Libra has suffered heavy setbacks recently and is experiencing its darkest moment.
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Libra alliance after multiple withdrawals
The fundamental reason for their withdrawal: the unanimous opposition from global regulation has led to a sudden increase in the uncertainty of Libra implementation, especially since these exiting companies are themselves financial or financial technology companies and are under pressure from financial regulation, so they choose to withdraw from the Libra alliance.
Libra responded that the official meeting will proceed as usual, and Facebook said it has not given up its efforts. Its chief executive, Mark Zuckerberg, plans to attend a hearing of the House Financial Services Committee (House Financial Services Committee) on the 23rd of this month to try to persuade legislation again. Investors and regulators are confident that its plans for a digital currency will not threaten the existing financial system.
Libra has reached its most difficult moment.
Now the internal army is weak and morale is low. If the attitude of regulatory opposition remains unchanged, the negative impact of the withdrawal of large companies will gradually spread, just like a chain of dominoes falling, which will cause more member companies to choose to give up due to overwhelming pressure, triggering the collapse of the Libra project. (When Uncle Kai wrote this article, another founding member: Booking Holding withdrew, and a total of 7 have withdrawn so far)
The failure of Libra will seriously hit the prospects of the digital currency industry, and the price of Bitcoin will also be significantly negatively affected. After all, the Bitcoin bull market in the first half of 2019 is closely related to Libra's upsurge and attention.
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Using history as a mirror, learn from Bitcoin
History is the best teacher. Studying the digital currency projects that have developed and grown may give Libra some inspiration.
Ecology, technology and compliance are the three most important characteristics of any successful digital currency.
Ecology refers to the complementary and self-balanced development community system formed among digital currency participants (including users, developers, and managers). The measurement of ecology mainly depends on the number of users, application scenarios, transaction volume, community activity and ecological management and operation mechanism. Technology refers to the innovation and practicality of the underlying technology of digital currency. Its main indicators are the number of technology developers, project update speed, and the parameters of digital currency itself, such as transaction speed and capacity. Compliance refers to the regulatory attitude towards the implementation of the digital currency, which is specifically reflected in whether the regulations of various countries allow the transaction and circulation of digital currency, and whether they have introduced corresponding regulatory measures.
Ecology, technology and compliance also influence each other. Mature technical level is the foundation of ecological perfection. A good ecology is conducive to regulatory approval. The regulatory attitude will in turn affect the development of ecology and technology.
Take Bitcoin as an example. 11 years ago, the genius Satoshi Nakamoto launched Bitcoin, which was unprecedented and unprecedented at that time. Bitcoin's blockchain-based distributed ledger, fixed output speed and total amount, mining mechanism measured by computing power, and completely decentralized management methods are all refreshing. At the beginning, only a few technical geeks participated, and then the community gradually expanded and prospered, attracting tens of millions of users today, participating in multiple scenarios of payment, investment, collection and trading.
The regulatory attitude towards Bitcoin has also undergone tremendous changes, from neglect and resistance at the beginning to relative attention and acceptance today. In the United States, Bitcoin has been officially recognized as a commodity, and its derivatives have also been allowed to be traded on official exchanges. In Japan, Bitcoin is a payment method with the same status as fiat currency. The reason for regulatory approval of Bitcoin is that, in addition to Bitcoin's huge user base, the most important thing is that Bitcoin is a completely open, transparent, and decentralized system. It is difficult to manipulate and does not represent the interests of any person or company. Assuming that one day the mysterious founder Satoshi Nakamoto shows up, he can refuse to participate in the Bitcoin hearing convened by the U.S. Congress, because in a completely decentralized Bitcoin system, even the creator cannot influence the development of Bitcoin.
In contrast, Libra, its advantages and disadvantages are equally prominent. In order to achieve the goal of being used by billions of people at the same time, Libra technically adopts a programming language (MOVE) with extremely high transaction throughput and low latency and a unique consensus mechanism (LibraBFT). Although these technologies are still in the early experimental stage, with Facebook's technical strength and talent pool, it should not be a problem for Libra to achieve the intended goal technically.
What has become a problem is compliance, precisely because of Libra's potentially huge ecology.
The most eye-catching thing about Libra is the future vision it depicts: through the alliance of 100 big-name companies, a global non-sovereign digital stable currency is created, allowing more than half of the world's population to easily pay and settle. It has so many potential users and a wide range of uses, not to mention unprecedented in the digital currency industry, even in the existing financial world, no country or financial institution has ever achieved this goal. The only thing comparable to Libra's vision may be the US dollar.
Extremes lead to opposites, and it is precisely because the plan is so grand that it has been boycotted by regulators from various countries. The financial industry is related to everyone's pocketbook and has always been a very strictly regulated industry. Among them, the right to issue legal currency is particularly important, and it is a symbol of a country's sovereignty. Today, a global monopoly and poor reputation of the Internet company united with some large companies, want to issue a universal non-sovereign digital stable currency, which will undoubtedly shake the global financial system and rob the central banks of various countries. Regulatory skepticism, mistrust and resistance are entirely understandable.
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Three measures to get out of trouble
The key to Libra getting out of the current predicament is how to use the advantages of ecology and technology to gain regulatory understanding and trust and reduce compliance resistance. The following 3 measures should be considered:
First, Facebook and Libra are decoupled, and Facebook’s centrality is minimized as far as possible-retreating to advance
Facebook played a leading role in the early days of the Libra Alliance, but it was also Xiao He's success and Xiao He's failure. Since Facebook has 2.6 billion users and occupies an absolute monopoly in the global social field, and there have been frequent incidents of improper use of user information recently, countries, especially the United States and the European Union, have long been dissatisfied with Facebook. Facebook's push for Libra will undoubtedly shake the global financial system and touch the most sensitive nerves of national supervision. U.S. Senator Sherrod Brown (Sherrod Brown) publicly shouted to Libra members: "Facebook is too big and too powerful, and it is unreasonable for financial companies to help it monopolize our economic infrastructure!" The department has stepped up its review of member companies. Apparently, Facebook's popularity has become an obstacle to Libra's further development.
Gaining the trust of supervision requires long-term communication, but if the communication fails to produce the expected effect, it can only be changed through technical and mechanism settings. The blockchain is known as "creating a trust machine" because of its distributed and decentralized characteristics. Libra should refer to the success of Bitcoin, especially how Bitcoin has gained regulatory approval step by step through the characteristics of complete decentralization. Facebook should decouple from Libra as soon as possible, let the Calibra company, which operates completely independently, participate in the affairs of the alliance, and at the same time mobilize the members of the alliance to work together, instead of fighting alone with Facebook as the core.
It is easier for regulators to accept a Libra that is decoupled from Facebook.
From Facebook's point of view, isolation from Libra will also help the company's long-term development and protect the interests of shareholders. After all, binding the entire company brand to the Libra project now seems too desperate. The recent movements and news of Libra can cause fluctuations in Facebook’s stock price and the attention of shareholders. It is time for Facebook to take appropriate measures to isolate risks and protect itself and Libra. Both help.
Secondly, be steady and steady, first achieve short-term goals - step by step
Libra's mistake is that the ecology has not really taken shape, and the technology has not yet landed, and public opinion has started to publicize its grand plan, which has become the focus of global attention. Doing so will draw the attention of regulators prematurely, so Libra has to spend a lot of precious energy dealing with regulatory consultations and hearings. This point can be referred to the JPM coin issued by JPMorgan Chase for inter-agency transaction settlement and the Ripple coin issued by Ripple for cross-border payment. On this basis, when communicating with regulators, they already have living examples, which are more convincing than white papers and PPTs floating in the sky.
Those who know the current affairs are the best, and it is too difficult to obtain the approval of the regulators of various countries before launching Libra. Libra should adjust its short-term goals and take it step by step. After all, it can't eat a big fat man in one bite. If it cannot be done globally at this stage, then limit the scope of use and make it regional. For example, Japan, which is the most open to digital currency, will be used as a breakthrough. If a fully open ecology cannot be realized for the time being, then a restrictive ecology should be realized first, so that specific authorized users can only use it. If cross-border payment involves too much foreign exchange control and financial security, start with the easier internal payment on the platform. If necessary, let Libra run to create a financial sandbox environment, so that regulators can see tangible results.
The key to these initiatives is to make Libra's best ecology and technology useful, so that users can truly taste the benefits of inclusive finance from Libra, so that the regulators can be forced to adjust and adapt.Regulatory trust is earned actively, and even needs to create conditions to force it instead of blindly begging.
In short, Libra's vision is grand, but realizing this vision is a long and dynamic process that cannot be achieved overnight, but can only be a spiraling process. Steady and steady, step by step is the only way for Libra to achieve its ambitious goals.
Finally, rapid expansion of technology-based Internet companies, especially blockchain companies, to become members - give up the fish and take the bear's paw.
Libra expects to be fully compliant, so when choosing founding member companies, a lot of balance has been made. In addition to Internet companies and blockchain companies, a total of 7 financial and payment companies are founding members. However, it turns out that you can't have your cake and eat it too. Now that 6 of the 7 financial and payment companies have withdrawn from the alliance and this "fish" is no longer available, it should open up the recruitment of technology-based Internet companies, especially blockchain companies. These companies do not have a heavy compliance burden, and have strong execution and creativity, which is conducive to quickly breaking the current deadlock. According to reports, 1,500 companies have applied to become Libra members, including many big-name Internet companies and well-known digital currency exchanges. I believe that Libra should be able to select suitable member companies to create a great cause.
Up to now, Zuckerberg's enthusiasm has been poured with a large basin of cold water, which confirms a sentence: the ideal is full, but the reality is very skinny.
Now that the strategy of holding high and playing high is no longer effective, Libra urgently needs to assess the situation, use its own advantages in ecology and technology, overcome the shortcomings in compliance, and readjust to the road.
Libra's vision is "to create a global currency and financial infrastructure that serves billions of people." While there is still a long way to go, the picture it paints of true financial inclusion around the world is exciting.
I sincerely wish Libra an early success.
