From a logical point of view, there are causes and effects, and the understanding of seeds can better predict the growth of fruits.

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1.1 The time coordinate of Libra

Regarding the origin of Libra, first of all, we must look at its time coordinates in two dimensions, one outside and one inside.

The outer dimension is the timeline of other big companies issuing coins. We will find that Facebook is not the first to eat crabs. The mainstream economy of the United States is embracing blockchain and digital currency step by step.

In July 2018, ICE, the actual owner of the New York Stock Exchange, cooperated with Microsoft, Boston Consulting Group and Starbucks to establish Bakkt, an encrypted digital asset service organization;【1】

Since July 2018, IBM has launched a stablecoin program, which is a stablecoin supported by the US government FDIC;

In February 2019, JPMorgan Chase released the digital currency Morgan Coin for inter-agency clearing;

On June 5, 2019, 14 banks also launched stablecoins for settlement purposes (Utility Settlement Coins USC). The 14 banks include Swiss, Canadian, American, British, Japanese, and Spanish banks. 【2】

On June 12, 2019, Visa announced the cross-border payment blockchain network B2B Connect;

The inner dimension is the timeline of Facebook’s own development. We will find two points. One is that Facebook’s contact and exploration with the blockchain began in 2017. The other is that Facebook and Zuckerberg are deeply affected by the “violation of user privacy "Questions of Distress:

Around the end of 2017, Facebook sought to acquire Coinbase, the largest trading platform in the United States. David Marcus, Facebook’s vice president of messaging products, also joined the Coinbase board of directors (withdrawn in August 2018). Marcus is currently appointed to be in charge of blockchain technology. 【3】

As early as January 2018, Zuckerberg revealed his plan to enter the cryptocurrency market in his New Year summary;【4】

In March 2018, an insider disclosed to the US media that Facebook violated the user agreement and provided the private data of more than 50 million users to a big data analysis company, which may have affected public opinion and political voting.

In May 2018, the EU-wide General Data Protection Regulation (GDPR) came into force. At the same time, Zuckerberg attended two hearings and accepted questions in the European Parliament.

In the first half of 2018, Facebook tried to acquire blockchain projects such as Algorand, Basis, and Keybase to speed up the research and development process. But it hit a wall again, and the acquisition fell through;

In February 2019, it acquired the UK blockchain consensus Chainspace and started recruitment in the direction of blockchain.

In April 2019, Zuckerberg proposed that "I believe Facebook should be able to pay as easily as sending photos."

In May 2019, a New York Times reporter broke the news that Facebook was seeking funding for projects in the payment field, and subsequently poached two experts in the field of financial compliance from Coinbase. Meanwhile, crypto economist Christian Catalini has joined Facebook.

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1.2 Several possible reasons for Facebook to launch Libra

Based on the time coordinates of Libra, there are several analysis on the launch of Libra in the industry:

1.2.1 Due to privacy leaks, we have to find new business models and improve the public’s negative image of Facebook

In 2018, Zuckerberg received great opposition from the United States and Europe regarding Facebook's violation of user privacy data. Zuckerberg was almost arrested because he refused to go to the UK for questioning.

Behind the privacy-infringing data is the business model that Facebook created and relied on for survival—possessing user data for free or at low cost, accurately characterizing user characteristics and preferences through high-level big data analysis, accurately pushing advertisements, and earning advertising fees. With the improvement of people's awareness of data privacy and the further improvement of the law, Facebook must obtain the explicit authorization of the user and pay the price before it can analyze the data, which means that the cost and risk of its original business model will be greatly increased. , and may even become unprofitable in the future. 【5】

100% of Facebook's revenue comes from advertising. When the environment changes, advertising revenue may face a sharp decline, forcing Zuckerberg to lead Fcaebook to find a new business model. Moreover, privacy issues have a greater impact on Facebook's stock price. It is very necessary for Zuckerberg to take action to improve the public's negative image of Facebook.

1.2.2 Exploitation in the field of payment

Payments are one of the largest businesses in the global financial system. In a sound ecosystem, payment is the most frequently used and most important infrastructure. Facebook currently has a sufficient user base, but it cannot be effectively realized. The introduction of the payment system will provide more possibilities for the realization of Facebook's value in various scenarios such as games, e-commerce, and news, and build a complete Closed loop ecology. 【6】

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Table: Facebook's attempts in the payment field (Source: Zero One Finance)

However, China’s mobile payment has always been leading the world. After WeChat, which is also a social product, turned to a “social + payment” composite product, the number of payments has far exceeded that of Alipay. The successful experience can also be fully used as a reference for Facebook. In contrast, Facebook also has a huge advantage in the field of cross-border payments, because although WeChat has a large number of users, they are mainly Chinese, while Facebook users are all over the world, and there is no need to re-cultivate the user base.

Therefore, Facebook has a natural advantage for paying, and has been constantly exploring and advancing.

1.2.3 Actively challenge the goal of blockchain first

Blockchain and digital currency are no longer the behavior of a small circle. It has been introduced earlier that big companies such as IBM and JPMorgan are trying one after another. However, Zuckerberg, the head of the technology field worth hundreds of billions of dollars, how can he not pay attention to new technologies? Technology, how can you not understand the future of blockchain and digital currency.

And since Facebook was founded, it has been invincible in the Internet world, and its success has also fueled Zuckerberg's ambition. As an Internet monopoly, he naturally understands the Matthew Effect in the digital world very well, so Zuckerberg must follow a pre-emptive and one-stop strategy in the blockchain world, and quickly grow to become the number one in the world, making it difficult for latecomers to challenge. 【7】

Therefore, at this time, he wants to step from the Internet to the blockchain directly, and become the leader of the blockchain world.

1.2.4 The reasons may be complex

It is true that the above three reasons all have their reasons. One is the existing internal worries, the other is the only way for normal development, and the other is Zuckerberg's personality and ambition.

It is hard to say that Zuckerberg will not consider any of the above three items when making a decision. Libra has been criticized by many people as eclecticism, perhaps because he wants to satisfy the three reasons at the same time.

If the three reasons exist at the same time, we should realize that the existence of Libra must meet two goals, and one is not enough:

a. Facebook Benefits.

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Some people say that there is no innovation in Libra, but a patchwork of existing technologies and thinking. This kind of statement reminds me of Bitcoin. Before Bitcoin, cypherpunks conducted a lot of digital currency experiments. The POW consensus mechanism that people are familiar with today has been invented by the predecessors. Some technologies make a combination. Isn’t Bitcoin an innovation?

When studying Libra, we need to know what combination of technologies and thinking it is, and why the Libra launch team chose the corresponding components in specific modules.

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2.1 Values ​​of Libra

Many great economists have differences in policy formulation not because of the level of economic theory or biased judgment of reality, but because of values. Differences in values ​​lead to different normative views of what policies should try to achieve.

Different values ​​will also cause the project to develop in different directions. Therefore, I will separate out the values ​​​​conveyed by Libra through the white paper.

Libra's values ​​can be summarized in three words, we will find that these three words run through almost all the mechanism designs that will be discussed below, and have established Libra's moral high ground from the very beginning.

a. to open. It is an openness that is not controlled by any single subject, an openness for the selection of reserve assets, an openness for association members, and an openness for technology.

b. Equality. It is the equality of users regardless of identity, region, occupation, rich or poor, the equality of voting rights regardless of investment and influence, and the equality that all currencies are eligible for consideration in reserves.

c. to share. It is the sharing of management power, the sharing of value returns, and the sharing of connecting the old and new worlds.

In plain language, any part of Libra can come in, and they all participate equally, and they can also share rights and interests.

Openness, equality, and sharing these three values, interpenetrating and influencing each other, have created the soul of Libra.

There are also many people who question whether Zuckerberg will implement this value. On the one hand, we have seen that all its mechanism designs are indeed consistent (even if there are many ways that have to be compromised, it is reasonable from the perspective of implementation) , On the other hand, at least it dares to reveal a problem: the development of science and technology has not brought about the healthy development of the global economy, and even created a greater imbalance, resulting in social problems, [8] the gap between the rich and the poor problems, and the serious irrationality of the allocation of monetary and financial resources that exacerbates the gap between the rich and the poor.

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2.2 Libra coin

There are actually two kinds of coins in the Libra system, one is the Libra Investment Token, which is held by the founder of the Libra Association after investing, and is mainly used for voting and dividends; the other is the Libar currency that everyone talks about. All coins refer to Libar coins.

2.2.1 Currency Mechanism of Libar Coin

Libra's goal is to become a stable digital cryptocurrency backed entirely by a reserve of real assets (called the "Libra Reserve") and backed by a network of competing exchange platforms that buy and sell Libra.

Anchored Assets (Reserves): A range of low-volatility assets, including cash and government currency securities provided by stable and reputable central banks, issued for 100% reserves.

Price: The price of Libra is not anchored to a certain legal currency, but is determined by the assets in its reserve pool. Libra does not have its own monetary policy, and any appreciation or depreciation of Libra depends only on fluctuations in the foreign exchange market. The mechanism in this regard will be similar to that of the Special Drawing Rights (SDR).

Asset custody: Assets in the Libra Reserve will be held by custodians with investment-grade credit ratings distributed around the world to ensure asset security and decentralization. 【10】

Seigniorage: For participants who mortgage their assets for minting, their seigniorage should come from various business income based on Libra. 【11】

2.2.2 Why did Libra choose a stablecoin that uses a basket of assets as a reserve?

Although Libra is a digital currency issued based on the blockchain, it is very different from digital currencies such as Bitcoin. Libra is an innovative stable currency.

The goal of the Bitcoin white paper is to become electronic cash, but due to the deflation mechanism and other reasons, the currency price fluctuates greatly, and people hardly use it for payment, and it has become a consensus-based digital asset. In the following years, the attempts of various digital currencies such as Ethereum basically announced the failure of the currency with large price fluctuations for payment.

For daily payments, people hope that the prices of items today and tomorrow will be basically the same, so stablecoins with less fluctuations in currency prices have become an inevitable choice for landing applications. The highest daily turnover rate of the top ten digital currencies except USDT is no higher than 35%, while the daily turnover rate of USDT is as high as 425%.

But it must be explained here that the name of stable currency can easily mislead everyone, because there is no stable currency at all. For example, the RMB will fluctuate against the U.S. dollar, and the U.S. dollar will always fluctuate against gold. Therefore, stability is a relative stability, not an absolute stability. When we talk about stablecoins, we must know what stability is relative to. This object is very important. 【12】

The stable currency that everyone is talking about now usually refers to the digital currency issued with legal currency as the anchor, such as USDT, etc. The difference of Libra is that it chooses to use a basket of assets as a reserve. Because most of the current stablecoins are collateralized by U.S. dollars, many also emphasize 100% reserve, which brings simple and strong credit support to stablecoins, but also wastes liquidity and limits the profitability of operators. Libra mortgages a basket of low-risk assets, not limited to U.S. dollar assets, so that it can avoid the risks brought by a single U.S. dollar asset, has more open financial characteristics, and has greater profit margins. Higher asset management capabilities. 【13】

Regarding whether Libra may be decoupled from currency issuance and national debt in the future, and transition to other assets, everyone can only speculate at present.

Some experts believe that after a few years, people are already familiar with and widely accepted by Libra, and the migration cost is also high, so they don’t mind whether Libra has enough low-risk asset anchors. :1. The adjustment caused commotion at the beginning, but it returned to normal after a short time. USDT is still the most used stable currency at present. Therefore, they believe that decoupling will definitely happen in the future, and even after decoupling, not only assets will be used as reserves, but also their own credits will be used as reserves for issuance.

Some experts believe that decoupling is an extremely difficult thing. The renminbi has not yet completed decoupling from the U.S. dollar, and Libra cannot be stronger than the renminbi. 【14】

2.2.3 The Nature of Libra Coin: Super Sovereign Currency

A large part of the controversy over digital currencies such as Bitcoin is whether Bitcoin can be called a currency. It can be said that the mainstream economic circle has not yet reached a consensus. But this time, almost no one has questioned whether Libra is a currency. Everyone has acquiesced, and more discussions are on whether Libra is a denationalized currency.

Because it represents a basket of existing currencies, Libra has no currency creation function. The issuance of Libra is 100% based on the legal currency reserve pool and will not generate seigniorage. Libra has no real monetary policy. Therefore, Libra is far from the denationalization of money. According to Zhou Xiaochuan's elaboration on super-sovereign currency, Libra is a super-sovereign currency. 【15】

2.2.4 Libra is the central bank of the digital economy

The issuance of currency is divided into basic issuance and derivative issuance. The currency issued by the former is called base currency, and the latter is called derivative currency.

The issuance of the base currency is based on two anchors, sovereign credit and real assets. This kind of reserve is 100%, usually carried out by the central bank. And in the case of derivative currencies, there is a class of chartered institutions in the economy, usually called commercial banks, that can lend against partial reserves. 【16】

Libra directly purchases government bonds from the Ministry of Finance, or the bond party directly accepts Libra, then Libra is equivalent to the central bank; Libra does not accept, and users can only achieve acceptance through the secondary market, which has a stronger flavor of the central bank. So for now, Libra is more like a central bank than a commercial bank. 【17】

2.2.5 Differences from Q coins, Alipay and Bitcoin

【18】

2.2.6 Questions to be answered

Regarding which currencies and bonds are specifically selected in Libra, there is not enough discussion in the current white paper. This is also a point criticized by some economists, because this is a core content that has been left blank. Therefore, this question needs to wait for the release of the Libra team's next step information:

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2.3 Libra Association

2.3.1 Introduction

The Libra Association is an independent Swiss non-profit organization with a mission to build a simple global currency and financial infrastructure that serves billions of people. The members of the association are composed of validator nodes of the Libra network, the founders of the Libra Association in the early stage, and open to all entities in the later stage. An important point that Libra has attracted the attention of the whole people is the luxurious lineup composed of founders of early associations such as Facebook, VISA, and PayPal.

The values ​​of Libra mentioned in 2.1 of this article run through almost all the rules and regulations of the Libra Association. The opening of the Libra Association has exceeded everyone's expectations. Unfortunately, this part has not been discussed enough.

Independence: In the context of the current media communication, many people will mistakenly think that Libra is a currency issued by Facebook, which is a huge misunderstanding. Facebook was only responsible for initiating and leading Libra in the early days, but before the end of 2019, it will give all decision-making power to the Libra Association. And the entire white paper of Libra is developed from the perspective of the Libra Association, and tries to describe the independence of the association itself. The few mentions of Facebook are also emphasizing that Facebook and other members are equal.

Openness and equality: All the institutional details of the Libra Association reflect the principle of ensuring the openness of members as much as possible while limiting the concentration of power. "Equality at the end". Facebook’s voting power in the Libra Association will also not exceed 1%. 【19】

Decentralization: Many people criticize Libra as a product of centralization. Although Libra is still centralized compared with Bitcoin and Ethereum, it is decentralized compared with traditional Internet companies such as Facebook. The world is not black and white, and Libra is a transitional state between centralization and decentralization.

Among them, many people mistakenly believe that Calibra (a subsidiary of Facebook, responsible for the development of the Libra wallet) is a privilege reserved by Facebook to ensure Facebook's interest returns. But in fact, the wallet service is also open, just like Bitcoin, anyone and any organization can develop a Bitcoin wallet.

2.3.2 Similar organizational structures have been successful

When the author read the description of the organizational structure in the white paper, I felt very familiar, because it was almost exactly the same as the organizational structure of VISA in the 1970s.

The predecessor of VISA was the credit card department of the Bank of America. The business centered on the credit card of the Bank of America and was authorized to a number of banks for business cooperation, but the progress has not been smooth. It was not until Dee Hock called for the separation of VISA from the US banking system, the establishment of the above-mentioned organizational structure, and an alliance serving all banks, fully considering the interests of all member banks, that VISA officially developed and became the world's number one.

Libra is similar to VISA, facing the collaboration among the same giants, so this organizational structure is applicable.

member

member

The ownership of assets of organizations such as trademarks is shared by members; members are open, no one can prevent qualified members from joining, and no one can allow unqualified members to join; members can enter and exit at will;

director

Directors are elected by voting, and the number of votes is based on the total transaction amount in previous years, with 1 vote for every US$1,000; a bank can only have one director; each director has only one vote; each district can elect a director, only the headquarters Only in the district are eligible to participate in the vote;

Directors are re-elected every year, and candidates are selected by the nomination group arranged by the board of directors; they can also be nominated by members, and more than two members support can also be added to the list of candidates;

Board of Directors

A number of rules and regulations can be amended; however, amendments to the terms of organizational principles related to the basis of the rules and regulations must be approved by more than 80% of the board of directors; key provisions require the approval of 80% of the directors and 80% of the members;

The chairman of the board of directors is elected by the board of directors; the chairman presides over all board meetings to ensure fair and just opportunities for expression, and does not violate the principles, laws and regulations of the organization, but may not prohibit others from speaking;

president

funds

funds

Each member pays 0.25% of the sales as a service fee; if there is a bonus or other income distribution, it will be distributed according to the proportion of the service fee paid by the respective bank to the total service fee;【20】

2.3.3 Can Libra be decentralized?

The author believes that in the process of moving towards decentralization, Libra faces two insurmountable problems:

a. Many assets are difficult to decentralize. Therefore, due to the constraints of asset issuers and managers, Libra is difficult to achieve decentralization.

As mentioned above, Libra is issued by anchoring assets. Therefore, we need to have a deeper understanding of assets. Assets can be divided into atomic assets, bit assets, and compound assets. And when we trade, what we trade is property rights, not assets. Therefore, there are two aspects that need to be guaranteed. One is to ensure the one-to-one correspondence between property rights and objects, and the other is to ensure that property rights can completely control objects.

Based on this principle, we can draw a conclusion that it is impossible to achieve complete decentralization for atomic assets, and must rely on centralized institutions to achieve.

Only a part of the bit assets can be decentralized. For example, "Game of Thrones" is very popular. The show itself is an asset, but fans may download pirated versions. When using pirated versions, there is no loss The acquisition of product value is no different from looking at the genuine version. Such assets are useless even if they are put on the chain, and a centralized organization is still needed to protect their rights.

To judge whether an asset can be completely decentralized, it is very important to see whether users must be in the network to obtain its full value. Bitcoin is a special case. Copying a Bitcoin from the blockchain network is just a number that cannot be consumed, so Bitcoin can be completely decentralized. If it can be obtained without being on the network, then it cannot be completely decentralized, and it must rely on centralized institutions for supervision, just like the current patent and current copyright.

From the current point of view, most of the assets used in daily life, even though the proportion of bit assets is already very high, the vast majority of bit assets still cannot be decentralized, so most of the assets cannot be decentralized. Centralized, must rely on a centralized management agency.

b. It is difficult for values ​​to resist the profit-seeking nature of capital.

Libra has almost the same organizational structure as VISA in the 1970s when it was first created. However, after VISA’s founder Dee Hock left VISA and retired, VISA became a company and went public. Although it is difficult to say that it is not successful from the stock price level, the initial vision similar to Libra has not been realized, so it is also a failure.

The founding team of Libra will definitely leave one day in the future. At that time, they will still face the problem of capital chasing profits. No matter how many fees, interest and other income are distributed to the founders of the Libra Association through a structure such as Libra, these income It is difficult to compare with the 15-fold and 20-fold leverage gains. This is the charm of capital that fully meets the demands of rational economic people. 【twenty one】

2.3.4 The long-term difficulty faced by Libra is the game of internal interests

Money is the most important commodity or business in a market economy. The larger the size and circulation of the currency, the greater the economic interests involved. The greater the economic interests, the more intense the struggle or game will be. As the system expands, coordination will become more and more difficult.

If Libra becomes a world currency, its every move, such as the composition of its basket of currencies, the selection and disposal of a basket of mortgage assets, etc., will affect the currency stability, balance of payments, national income, etc. of different countries. It will even involve complex social issues such as race, religion, and terrorism. Libra, as an alliance, in this complex social environment, games and struggles will become so intense that it will be difficult for its currency to operate stably and continuously.

Thinking about how the United Nations works, and why the United Nations has not launched a world currency, may help to understand the difficulties Libra will face in the long run. 【twenty two】

2.3.5 Everyone's concern: Why are most of the founders of the association members from the United States?

Although Libra has set up a very democratic voting mechanism, the first 27 founders of the association are basically American companies, which is close to one-third. Many non-US business organizations said that even if they join Libra, voting rights have been monopolized, and it is difficult to obtain real voting value, which is only a formal democracy.

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2.4 Libra Blockchain

2.4.1 Introduction

The Libra blockchain is an alliance chain based on the LibraBFT consensus mechanism, and will move towards a public chain with a POS mechanism in the future.

Three requirements during the alliance chain period:

a. Capable of scaling to billions of accounts, extremely high transaction throughput and low latency, and has an efficient and high-capacity storage system.

b. Highly safe and reliable, which can guarantee the safety of funds and financial data.

c. Flexible enough to support the governance of the Libra ecosystem and future innovations in financial services.

2.4.2 Move is a smart contract platform language for "digital assets"

"Move" is a new programming language for implementing custom transaction logic and "smart contracts" in the Libra Blockchain. It was rated as the only innovation and two points in the Libra white paper, and this new language was also rated as "this may be what the future smart contract language should look like".

First-class Resources Philosophy

In traditional programming languages, including the Ethereum smart contract language, there are quite a few smart contracts with misrecorded accounts, which even made everyone lose confidence in the future of smart contracts.

The Move contract adopts a type that absorbs the traditional theory of "linear logic", called a resource type. Digital assets can be defined by "resource types". In this way, digital assets, like resources, satisfy some characteristics in linear logic:

Digital assets cannot be copied;

Digital assets cannot disappear in thin air.

The real meaning of First-class Resources is that digital assets are first-class citizens. This sentence can be extended to the fact that Move is a smart contract language for operating digital assets. From a technical point of view, digital assets can be used as contract variables, digital assets can be stored, assigned values, used as parameters of functions/procedures, or as return values ​​of functions/procedures.

Bottom-up static type system

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2.5 Application scenarios

The application scenarios of Libra are mainly as follows, and it is likely to be promoted in the following order:

2.5.1 Cross-border remittance

The poor people mentioned at the beginning of the Libra white paper cannot enjoy financial services equally, and the first thing to do is the issue of cross-border remittances.

Since Libra uses blockchain-based algorithmic ledgers, which only contain a single ledger, the management of cross-check relationships between sub-ledgers is eliminated, and the efficiency of clearing and settlement should be greatly improved. This is especially evident in the efficiency improvement in cross-border remittances. [24] This is a big market and a pain point: annual cross-border remittances have at least trillions of dollars in transfers, and the average transaction fee is 7% of the transaction fee. The transaction fee alone is a cake of 70 billion U.S. dollars. [25] According to a report by Bloomberg, Facebook-owned WhatsApp users can use Libra to send money to India.

The landing of cross-border remittances is relatively easy and widely accepted.

2.5.2 Payment based on Facebook and digital economy

Facebook itself has a huge volume of products, and Libra’s first step in purchasing products is to test within its own system, which is more controllable and easy to promote. According to the New York Times, Facebook plans users to be able to use Libra to pay for Facebook advertising. 【26】

Furthermore, Facebook itself is in the digital world, and there are many online ecological partners. In this field, Libra will go unimpeded. Just imagine, if we use Libra as a unit to purchase membership, listen to music, buy game props, and give rewards online, what impact will it have in the long run? Substantially, people will accept Libra as the value measure in the digital economy, that is, the standard currency.

The above section on stablecoins mentioned that the stability of stablecoins is relatively stable, and the relative objects that people usually use are closely related to life and consumption. We use some daily items to make judgments. Currencies are considered stable if they fluctuate less than most items. For example, people will not use houses to judge currency stability, even if the house accounts for the amount of funds that he has worked for for 20 years, he usually chooses the ones with higher frequency such as food, clothing, housing and transportation.

Now the per capita usage of mobile phones in China and the United States has exceeded 4 hours a day, and it can be expected that the time will only increase in the future, and the frequency and proportion of consumption in the digital world will only gradually increase. If this part of consumption accounts for the majority and is paid through Libra, Libra will not only be the value scale of the digital economy, but will become the value scale of the entire human economy.

2.5.3 Investment

In the future, there will be digital financial products developed based on Libra. These assets themselves will be anchored by Libra, and Libra is used to raise the most suitable currency for investing in them, just like the Token Fund that specially raised BTC and USDT in the digital currency field before .

2.5.4 Offline payment

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2.6 Libra compliance

2.6.1 Attitude: Embracing Regulation

First of all, it must be made clear that Libra's attitude embraced regulation from the very beginning. Various sources also indicate that Libra has communicated with multiple authorities before the release of the white paper.

This attitude is very straightforward in the white paper: We believe that cooperation and innovation with the financial sector, including regulators and experts from various industries, is the key to ensuring a sustainable, secure and credible underpinning for this new system The only way to frame.

2.6.2 Responses from government agencies in various countries

Source: Zero One Finance and Zero One Think Tank based on public information

Source: Zero One Finance and Zero One Think Tank based on public information

2.6.3 Regulation is the main short-term problem, but it is not unsolvable

The current situation facing Libra is that technology is once again at the forefront of the regulatory system. At this time, it is not irreconcilable, but that everyone still does not know how to deal with it.

It is not the first time that the regulatory system represented by the United States has encountered such a situation, and they have their own inclusiveness. Experts from the U.S. regulatory authorities intervened early, and the regulatory system takes the balanced development of society and the well-being of the people as the regulatory goals. When the law and illegality of financial innovation are blurred, it will not be held accountable, so that innovators will not be burdened with such a burden. This kind of ideological burden, can start a business within the clear boundaries of the law in the process of innovation, and can boldly try without clear boundaries of the law, without worrying about personal threats. Such a light-packed entrepreneurial model has enabled American innovators to obtain the most basic protection. Companies such as Uber and Coinbase in the Libra Association have grown up in such a regulatory environment. 【27】

It can be expected that Libra has a lot of regulatory details that need to be considered and improved in terms of currency issuance, asset mortgage, stable currency circulation, anti-terrorism, and anti-money laundering. But on the other hand, from the legal point of view of stable currency, Libra is not the first person to eat crabs. The USDC/TUSD/PAX on the market are all compliant stablecoins. The design structure of Libra is not fundamentally different from them. It can follow the laws of the country where it is implemented and implement the corresponding KYC, ALM, license application, etc. Moreover, Libra has a stronger team and financial resources, and can fully afford the best lawyers and lobbyists to help them clear the relationship and settle the matter.

In some small countries where the legal infrastructure is not in place, Libra may be opposed by populism because of its impact on the local currency. However, these countries often have a characteristic that even if there is supervision, it cannot be implemented well. When they really declare Libra illegal, they cannot hinder the circulation of Libra in the country unless they completely cut off the Internet connection. 【28】

2.7 Libra is dynamic and constantly evolving

Finally, I would like everyone to note that the Libra that people are discussing today is based on its white paper, not Libra's ultimate solution, let alone how Libra will be implemented in the end.

The Libra white paper released now should be said to be a document with the function of inspiring others, or in other words, a draft for consultation sent to the world. The white paper will definitely be upgraded. I believe that the Libra team will make corresponding adjustments and revisions based on feedback from all over the world, and continue to enrich it.

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3.1 Looking at the impact of Libra from several dimensions

3.1.1 Popularity

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Data source: WeChat Index

3.1.2 Period

In today's communication environment where most topics are less than three days hot, Libra has gone from revealing news, brewing hot spots, detonating after the release of the white paper, and continuing to ferment today. The duration of the entire topic has exceeded most economic topics. The last event with such heat and persistence was the trade war.

As the first super-sovereign currency initiated by a multinational enterprise alliance, Libra has to face the most complex supervision and challenges in history. It may not succeed, and even the probability of failure is not small; but once the door of Pandora is opened, there are countless interests. The multinational corporations in the Qing Dynasty are bound to follow suit.

3.1.3 Scope

The Libra incident has such a wide range of influence, from officials of government agencies to private self-media practitioners, from academia to business circles, from financial predators to Internet giants, from token circles to currency circles to chain circles, from the United States to From Europe to China, from industry insiders to ordinary people, Libra's actual influence has far exceeded ordinary economic and technological events.

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3.2 Impact on traditional currency and financial system

Uncovering the appearance, in fact Libra is just an attempt by Facebook to solve the payment problem. The breakthrough innovation in the blockchain field expected by most followers seems to be more of an imagination at present.

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3.2.1 Libra opens the first year of a super-sovereign currency led by an alliance of multinational companies

Since the emergence of currency, it has always had dual functions of economy and politics. Therefore, the competition between currencies is given a strong political significance. However, with the advancement of globalization and the rapid expansion of international trade, people need a unified world currency, and today this role undoubtedly belongs to the US dollar, although it brings many problems at the same time. In today's situation of political fragmentation, great power competition, and clash of civilizations, based on the traditional financial structure, it is difficult to realize the ideal world currency.

The blockchain-based Libra, a cross-border, alliance-based super-sovereign digital currency, will effectively reduce transaction costs and greatly improve collaboration efficiency, which is what multinational companies have been dreaming of. , will have a great impact on the traditional financial system. 【31】

And Facebook is only the first rebel among the Roman legions. Multinational giants such as Twitter, google, whatsapp, Instagram, and JP Mogan certainly smell the huge profits of super-sovereign currencies, and have already made various preparations secretly, just waiting for the right time.

The super-sovereign currency dominated by the alliance of multinational corporations will completely break and reconstruct the current stable symbiotic relationship between economy and politics, and the governance mechanism of the super-sovereign currency based on distributed and open values ​​will also bring capitalism into a new stage.

3.2.2 The impact of Libra on the US dollar

Libra is still an extension of the fiat currency system. Libra is essentially a credit currency. It anchors legal currency and mortgages legal currency-denominated assets, and uses legal currency credit to support private credit. The problems and challenges faced by the fiat currency system will also affect the stability of Libra. Facebook has given the direction of Libra's future decentralization, but it is extremely difficult for a complex and huge alliance credit currency system to switch to a decentralized currency. 【32】

Libra will only help the dollar, not replace it. If the U.S. government wants Libra to be delisted, it will be delisted in two minutes, and it can be done with a phone call, so it is impossible to replace the US dollar, no matter how powerful it is, it is only a tool of the US dollar. 【33】Even if one day Libra replaces the U.S. dollar, for the United States, it is nothing more than the relocation of the financial center from New York to Silicon Valley. The United States' influence on global finance has not declined, but has been greatly improved. 【34】However, it should be noted that Libra is not 1:1 anchored to the U.S. dollar, so its impact on the status of the U.S. dollar remains to be seen. 【35】

In general, the support of the U.S. dollar is the national credit of the United States, and the violent machine is a key part of national credit; Libra, which is highly centralized, cannot feel bad about its ability to physically and physically eliminate itself at any time. is threatened; therefore its desire to replace the US dollar will be far less than that of decentralized digital currencies, at least at this stage.

So will Libra become a puppet of the dollar and fall into the tragedy of relying on the dollar for pricing?

It is generally believed that USDT or other so-called dollar-anchored digital currencies deviate from the U.S. dollar as a sign of failure; while Libra allows fluctuations within a certain range, its so-called fluctuations must be based on the U.S. dollar as the reference system. 【36】Just like the SDR is calculated based on the dollar exchange rate of the currencies in the basket, it means that its anchor is still the dollar. If in the end Libra is very similar to SDR in terms of monetary nature, will its fate be the same as SDR? (Denominated in U.S. dollars in an attempt to counteract the U.S. dollar system...)【37】

The author believes that being close to SDR in terms of currency design does not mean that it will repeat the mistakes of SDR in terms of use and ultimate fate. The most critical issue is: the final decision-maker of whether to accept a currency is the consumer, that is, we often said"C-end users".

SDR is built on the traditional banks and the old clearing system, which cannot reach the final consumers, so it can only live in the basket for the rest of its life.

Libra is born with billions of C-end users, and it is entirely possible to subtly change the consensus of users. For C-end users, whether a currency fails will not only be marked with the most powerful US dollar, but also more intuitively judged by their own daily contact and consumption. In the eyes of ordinary consumers, such things as the US dollar exchange rate are not as real as a meal or a game prop. When the exchange rate between the U.S. dollar and Libra is seriously deviated, but the price does not fluctuate when ordinary Libra users eat, consume, play games, and watch videos in the Facebook ecosystem, the price does not fluctuate. Reliable". (See 2.5 above) As for the deviation of the exchange rate between the U.S. dollar and Libra, only when it uses services such as Libra's cross-border remittance, can it have a more intuitive judgment.

Finally, combined with the analysis of the possible future changes of Libra anchors at the end of 2.2.2 above, we can think about the following two questions:

1. Is it the best solution for Facebook to be friends with the traditional financial system instead of enemies?

2. Does not challenge the traditional financial order at this stage, does it mean that it will never be challenged?

3.2.3 Impact on sovereign currencies of small countries

Wang Xing once made a statement in Fanfou that the world should not have more than 200 independent countries as it is now, because it is impossible to find 200 teams capable of currency issuance. After the release of the Libra white paper, he commented that Facebook's strategy is very clear, and the persimmons are picked softly, and the currency systems of weak countries among the 200 countries in the world will be gradually replaced. Bow your head, if you have to collude, just collude.

Undoubtedly, between the sovereign currencies of small countries issued at will and the world stablecoin anchored by a basket of high-quality legal currency national bonds, people will definitely choose the latter, so the circulation of Libra will definitely have a great impact on the sovereign currencies of small countries, and even replace.

Regarding the impact Libra will have on the original economic system, there is a very appropriate case to refer to, that is, Cambodia's "dual currency system" and its impact.

After the coup in Cambodia in 1997, Professor Zhu Jiaming made systematic suggestions for the Cambodian government on rebuilding the economy, especially the currency system, that is, the US dollar as the main currency and the Cambodian currency as the auxiliary currency. Because the Cambodian people who have gone through wars and the era of non-monetary economy only believe in US dollars, because the Cambodian government cannot issue additional US dollars at will. The US dollar can achieve price stability and avoid hyperinflation. Only with relatively stable prices can political and social stability be achieved. Professor Zhu Jiaming's opinion was accepted, and practice has proved that this choice is correct. 【38】

In fact, the US dollar is no longer the American dollar, but the world currency. There is no conspiracy here, which is the result of history.

Therefore, combined with Professor Zhu Jiaming's design of Cambodia's dual currency system, the US dollar and Cambodian riel dual currency system is obviously more advanced and better in terms of actual implementation effects.

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Libra search interest by region. Source: Google Trends

The darker the color in the picture, the higher the heat. The top five most popular countries are the Dominican Republic, Nicaragua, Uruguay, Paraguay, and Argentina. And this time the Libra white paper also clearly stated that the main service target is the people of small countries. From the picture, it can basically be understood that it has accurately reached the target users.

Interestingly, China's popularity ranks 10th.

3.2.4 Libra's impact on the traditional banking system

Libra is trying to steal a big piece of the bank's monetary system: seigniorage and inflation tax: With the gradual establishment of Libra's credit, it will gradually break away from its dependence on legal currency and become the base currency, which will have a great impact on the legal currency system and the traditional banking system This also brought great suspense to its prospects. 【39】

The foregoing expressed the possibility that Libra is only an extension of the US dollar, and also analyzed its direct access to C-end consumers, so it has the opportunity to change the principle of consumer pricing consensus (3.2.2). At the same time, we must also see that its design does bury the possibility of targeting the existing cakes of traditional fiat currencies and the banking system.

3.2.5 Impact on geo-economics and politics

New technology brings new game battlefields, which is an important issue that all economic powers must seriously face.

The hegemony of the U.S. dollar is mainly reflected in international trade, investment and foreign exchange reserves, and it cannot be unimpeded in the daily payments of residents of various countries and trade between enterprises, especially in the life of the digital economy. However, what the dollar cannot do, Libra can. Facebook users can create, work, shop, travel, consume, buy insurance, etc. around Libra. More importantly, Libra is a currency with a "civilian" identity and does not have the strong political color of the US dollar.

Therefore, Libra and the U.S. dollar are more complementary. When the two sides need each other, the alliance between the U.S. dollar and Libra is a high probability event. Once the alliance between Libra and the U.S. dollar is formed, in the long run, it will be difficult for the government, especially the government of a democratic country, to effectively prevent Libra from penetrating its digital economy. The more reasonable choice is to cooperate with Facebook and its allies. 【40】

Economics and politics have never been separated. When the US dollar + Libra is unimpeded in the world, the existing geopolitical and economic structure will inevitably be broken, and the world structure will face a new round of reshuffle.

How to deal with the new situation of US dollar + Libra, which is jointly promoted by the old and new world? For the decision makers of other big economic countries, I am afraid that they have to get rid of their old ideas, earnestly research and analyze, and formulate countermeasures based on their own advantages and characteristics.

3.2.6 Impact on regulation

When we consider and discuss Facebook's regulatory issues, we should note that its regulation is not just being regulated, but it is likely to change the traditional thinking of regulation and change the regulation system. 【41】

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3.3 Impact on digital currency and blockchain circle

3.3.1 Libra to rectify and speed up encrypted digital currency

As a form of generalized cryptocurrency, Libra is similar to other cryptocurrencies in terms of ideas, concepts, logic, technology, and infrastructure. 【42】The release of Libra will undoubtedly bring huge promotion and popularization to the field of cryptocurrency. In addition to the direct users of Facebook, there are also potential indirect users brought by its strong demonstration effect, such as Twitter, Google and other giants to follow up The users brought in, alone, may bring billions of potential new users to the entire cryptocurrency industry, which will undoubtedly be the best dividend for the cryptocurrency industry.

The birth of Libra means that the promotion of digital currency by top commercial forces has begun to accelerate, and it also marks that the new thing of digital currency has finally finished its staggering infancy and has begun to enter the growth period. At the same time, Facebook's strong brand influence has also brought opportunities for "rehabilitation" to the entire digital currency industry.

3.3.2 Decentralized digital currencies such as Bitcoin

First of all, Libra cannot replace decentralized digital currencies such as BTC.

The decentralized framework designed by Satoshi Nakamoto for Bitcoin, especially the simple POW mechanism that has nothing to do with personal preferences, has greatly abstracted away various social relationships that may affect the operation of the currency, and avoided the politics that Libra will face for Bitcoin. The economic game has laid a solid foundation for being competent as a world currency. This framework also provides strong vitality for Bitcoin in its weak period.

As a private credit currency that uses the fiat currency system to improve credit, Libra is rooted in the problem of centralized currency, which is fundamentally different from decentralized cryptocurrency. 【43】

Secondly, from a secular point of view, Libra will promote the violent rise of decentralized digital currencies such as BTC. (In the week after the release of the Libra white paper, the price of Bitcoin did usher in a sharp rise) for two reasons:

a. Libra has brought unprecedented exposure opportunities to digital currencies and BTC, which has greatly strengthened the popularity and consensus strength of BTC.

b. Among the large number of new users that Libra is expected to bring, the proportion of users with investment attributes and preferences is certain, that is to say, the investment needs of new users will be released in a concentrated manner. Libra itself is a stable currency. Due to various regulatory issues, most follow-up giants can only issue stable coins. The investment value-added property of the stablecoin itself is weak and cannot meet the massive investment needs. Therefore, these new investment demands will greatly push up the prices of digital currencies such as BTC and various industry-related tokens.

3.3.3 Stablecoins for existing and other large institutions

In the long run, it will definitely have a great impact on USDT, because USDT mainly acts as a stable intermediary in the trading market, secondary market, and speculation market. This function can be completely replaced by Libra, not to mention the liquidity of Libra. Should be better.

But in the short term, USDT will definitely respond. The most likely situation is that Libra is the mainstream, and USDT can still find its own living space. In particular, Libra's account system is not as anonymous as USDT, so for some users who are particularly concerned about privacy, USDT still has its important value. 【44】

At the same time, the impact on Ripple is also relatively large. In fact, the Ripple system was found to be a centralized system two years ago, and it was an independent report issued by a third party after a lot of research.

The 14 traditional banks are similar to the "little tigers" and are uniting against the "big tiger" Facebook. They are currently clustered together, but they are still outnumbered by Facebook, whose users cover more than 130 countries and regions around the world. 【45】

Libra obviously poses a great threat to the stablecoins issued by other institutions, but at the same time, the threat itself will prompt other institutions to conduct more in-depth research and thinking, thus giving birth to better new solutions.

In short, only with competitiveness can there be progress.

3.3.4 Full of imagination for other public chains: Libra-based open finance

For other public chains, Libra is not only a competition, but also a promotion.

The Libra blockchain will likely be Ethereum's biggest competitor. The main reason is that the Libra project has great potential to bring it to customers through existing channels; it is built by organizations with large-scale development teams; and ideas are copied from Ethereum and improved (state rent, account abstraction...) etc. .

Vitalik, the initiator of Ethereum, believes that Facebook Libra is a great benefit to Ethereum and the industry. Its influence, connected more than 2 billion users, existing funds and developer resources all contain huge opportunities. Vitalik said that if the Ethereum application can build a bridge to connect Libra and Ethereum, it will bring millions of users.

However, Vitalik also admitted that Libra will "absolutely" compete with decentralized blockchain public chains, but will not replace them. Because the decentralized value created by blockchain companies cannot be replaced by the consortium of companies behind Libra. A careful study of the organizations behind Libra reveals that many are commercial companies located in the United States. And there are many people in the world who are uncomfortable with the blockchain projects, decentralized applications and cryptocurrencies that these organizations manage. So there's a lot of opportunity in both systems right now. 【46】

3.3.5 Sovereign digital currency issued by the country

For governments of various countries, the issuance of national sovereign digital currencies must be one of the highest priority issues for senior officials at this moment. We can make a simple reasoning on this matter, and we can draw the following inferences:

a. The birth of national sovereign digital currency is accelerated.

In order not to be left behind, a group of national sovereign digital currencies may be launched hastily, but due to historical reasons, sovereign digital currencies are different from each other. According to "open or not" and "strength and weakness", we can roughly divide them into four situations: "open, closed, strong, and not strong enough", and we can draw the following inferences:

Open strong sovereign currency: long-term parallel existence, each doing its own thing.

Open weak sovereign currency: Sovereign currency is weakened or even replaced.

Closed and strong sovereign currency: Short-term closed operation will not be disturbed, but it cannot prevent flight, and it will remain weak for a long time.

Closed weak sovereign currency: Same as above.

Regardless of whether it is a strong sovereign currency or a weak sovereign currency, it is impossible to completely cut off the link with the outside world when information circulation is so convenient and developed; therefore, it is also impossible to completely prevent capital flight. Therefore, isolation and evasion are undoubtedly the seclusion of the new era. Putting your head in the sand will not change the situation of being beaten outside, and it will cause irreversible consequences over time.

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3.4 Impact on the public

Libra raises public awareness of open finance. Previously, the financial system was shelved and far away from the lives of ordinary people, but Libra brought it down from the altar, so that people have a real feeling for finance and open finance. This contact will push them to continue to learn related knowledge.

It is difficult to make actual progress in privacy protection. Using Clibra requires KYC, and when using Libra, your identity on the chain is bound to your real identity. And Facebook can have permission to know your information. Calibra, a subsidiary of Facebook, "promises" not to share your account information or financial data. However, aggregated data may be shared. This means that Calibra always has a reason, whether it is business or legal, to extend its tentacles to users' financial data. 【47】

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3.5 Impact on other Internet companies

Since Libra itself is an encrypted digital currency and an out-and-out financial product, the impact on Internet companies can also be analyzed from the financial level.

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4.1 Government level

4.1.1 Implications for the government: Enhance the sense of crisis and face up to the impact of digital currency on the traditional financial system

Digital currencies such as Bitcoin have been generally underestimated by monetary authorities, bank executives, government departments, economists, etc. for quite a long time. There were a lot of people who wanted to bury their heads in the sand when this thing didn't exist. Some people think that they can keep the enemy out of the country through administrative and technical means, and are willing to lag behind the general trend of the world. Some people are lucky about this, hoping that the governments of other countries will act collectively to block digital currencies and reverse the historical trend. 【48】

However, from Bitcoin, altcoin, to token, USDT, GUSD and other expanded digital currencies, the impact on the traditional financial system based on fiat currency has never stopped in new ways. After Bitcoin was used for anonymous transactions and cross-border remittances, ERC20 tokens brought a low-cost and high-liquidity securities issuance and circulation system, challenging the existing securities system. The emergence of USDT has broken the clearly defined borders of legal currency sovereignty and penetrated deeper into countries that implement foreign exchange controls. As the latest form of digital currency, once its ecology is established, Libra will bring a huge business system in the frontier fields of modern economy such as social networking, payment, exchange, and the Internet, and have a major impact on the traditional currency and banking system. 【49】

The continuous impact of digital currency can be ignored, but the trend of the world will not change, and the transformation of digital currency to the world is irreversible. At this time, closing the country to the outside world will not bring prosperity, but will only bring backwardness and beatings. Just like the sharpest sword is not as good as artillery, this is a dimensionality reduction blow of the new paradigm to the old paradigm. No matter how great achievements are made in the old paradigm, if you choose to escape, you will soon be surpassed.

4.1.2 Encourage giants to join the Libra Association

Libra outlines a beautiful belief and organizational structure in the white paper. This unique openness makes Libra not belong to anyone or any organization. But whether this belief and framework is a verbal cover, or whether it will be firmly implemented, we don't know.

The best way to test is to apply to join Libra.

First of all, the cost of testing is not high. If non-US institutions fail to apply, it will prove that Libra is inconsistent, and Libra will be disintegrated from the lowest level of consensus;

If a large number of non-U.S. organizations succeed in applying and diversify the members of the organization, then everyone will be at the helm of Libra and will not lose their right to speak in cyberspace. The above-mentioned problems of worrying about the unreasonable allocation of various currencies in a basket of currencies and some unreasonable rules can be directly optimized by themselves, and those problems are no longer a problem. 【50】At the same time relying on the Libra currency platform, many companies can also go abroad and become global applications. 【51】

In fact, this is not much different from rebuilding a Libra by yourself. It even saves costs and makes better use of the existing consensus and network advantages.

4.1.3 Support other giants to launch digital currency and divide the influence of Libra currency

Many governments are worried that their own country does not have enough voice in the Libra Association, and Libra will easily abuse its market dominance after it becomes a monopoly step by step. For this kind of problem, in addition to the rigid means of supervision, encouraging competition is also advisable. 【52】

The world has never been dominated by one company. There are VISA and MasterCard, Alipay and WeChat Pay. Libra can be used as a template to improve the inappropriateness of it, and join forces with other giants that have not joined Libra to create a new digital currency to form a check and balance with Libra.

4.1.4 Let go of the restrictions on academic discussions

The topic of digital currency is extremely easy to be used for illegal financial activities, so it is usually suppressed by the government to a certain extent, which is a practical need for maintaining financial stability. However, opening up related discussions in the academic and technical fields is not only necessary, but also does not conflict with the goal of maintaining financial stability. The key to the global digital economic competition that has come is financial thinking, incentive models, governance mechanisms, regulatory compliance levels, and experience in international operations. These things cannot be achieved without extensive exchanges and full discussions. here.

Therefore, within a certain controllable range, let go of academic and technical discussions on encrypted digital currency, allow related conferences and exchange activities to be held, and rapidly improve the level of understanding of this topic by relevant industry professionals. 【53】

4.1.5 Open regulatory space

Developed countries in Europe and the United States continue to hold hearings and seminars to allow digital currency projects to be tested in an orderly manner in the regulatory sandbox. However, public discussions and trials of digital assets and digital currencies are restricted in some countries, which greatly restricts the development of the industry.

Therefore, a reasonable risk avoidance mechanism should be established to allow enterprises to try within a certain range, such as trial operation abroad or the establishment of regulatory sandboxes in enclaves. 【54】

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4.2 China

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4.2.1 Enlightenment to China

Reflect on past regulatory issues

The creation of Libra currency benefits from the active actions of American private enterprises on the one hand, and the prudent tolerance of the US government on the other hand. The experience and lessons of fintech and inclusive finance should be re-examined to give fintech innovation market space.

The financial technology industry represented by blockchain technology sprouted in China no later than the United States, and even China once led the world in blockchain technology and applications. Due to the tightening of regulatory policies in the later stage, China's blockchain ecology is shrinking day by day, and it has lagged behind the United States as a whole. One-size-fits-all or hands-off governance methods can no longer adapt to the fast-growing fintech industry. Not only is it not conducive to financial stability and resolving financial risks, but it will also cause innovation to stagnate, and then lag behind other countries, resulting in the risk of asymmetric strength.

Judging from the depth of the transformation of blockchain digital assets, stagnation and backwardness in this area may cause overall backwardness at the intergenerational level, and it is not alarmist to repeat the mistakes of being backward and beaten a hundred years ago.

Therefore, it is imperative for China to establish a prudent and inclusive financial technology regulatory system to promote the healthy and orderly development of financial technology innovation. In order to achieve inclusive and prudent regulation, it is necessary to realize "regulatory technology plus negative list" to achieve evidence-based prudence and bottom-line tolerance. 【55】

Be open-minded and dare to participate in the competition.

China has the conditions to participate in this competition and gain a place. China has a number of powerful Internet companies, a large group of young and creative engineers, and a huge real economy. If digital currency is used as a new tool, it can rapidly develop overseas business, sell Chinese products, and occupy the international market. The market, effectively supporting the "Digital Belt and Road" strategy, can completely occupy an advantageous position in the new global digital economic competition.

No matter how big the Chinese market is, it is still a single market.

Although Alibaba and Tencent are among the top five Internet companies in the world, their main user groups are domestic or mainly Chinese, while Facebook’s users in the United States account for no more than 10%, which is why Facebook was able to launch Libra. .

How to establish an international market is a problem that must be faced before us, and this also requires China to be more open.

4.2.2 Taking Macao as a pilot to build a digital special economic zone

As a large country with a population of 1.4 billion, China tends to be more cautious in formulating and promoting many policies, which is also necessary in order to take into account the overall situation. But this will make it easy to miss the wave of science and technology, and some of the country's high-quality talent project resources will be lost, and even lag behind other countries. Under such circumstances, it is most appropriate to carry out reforms based on a region that belongs to China but is relatively isolated from the bureau, and under the one country, two systems system, Macau just meets the demands.

Macao can be used as a special zone for China's digital currency reform. All new policies and new projects for digital currency should be given priority to experiments in Macao. This can effectively isolate possible risks to the whole country, and after the experiment is successful, it can naturally be pushed to the world through the window of Macau.

The digital currency policy is not only oriented locally, but also globally oriented from the moment the policy is born. The implementation of such a good policy will bring about a vortex-like effect, involving global resources. For example, the foundations of many Chinese blockchain projects are registered in Singapore, and many digital currency exchanges are registered in Malta.

4.2.3 A specific plan to improve Libra

Use Libra as a model to imitate and improve Libra's deficiencies. Improvements include:

First, improve the Libra seigniorage distribution mechanism, extending from a minority group monopoly to a wider group, such as Libra users can participate in the distribution of seigniorage, and stimulate the enthusiasm of a wider group of people to use and promote Libra;

Second, increase the participation in the Libra system and allow a wider range of sovereign governments/institutions/crowds to participate in the Libra infrastructure (that is, Libra token holdings are more decentralized and long-tailed);

Third, the reserve pool is mainly based on bonds, reducing legal currency, which can reduce the cost of using funds for users and transfer real benefits to the public, but there is a risk of capital arbitrage between the legal currency system and the Libra system (however, considering the Chinese government’s interest in foreign exchange and The effectiveness of currency management, this risk can be controlled, which is an advantage that the United States, Britain and Europe do not have);

Fourth, increase non-debt assets into the reserve pool, such as gold and Bitcoin, to reduce the color of Libra dominated by sovereign countries;

Fifth, strengthen the risk management mechanism of the Libra reserve pool, such as restricting the leveraged funds of commercial banks/shadow banks from entering the Libra system for arbitrage. shadow banking system), the result is that Libra becomes a truly independent central bank and a more stable quasi-full reserve bank (reserves are debt with limited leverage rather than non-debt assets), which can effectively reduce