBay, the network car platform Uber, and other financial institutions such as Visa, but no traditional commercial banks involved. .

Calling Ali, Tencent or “challenge” the central bank?

As soon as Libra was released, it attracted a hot discussion in the industry.

According to some opinions, the number of Facebook users reached 2.7 billion at the end of last year, which is more than the total number of users of Ali and Tencent. Libra, a borderless, non-feeing digital currency, will have an impact on domestic Alipay and WeChat wallets, and even It will face the traditional banks, especially the central banks of various countries.

"New York" magazine wrote that Facebook is imitating Tencent's WeChat, but its real purpose is not to compete with WeChat, but to compete with currencies such as RMB, USD, and JPY.

In this regard, blockchain practitioners, logistics information sharing technology and application of national engineering laboratory researcher Wang Zhibin in an interview with China Economic Weekly reporter: "Libra will not have a substantial impact on Ali, Tencent. Facebook's social Software is not widely used in China, and Libra's virtual or physical product application market, online or offline scenarios will not be widely available."

According to Analysys released in the second quarter of 2018, the proportion of China's third-party payment institutions' comprehensive payment market transactions accounted for Alipay, Tencent Financial and UnionPay's business share in the top three with 44.50%, 30.80% and 11.42% respectively. The total market share reached 86.72%.

Wang Zhibin analyzed that Chinese consumers would not easily abandon the existing convenient and basically free payment system and use a complex digital cryptocurrency payment system. In addition, even in the United States, the vested interests of existing payment systems such as Mastercard, PayPal, and Visa will not easily give up the original market and profits, and it is difficult to fully support Facebook's Libra ecosystem.

According to Wei Xuefei, the dean of the Shanghai-Baocheng Technology Industry Research Institute and the think-tank expert of the Shanghai Blockchain Technology Association, the blockchain technology has the characteristics of “decentralization and non-tampering”, and at the same time strengthens privacy protection. For legitimate industries, Good things, but the borderless Internet world will also be given more gray space. If social media has the right to issue currency, once it is used by hostile forces, it is very dangerous. Governments and industry organizations should be vigilant.

However, Wei Xuefei also suggested that China should now encourage blockchain technology to be applied to government and people's livelihood-related fields. For Facebook at this time, more prudence is required to allow its use in China.

Challenge the bottom line of supervision, Libra is threatened by countries

"Technology is not difficult, it depends on whether the regulation is allowed." On June 19th, Tencent's founder Ma Huateng commented on Libra in a circle of friends. Many blockchain industry insiders also analyzed the China Economic Weekly reporter. From a purely technical point of view, Libra does not have much technical innovation, and domestic Internet giants can do it, and more are regulatory and model issues.

The head of the financial account-to-blockchain chain team operation believes that although Facebook calls it a payment instrument, it has a certain impact on the legal currency because it has the property of “coin” and can be exchanged by the currency. Supervision. Those regions with relatively poor financial systems may welcome Libra, but countries with sound financial systems are not welcome.

Wang Yongli, former deputy governor of Bank of China, talked about the many pain points of Libra's “landing” in the article “Seven Questions on Facebook Cryptography”. In Wang Yongli's view, when people are discussing Facebook's cryptocurrency, it seems that their vision has been realized or can be realized. It is believed that its 2.7 billion users will naturally become Libra users. They should carefully analyze the conditions and problems they have implemented. Faced with competition and other issues.

At present, people from many countries in the financial industry have expressed doubts about Libra.

According to a Bloomberg news report on June 19, French Finance Minister Bruno Le Maire said in an interview with the media that digital currencies like Libra should not be considered as substitutes for traditional currencies. The minister will prepare a report on Facebook at the July meeting. His concerns include issues such as privacy and money laundering.

According to another report, Maxine Waters, chairman of the US House Financial Services Committee, asked Facebook to suspend the development of the Libra cryptocurrency network until a hearing was held. He stated in a statement: "For the cryptocurrency industry, there is currently no clear regulatory framework."

In Wang Zhibin's view, credit endorsement of digital currency and popularization are difficult problems. Unlike the existing monetary system, which is endorsed by sovereign countries, the Libra Association is currently composed of a very loose and inconsistent member, and is not able to provide the digital currency with a credit endorsement equivalent to that of a sovereign state.

Author: Song Jie

Article from: People's Network – China Economic Weekly

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