Text | Zhou Wenyi Editor | Tong Source | PANews.io
Recently, Sun Tianqi, chief accountant of the State Administration of Foreign Exchange, said at the third Yichun Forum of China's 40 financial people, "Libra should be regarded as a foreign currency and must be included in the overall framework of China's foreign exchange management, otherwise it is recommended to ban the use of Libra." This statement , to set another barrier for Libra to enter the Chinese market in the future.
Since Facebook released the Libra white paper on June 18, which claims to "build a simple, borderless currency and financial infrastructure for billions of people", it has sparked extensive discussions among officials around the world.
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Libra born of time and business
Economist Milton Friedman once likened money to nothing more than a veil. However, what really supports the operation of the currency is often the result of the interweaving of multiple factors, which of course includes the human intelligence, political and economic resources that we all agree on, and of course the organizational models of different types of state machines, etc. wait. "Unless we come to realize that there is hardly a single human invention that, when it goes wrong, is more harmful to society than money." If we fail to recognize the multiple logics behind money, wait for us Maybe it's not just a mistake!
In fact, the birth of Libra is not accidental, it is the dual effect of the background of the times and the basis of reality.
As early as 2008, the global financial crisis broke out again, the disadvantages of the traditional financial system and currency system were exposed, the country's credit was discredited, and people's belief in legal credit currency collapsed, and finally a new payment system, Bitcoin, was born - as The birth of a legal currency system (digital currency) that does not require politics and centralization.
The digital currency taking Bitcoin as an example is a virtual currency based on node network and digital encryption algorithm. However, digital currency digital currency still has its limitations, including the inability to regulate the economy; regulatory vacuum, lack of security in the transaction process, price instability, and a complete price rise and fall mechanism have not yet been established. In the long run, the development of the digital economy will eventually develop in the direction of "legal digital currency" (stable currency). The birth of Libra is based on this background.
“Both Bitcoin and Facebook's Libra represent different stages in the evolution of money, but in very different ways.Bitcoin is permissionless, fully decentralized, deflationary, and volatile.Libra is permissioned, more centralized, controlled by supply and demand, and pegged to fiat currencies.said Charles Hayter, co-founder and CEO of CryptoCompare.
By "supply and demand," Hayter means that Facebook and its partner companies can adjust supply to match the amount of other assets in reserve, effectively maintaining a stable price as demand changes.
From a certain point of view, Libra is more like a digital virtualization of "sovereign currency" (US dollar, renminbi, etc.).
The birth of Libra is most directly driven by Facebook's own operational requirements. Ren Zeping, president of the Evergrande Economic Research Institute, concluded: "Libra is the product of Facebook's attempt to use accumulated data to expand its business structure and find new profit growth points."
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Libra's "sovereignty challenge"
However, as a new attempt in the field of digital finance, Libra is not perfect. Issuer risks and national regulatory challenges are the biggest problems, and they are also the most unnegligible obstacles on the way for Libra to become a global currency.
In fact, the US dollar-backed digital currency built by the Libra project will challenge the sovereign currencies of various countries, and is more likely to replace the sovereign currencies of backward countries in the near future. It has indeed aroused the vigilance of many sovereign countries. In the process of receiving widespread attention, Libra is also considered by many to be a potential competitor of the future super-sovereign currency.
just recentlyRen Zeping, director of the Evergrande Economic Research Institute, wrote in his long article "Libra: Principles, Influences, Opportunities and Challenges of Digital Currency"It is specifically mentioned that Libra may impact the global monetary system and naturally evolve into a super-sovereign currency, and this is an important reason why sovereign countries of all parties are cautious about Libra.
Specifically, it can be summarized as follows: first, Libra may replace the sovereign currencies of some countries; second, the difficulty of foreign exchange control in various countries has increased; third, it has become more difficult to implement monetary policies in various countries; fourth, it has increased the difficulty of anti-money laundering and anti-terrorism. In fact, one of the key elements is the country's concerns about monetary sovereignty.
If Libra will completely or partially replace the national sovereign currency, this will inevitably affect the national monetary policy and fiscal policy. First, Libra will impact the implementation of monetary policies in various countries. This not only means that it is more difficult for sovereign countries to control capital flows, but also because some commodities may be priced with Libra, the currencies of some small countries may be completely replaced.
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Libra white paper
according toLibra white papersaid in"Collateralized with a range of low-volatility assets such as cash and government bonds from stable and reputable central banks"It can be seen that Libra's issuance mechanism is based on cash and government bonds as collateral.
According to Ph.D. in computer science from Tsinghua UniversityLong Baitao "Evaluating Libra from the History, Current Situation and Future of the Monetary and Financial System"The release mechanism of Libra is explained as follows: "If the Libra Association is regarded as a central bank that stabilizes cryptocurrency, then Libra belongs to the full reserve bank, and its reserves are legal tender or government bonds. Libra also opens the reserve to the whole society. Gold account. This means: In the Libra currency and financial system, Libra is the only "minting" institution, and other institutions have no right to mint coins. Traditional financial services, such as payment/deposit and loan businesses, are facing fundamental changes. Because the user's address on the Libra public chain can be regarded as the central bank's reserve account, and the payment and liquidation of the user's account are completed immediately on the public chain. The payment service provider will no longer have the opportunity to create a fund pool, nor can it control the user's account and create financial Leverage. This forces service providers to focus more on providing account management services for users and developing other types of profitable businesses. Savings and loan institutions (Libra Bank) will no longer be able to create money, but can only lend out existing deposits, which can be Libra Bank’s Equity, accumulated undivided profits and other funds borrowed. The association, as the central bank, will no longer provide deposit protection plans and bailout plans for Libra banks. Libra bankruptcy will cause depositors themselves to lose.”
And this has to mention the legal currency issuance mechanism. The issuance mechanism of legal currency means that the currency issuer (usually the central bank) issues currency by mortgaging certain assets as reserves. Legal currency is mainly based on national credit to issue currency, and national debt is the most important reserve. Due to the unstable demand for currency in a specific period, and at the same time, it is also affected by multiple factors such as natural disasters, population factors, and national policies. Although the price of legal currency often remains relatively stable, the currency system is not stable. Through intervention in the market, the central bank tries to maintain a relatively smooth market operation and control inflation/deflation and interest rates within a certain range. However, it is worth noting that the operation of the legal currency system is often affected by the instability of the financial system; at the same time, Excessive intervention in the market to maintain the price stability of legal currency is not conducive to the operation of the entire financial system.
Although Libra claims that its reserves are a basket of fiat currencies in order to keep the value of Libra relatively stable, in the view of Zhao Yao, deputy secretary-general of the Financial Innovation and Internet Finance Legal Research Center of China University of Political Science and Law, the 1:1 reserve issuance method is very important for Libra. The Libra Association becomes an insoluble paradox.
"It's good for Libra, or for other so-called stable tokens that have appeared or are about to be issued, as long as the value of the collateral (or reserves) behind them is not lower than the price of the token, and the token can be used freely. Redemption, then the market has enough motivation to "melt" it away, and Libra can only become a currency exchange medium for holders to exchange for reserve currencies (especially the US dollar), and it is difficult to become a currency exchange medium to enter the market circulation. On the other hand, this will cause a chain reaction, which will at least lead to the "insufficiency" of token issuance, that is, when the token issuance is less than a threshold (increasing function of market share), member institutions will not accept Libra. Such tokens serve as internal settlement assets. Zhao Yao believes that there are still many problems that have not been solved in the historical development of currency and payment, and has reservations about the development of Libra.
Today's Libra is similar to the U.S. dollar after World War II. The Bretton Woods system established a world currency system centered on the U.S. dollar. The U.S. dollar is linked to gold and a basket of currencies, and an adjustable fixed exchange rate is implemented. relatively stable. But the Bretton Woods system violated the principle of stabilizing and developing the national currency of each country, and the system eventually ended in failure. It was replaced by the Jamaican system with a floating exchange rate regime and the demonetization of gold.
