Editor's Note: This article comes fromDeep Chain Finance (ID: deepchainvip)Editor's Note: This article comes from
Deep Chain Finance (ID: deepchainvip)
, the author is out of Shu, reprinted by Odaily with authorization.
On October 15th, the first issue of the new online salon brand "Non-Consensus Dialogue" of Deepchain Finance (ID: deepchainvip) invited Dr. Ouyang Mo, Facebook's legal advisor and CEO of Stonewood Capital, Zhao Dong, founder of RenrenBit, and economist Dr. Long Baitao, academic assistant of Zhu Jiaming and one of the authors of China's first Libra monograph, started a discussion on the topic of "Rebellion" by PayPal and other six giant allies, is there still a role for Libra?"
"Core Views"
1. Libra should be simplified, now it is like a basket containing complex currency reserves. Facebook changing the structure to dollar-denominated would help get approved.
2. With regard to Libra, a congressman can freely express his opinion or write a letter requesting to "prohibit" many things, but he is far away from actually forming a legally effective document.
3. Libra fundamentally represents the interests of the traditional fiat currency system, because they use fiat currency and/or fiat currency assets as reserves.
4. Germany and France, the leaders of the European Union, are really opposed to Libra. The fundamental reason is that Libra represents the interests of the U.S. dollar and erodes the monetary sovereignty of the euro zone.
6. Libra is not a cryptocurrency, but it will increase the number of people using cryptocurrencies.
7. Libra is difficult to issue without the permission of the US government. Libra issuance requires many legal structures, it is like a "reverse VIE structure".
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The deep-seated reasons why 7 giants withdrew from the Libra Association
Deep Chain Finance: Seven important partners led by PayPal (especially five important payment companies) have withdrawn from the Libra project one after another, causing a sensation. Anthony Pompliano, founder of Morgan Creek, said that Visa and MasterCard have just withdrawn from the Libra Association because the political pressure is too great for companies to deal with.
According to Bloomberg reports, two U.S. Senate Democrats, Sherrod Brown and Brian Schatz, wrote to three companies, Mastercard, VISA and Stripe, asking them to reconsider their cooperation with Facebook's Libra cryptocurrency project. The two congressmen believe that Libra will not only bring risks to the global financial system, but also to the company's broader payment business. Institutional high-level scrutiny of all payment activity, not just Libra.
What do you guys think of the deep-seated reasons why the seven companies withdrew from the Libra Association? Is it really a political threat? Are there any considerations about competition? Why are U.S. lawmakers making things so difficult for Facebook?
Ouyang Mo: First of all, the US Congress does not trust Facebook because of the Cambridge Analytica scandal. Previously, a whistleblower named Brittany Kaiser reported to the U.S. government that a British AI company called Cambridge Analytica used user information on Facebook to influence election results by testifying in Congress.
Cambridge Analytica has influenced many elections in this way, including the most high-profile Brexit and US elections. In the UK, pro-Brexit political groups hired Cambridge Analytica to influence voting citizens into supporting Brexit. Trump also invited Cambridge Analytica to influence the US election, and he was also elected president. The U.S. government is very angry about Facebook's privacy breaches and collection of users' personal information and manipulation of users.
The U.S. government fined Facebook $5 billion. This is the largest fine ever imposed on a tech company in U.S. history. Two Democratic senators wrote letters to members of the Libra Association, including Mastercard, Visa and Stripe, to put pressure on them. These letters amount to government pressure. So it was political pressure that made these members worry and quit.
Zhao Dong: Libra has been dancing with shackles since its birth, because it is difficult for Facebook and Libra nodes to make a difference under the scope of the US regulatory system. Due to regulatory pressure, everyone withdrew one after another.
Long Baitao: There may be several reasons for the withdrawal of the six companies:
First, you may have the attitude of learning or stealing from the teacher, and see clearly how the Libra project is structured, governed, and operated from the perspective of an insider. There is no specific actual cost before the official signing of the agreement, and the association does not require "intent". Members have any commitments, so choosing to be the first batch of membership candidates is a not bad choice.
Second, as many media reports have said, these companies are mainly traditional payment companies. They have found great resistance in the process of communication between the association and global regulators, and they need to face the "highest regulatory standards". Affecting its traditional payment business.
Fourth, it is not ruled out that some of these six companies may start anew. Through internal observations during this period, I have become familiar with the Libra governance structure, which is essentially similar to the decentralized governance structure formed by VISA/MasterCard traditional members. It is not enough, and there may be some ideas that do not fully want to obey Facebook’s authority in the Libra project. Therefore, under the premise of facing huge regulatory uncertainties, it is better to do it yourself (Amazon, JPM, etc. did it themselves).
Strictly speaking, the "difficulty" of members of Congress is a natural result of American power and democracy. As a new thing, there must be different opinions, and different interest groups must have different cognitions and understandings, which requires debate. A congressman can freely express his opinion or write a letter requesting to "prohibit" many things, but it is far away from actually forming a legal document.
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"Why are the US and the EU actively opposing Libra?"
Deep Chain Finance: It is generally believed that Libra will have an impact on the legal currency of third-party weak countries. According to Libra’s blue sub-plan, the US dollar is the main currency supporting the digital currency Libra, accounting for 50%, the euro accounts for only 18%, and the Japanese yen Accounted for 14%, the British pound accounted for 11%, and the Singapore dollar accounted for 7%, but what we see is that the United States and the European Union are actively opposing Libra. What is the logic?
Last week, Andreessen Horowitz encryption venture partner Chris Dixon suggested that Libra could become a digital currency denominated only in U.S. dollars, which means that Libra is only pegged to the U.S. dollar instead of "pegging" a basket of international currencies as it is now. According to this design, will the US government give Libra the green light?
Ouyang Mo: Libra should be simplified. Now it is like a basket containing complex currency reserves. Facebook changing the structure to dollar-denominated would help get approved. The great thing about American law is that it is based on common law, that is, the legal system is based on precedent. In September 2018, the New York state government approved two 1:1 USD-pegged stablecoins: PAX and Gemini. Because there is a precedent for being approved before, Facebook can use the precedent to get approved.
Zhao Dong: Is the reason for the U.S. opposition because Libra chose Switzerland as its registration place, which is not under the direct supervision of the U.S.?
Ouyang Mo: Yes, this is the main concern of Congress. But the main reason Congress is angry is because of the distrust of Facebook because of privacy concerns.
Long Baitao: Regarding the attitudes of various countries towards Libra, please don't be fooled by all kinds of complicated appearances.
First, clarify a basic fact: Libra does not actually subvert the interest pattern of the traditional monetary and financial system, because it uses legal currency or legal currency assets as a reserve pool. It is a "pseudo-innovation" based on the traditional legal currency system. . Most people over-interpret Libra's subversion of the traditional system, so they misread the relationship between Libra and the Federal Reserve, or misread the relationship between Silicon Valley geeks and Wall Street capital.
Today I emphasize again that Libra fundamentally represents the interests of the traditional fiat currency system, because they use fiat currency and/or fiat currency assets as reserves. If Libra announces the use of Bitcoin or other native digital assets as a reserve, it will be a real subversion, and it will be firmly pressed to the ground by the Federal Reserve on the first day.
In the United States, only the Federal Reserve, which represents the interests of Wall Street, controls the fate of Libra. I believe that before the release of its white paper, Facebook has fully communicated with the Federal Reserve and gained approval. The Fed has actually never expressed a clear disapproval. The fundamental reason why the Federal Reserve "secretly" supports Libra is that it represents the interests of the dollar and is an extension of the dollar's hegemony in the digital world. This fact was still controversial a few months ago, and I believe it should be a basic consensus now (50% of the weight of the U.S. dollar in the basket of currencies, and Zhu Min, president of the National Institute of Financial Research, made a clear statement on behalf of the government).
Congress seems to have a strong influence, but on the one hand, there is a lack of real professionals who can effectively prevent such projects (for example, the Federal Reserve is theoretically responsible to Congress, but Congress has never had enough professional skills to effectively hold Fed officials accountable , including the 2008 financial crisis, Bernanke and Paulson lied in public in Congress in order to protect the interests of Wall Street banks, contradicting themselves, Congress has nothing to do), on the other hand, it is greatly influenced by lobbying forces.
The current obstacles encountered by the U.S. Congress can be understood as rationalizing this matter from a legislative perspective. Therefore, Facebook needs to communicate and coordinate with Congress representing a wider range of interests (outside Wall Street). Although there are many different voices in Congress, the core idea is actually to figure out how to supervise.
Congress seems to have a strong influence, but on the one hand, there is a lack of real professionals who can effectively prevent such projects (for example, the Federal Reserve is theoretically responsible to Congress, but Congress has never had enough professional skills to effectively hold Fed officials accountable , including the 2008 financial crisis, Bernanke and Paulson lied in public in Congress in order to protect the interests of Wall Street banks, contradicting themselves, Congress has nothing to do), on the other hand, it is greatly influenced by lobbying forces.
The largest lobbying force in the U.S. Congress comes from two industries, military industry and finance. British regulation follows the opinions of the United States, and it clearly says "the highest standard of regulation" from beginning to end. Isn't it very similar to the Fed's repeater?
Germany and France, the leaders of the European Union, are really opposed to Libra. The fundamental reason is that Libra represents the interests of the U.S. dollar and erodes the monetary sovereignty of the euro zone.
Of course, Facebook’s taint in terms of data privacy is also a key target of attack, but I understand that this is more of an excuse. The main reason is that Germany and France believe that Libra has eroded the sovereignty of the euro currency. In fact, since the day the euro was born, the euro and the dollar have been competing.
Although Libra's basket of currencies includes five fiat currencies, it does have a high probability of being denominated in U.S. dollars. Many people misunderstand or misuse the term "anchor".
In the current context, sometimes "anchor" refers to the "anchor" of Libra's reserve assets to a set of fiat currency or national debt. The "anchor" here actually means the support of reserves; sometimes it is said that " "Anchoring" refers to the currency's denomination unit; when discussing Libra, people usually say "anchor" to a basket of legal currencies, and then many people take it for granted that they are also "anchored" to Libra's unique denomination unit. In fact, the Libra white paper Only the first kind of "anchor" is clearly mentioned, that is, the issuance is supported by a basket of legal currencies or national bonds, and the unit of denomination is not clearly stated.
I think there is a fair chance Libra will be denominated in USD for several reasons:
First, it is basically a consensus that Libra represents the interests of the U.S. dollar, so how to maintain the authority of the U.S. dollar? The first is the weight of the U.S. dollar in the basket of currencies, which is now 50%. In fact, it exceeds the current 40% ratio of the U.S. dollar in global trade valuation and settlement. Considering that Libra was originally mainly used as a payment tool, this 50% ratio actually strengthens the status of the U.S. dollar. .
Third, using the US dollar for denomination, the unit of account is the most important attribute of a currency (different payment instruments are connected to an independent currency through its unit of account rather than other attributes such as exchange medium and value storage), as long as the US dollar is used for denomination, the Federal Reserve It guarantees its monetary authority. I have told my friends since the end of June this year that Libra will eventually be denominated in US dollars, otherwise it will be impossible to go online. I still stick to this point of view.
Ouyang Mo: Libra is good for cryptocurrencies, because Libra will greatly increase the number of people using cryptocurrencies. Now about 40 million people own digital currency, and the actual users are even fewer. But Libra will allow the entire world to start using cryptocurrencies, not just for investment, speculation or holding. This will make the cryptocurrency market grow 10 times, 20 times what it is now. Of course, Libra is not yet a cryptocurrency, and it is too centralized now.
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1,600 organizations are applying to become Libra nodes
Deep Chain Finance: After many companies withdrew one after another, Libra officials also began to express their views. David Marcus, the project leader, tweeted that he respected the decisions of Visa and MasterCard, and companies are free to choose whether to join or withdraw. The news of withdrawing from the Libra project is cautiously skeptical about the fate of Libra. The implication seems to be, "Don't deny Libra's future just because several companies have withdrawn."
What do you guys think of the impact of the withdrawal of 7 important partners from the Libra Association, especially considering that most of them are payment giants?
Ouyang Mo: First of all, the most important signal of Libra's future is that this is a project of an international group, not Facebook's own project. You will see this signal more and more in the media in the future. Other Libra Association members will work together to start spreading the word about Libra.
Second, five Libra Association directors were appointed.
Third, the 21 members of the Libra Association will determine the criteria for screening other nodes.
Fourth, although 7 organizations have withdrawn, there are still 1,600 organizations applying to become nodes. We think about 180 of these applicants would have met the open requirements. However, only about 40-80 can meet the internal requirements. Over the next month, these internal requirements will continue to be discussed and finalized.
Zhao Dong: If Libra succeeds, it will undoubtedly directly challenge the status of payment giants. Then, the withdrawal of these payment giants is due to regulatory pressure on the one hand, and on the other hand, they dare not really "remove their own lives."
Long Baitao: There is no actual impact. To be honest, the impact is to free up the positions of the six founding members for others, allowing other institutions to have greater influence on the Libra Association. For other possible impacts, these six payment companies will start anew to form a Libra-like alliance, and Libra may face competition in the future. Also, as Dr. Ouyang Mo said just now, more "like-minded" people can be selected, which is a good thing for the success of Libra.
Ouyang Mo: In fact, Libra also wants more reliable partners. Such as Vodafone, and Andreessen Horowitz. Ms. Katie Haun of Andreessen Horowitz will take a leadership role in the association. She is also one of five directors elected at yesterday's meeting. Now Libra's strategy is to make this project a common project of an international group, rather than a project owned by Facebook alone.
Zhao Dong: Dr. Ouyang Mo, which country do you think is the most open country for cryptocurrency? China? Japan? Europe? Singapore?
Ouyang Mo: The order is Singapore, Switzerland, and Japan, because they all want to get rid of the rule of the dollar.
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Libra will not be released in 2020
Deep Chain Finance: In addition to the withdrawal of partners, whether it is the report and statement of the G7 Group, or Facebook CEO Mark Zuckerberg's appearance at the House of Representatives hearing on October 23, it has brought a regulatory shadow to Libra. Ripple CEO Brad Garlinghouse, who had previously looked forward to Libra, said in an interview with Fortune magazine that since Libra faces strong opposition from regulators, he would bet that Libra will not be launched before the end of 2022.
Distinguished guests, what do you think of Libra's future prospects? Will Ripple CEO's bet succeed?
Ouyang Mo: Libra will not be issued in 2020, mainly because the government has put a lot of pressure on it. But Libra's new strategy pushes the entire Libra Association to do the same, not just Facebook itself.
Zhao Dong: Dr. Ouyang Mo, can Libra be issued without the permission of the US government?
Ouyang Mo: It is difficult for Libra to be released without the permission of the US government. Libra issuance requires many legal structures, it is like a "reverse VIE structure".
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Now it is to watch the "thief" be beaten, but in the future it is to watch the "thief" eat meat
Deep Chain Finance: Zhao Dong, may I ask if your disapproval of Libra is related to your position, such as USDT?
Zhao Dong: It doesn't matter, the reason I support USDT is simple: I can make money by trading USDT. If I can legally make money by trading Libra or CNHT, I will support it. The reason we are not currently trading other stablecoins is: there is no customer demand. Our customers don't need it, so we can't make money. Everything should return to the essence of business: being useful and making money. Only by being useful to customers can a company make money.
Long Baitao: I don't think his bet will succeed. Although I firmly believe that Libra will erode RMB monetary sovereignty and hinder RMB internationalization, I firmly believe that Libra can succeed. The question is how the Chinese government/people respond.
The only thing Ripple CEO is right is that Facebook's bad record has affected Libra's acceptance. But this is not the decisive element of Libra's fate. The decisive element is how the traditional monetary system (including regulation) views the challenge of stablecoins to them.
Although Libra is facing the situation of "calling and beating" by various regulations around the world, we must look at this issue objectively.
First of all, Libra is indeed a new phenomenon, and it is a challenge that the monetary authorities have not encountered in the past. Therefore, they must be allowed to figure out the risks inside and solve the related financial stability risks before going online (pay attention to distinguishing promotion).
Secondly, Libra will indeed bring about subversion, such as the digital currency area, which allows a currency to cross the boundaries of geography and judicial sovereignty, and can connect all economic activities and 2.8 billion users in the Libra network. His economic scale is larger than that of many economies. The body may be much larger (A quarterly transaction volume of Alipay network reached 700 million US dollars, Alipay network users 860 million, you can make a comparison).
Third, the success of Libra requires cross-border regulatory coordination to form a regulatory consensus to prevent regulatory arbitrage and financial stability risks.
Regardless of the conclusions of the G7 working group’s initial assessment of global stablecoins, this work has now been handed over to the Financial Stability Board FSB.
The FSB's mission is to submit any policy recommendations to G20 government finance ministers and central bank governors on the stability of the global financial system in a forward-looking manner.
If you still don’t understand the meaning of this sentence, let me make it more clear. After the financial crisis, the FSB is responsible for the reform policy recommendations and implementation supervision of the global banking and financial system, such as the Basel III agreement, shadow banking supervision, Issues such as the supervision of financial derivatives and OTC, of course, the supervision of global stablecoin projects is a new task for the FSB.
The FSB's takeover of this matter means that global regulation has reached a consensus, and the establishment of global stablecoin regulation has been included in the formal work process. The FSB plans to submit a formal report in July 2020. The FSB's official report is a proposal for regulatory policy details for a specific issue. The chairman of the FSB is the Fed's vice chairman for supervision.
At that time, the global stablecoin regulatory rules were introduced (formed a global consensus), who can achieve the most compliance? Could Libra be the only stablecoin to be “certified” by regulation (the “certification” of the global regulatory consensus)? Now it is to watch "thieves" being beaten, and in the future it is to watch "thieves" eat meat.
Ouyang Mo: We will strive for the success of Libra and Facebook. Even if Facebook doesn't succeed with Libra, others will. I predict that if Facebook doesn't succeed, different major groups in major industries will also issue a stable coin. For example, Shell or PetroChina could develop their own stablecoins to facilitate cross-border payments. And Vodafone, a member of Libra, can also issue its own stablecoins.
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Libra's biggest advantage in the future may be compliance
Deep Chain Finance: The recent important news related to cryptocurrency is almost related to regulation, especially the presence of SEC: Block.one agreed to settle with the US Securities and Exchange Commission (SEC) by paying $24 million in civil fines; Two offshore entities of the TON ICO issued a temporary restraining order.
What role will regulation play in the cryptocurrency industry from here on out, will it make the industry better or will it hinder it to some extent?
Ouyang Mo: Regulation is the biggest technical obstacle in the cryptocurrency industry. This is what we predicted 2 years ago and has become a reality today. It will also become more important in the future, especially in the next 2-3 years from now. For example, EOS Block, their legal advisor is my friend, he told me that they hired 18 in-house lawyers and legal personnel to deal with regulatory issues, including the SEC.
Zhao Dong: I think digital currency companies should focus on innovation and try to avoid regulatory dead ends. Especially in the start-up stage, try to do some business that does not require a license or does not need to deal with too much regulation, otherwise the start-up company cannot afford the cost of regulation. After growing in size, communicate more with regulators, embrace regulation, and promote regulatory development.
Long Baitao: Successful cross-border policy coordination and regulatory consensus will lay the foundation for the rise of a truly global private digital currency. Libra's biggest advantage in the future may be compliance.
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Libra is good for Bitcoin
Deep Chain Finance: Recently, Forbes issued an article saying that Libra launched by Facebook is actually "another" payment system. It can be regarded as a better enhanced version of PayPal, but it is not a better cryptocurrency, neither Free currency also lacks the "moral idea" of the blockchain.
What do you think of this point of view? If Libra succeeds, will mainstream cryptocurrencies pose a threat, such as stable coins like Bitcoin or USDT?
Long Baitao: I agree or disagree with this point of view.
The part that agrees is, "it's not a better cryptocurrency," and it's true, it might not even be a cryptocurrency.
What I disagree with is that, first of all, Libra is a currency system, and payment is only one of its incidental functions. Comparing Libra with PayPal dwarfs the former and elevates the latter; secondly, Libra is a "free currency" to a certain extent, "free currency". "It's all relative. Bitcoin fundamentalists seem to be free except for Bitcoin, but compared with traditional fiat currency, Libra is still much freer, at least allowing non-bank private institutions to participate in the creation and distribution of currency minting Tax.
But this kind of freedom is indeed limited, because even if non-bank private institutions participate in the currency creation process, we know that the threshold is actually quite high. It is not a simple person or institution that can become one percent of the Libra Association. Libra is strictly In other words, it is just a redistribution of coinage rights among the top rich people. The rich people always have old money and new rich, but there is never a shortage of bankers, right?
If Libra really represented the ideals of Satoshi Nakamoto, he would have been pressed to death by Wall Street; since he came out alive and kicking, it shows that he has reached a consensus with Wall Street, and it is okay to talk about collusion.
One sentence in my June article, I can say it again today, Libra is the most evil business model I have ever seen, so I agree with the "lack of blockchain morality". Why is it evil? Libra is essentially a business model in which everyone mints coins, but everyone pays seigniorage to the Libra Association.
But what we want to see in the future is that stablecoins need to support real economic activities (not just transaction speculation). Under this premise, Libra is bound to a payment service, complete social, e-commerce and content economic activities and ecology, and also bound to a digital network of 2.8 billion users, which will generate powerful network externalities With strong competitiveness, and the blessing of supervision (the Fed is behind the escort), Libra will kill USDT with a destructive momentum. Of course, there are other counterfeit stablecoins, and RMB DC/EP may not be able to stop it.
For cryptocurrencies that cannot be used as stable coins, such as Bitcoin, I think it is positive, because the latter is positioned as an "asset" rather than a "currency". Awareness, a larger user base, a larger scale of funds, and a wider range of economic activities enter the encrypted economy, which should be a benefit for everyone.
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Libra Association's new standards will be developed in 2 to 4 weeks
Deep Chain Finance: Why is Ripple CEO so strongly opposed or not optimistic about Libra? Could it be because he, like Uncle Dong, has his own standpoint, and is he a vested interest?
Long Baitao: Because Ripple itself is the largest altcoin, the success of Libra means the demise of Ripple’s altcoin. Do you think he can not be in a hurry. Ripple is a 100% centralized system.
