Recently, the Financial Times has news that Facebook’s digital asset Libra is planned to be launched in January 2021. Looking back at Libra’s fate, it can be described as twists and turns.
The collision of ideal and reality
On June 18, 2019, the ambitious Facebook released the Libra white paper, ready to do a big job in the field of digital assets. According to the original idea, Libra is a synthetic currency unit based on a basket of currencies (US dollar, euro, pound sterling, yen, etc.). It is committed to promoting inclusive finance worldwide, focusing on payments and cross-border remittances.
Ideal is full, the reality is very skinny. Since July 2019, central banks, finance ministers, legislators, and many privacy protection structures in many countries around the world have questioned Libra and listed multiple issues related to Libra, including money laundering, terrorist financing and Financial stability, etc.
In order to cope with stringent government supervision, Facebook can only be forced to change its thinking, not to shape a business alliance against the central bank, but to build an ecosystem with stable coins as the core. In April 2020, Libra released version 2.0 of the white paper. The Libra Association stated that in order to solve the regulatory issues, the project has made four key changes: (1) In addition to providing currencies anchored to a basket of fiat currencies, it will also provide stablecoins anchored to a single fiat currency; (2) through a strong partnership The regulatory framework improves the security of the Libra payment system; (3) abandoning the transition plan to a permissionless public chain system while maintaining its main economic characteristics; (4) establishing strong protection measures for Libra’s asset reserves.
A payment system that will eventually improve
On November 25th, the Libra Association appointed Saumya Bhavsar as the new general counsel of the Libra network to oversee the upcoming blockchain-based payment system. Bhavsar has 20 years of legal, regulatory and compliance work experience in the financial services industry and has worked for banks and regulatory agencies in the United States and Europe, including Credit Suisse, the European Commission and the U.S. Department of the Treasury. I believe that Bhavsar’s rich experience will definitely contribute to Libra’s response to regulatory issues.
Although it is not clear whether Libra will bounce tickets again, one thing is certain, digital assets will be surging. As a social giant with 2.7 billion real users, Facebook unites dozens of financial institutions and has experience in large-scale system research and development. If Libra is successfully launched, it will have an important impact on world financial payments.
The impact of Libra
The launch of Libra may provide guidance and reference for central bank digital assets (CBDC), and will accelerate their launch.
my country’s CBDC research and development work has always been a global leader. At present, the digital renminbi has been tested methodically in the four cities of Shenzhen, Suzhou, Chengdu and Xiongan. In October, the People’s Bank of China conducted a pilot digital RMB red envelope in Shenzhen, and it will be rolled out to Suzhou and more cities in December.
Compared with other stablecoins, legal mortgage stablecoins represented by Libra and CBDC can provide more consumer protection, inclusiveness and security, and will have a great impact on the existing stablecoin system.
If Libra is widely adopted and does not support the digital renminbi, then the Libra alliance chain will confront the digital renminbi. It is undeniable that CBDC represents their respective national interests and is an extension of monetary sovereignty in the digital economy world.
Some digital asset researchers believe that Libra essentially represents the interests of the U.S. dollar and embodies the U.S. dollar’s financial hegemony. my country’s implementation of digital renminbi will be an effective measure to deal with digital dollarization. Through trade with countries along the Belt and Road, China will continue to expand the economic circle and international order dominated by China, and strive for more voice in the formulation of international standards and rules.
