[Exclusive] Famous Chinese Economist Says Facebook's Libra Is Not Something Disruptive


Jun 20, 2019

摘要: The White Paper mentions that Libra's goal is to become a stable digital encrypted currency with the mission of building a simple, borderless currency and a financial infrastructure for billions of people. However, a famous Chinese economist believes it is not something disruptive.

The White Paper mentions that Libra's goal is to become a stable digital encrypted currency with the mission of building a simple, borderless currency and a financial infrastructure for billions of people.

Libra's main purpose is to pay, and it can also be used in many scenarios such as currency exchange, storage, trading, etc. It is reported that Facebook has cooperated with large Internet companies in tourism and other industries. Libra plans to build a digital economy consisting of 100 cooperative alliance nodes. At present, Visa, Mastercard, Uber, Paypal and other companies have signed up to become the founding node. Over time, the economy will include 2.7 billion global users of Facebook and WhatsApp.

Facebook's high-profile entry into the field of encrypted currency will become a very symbolic event in the history of encrypted currency. The curtain of commercialization of encrypted currency will be opened. The main battlefield of Internet competition will move to the field of digital economy, and the mature and stable central financial system will be impacted.

But there are still doubts and uncertainties to Facebook's globalized, borderless, encrypted currency plan. These voices come mainly from the central banking system and government regulatory authorities. According to Reuters, Mark Carney, governor of the Bank of England, is open to Libra, but he also points out that the currency may face strict regulation. "Regulators will have to pay attention to the"operational flexibility"of the encrypted currency, as well as their anti-money laundering and anti-terrorist financing procedures."

Markus Ferber, a member of the European Parliament, pointed out directly that Facebook could become a "shadow bank" and regulators should be vigilant. The French finance minister said Libra could not become a sovereign currency.

In response, ChainDD exclusively interviewed Liu Zhiyi, a well-known digital economist based in China, regarding "is Facebook challenging traditional financial institutions? What is the impact on global financial markets? What are the implications for China's giant companies and policy regulation?"

ChainDD: Facebook's Libra anchors a "basket of fiat currencies" to create a "borderless currency". What is the purpose of this design?

Liu Zhiyi: Let's first look at some of Facebook's actions in the area of encrypting digital money. About the end of 2017, Facebook sought to acquire Coinbase, the largest trading platform in the United States. David Marcus, vice president of Facebook's messaging products, also joined the board of directors of Coinbase (which withdrew in August 2018), and Marcus is currently appointed to take charge of block chain technology. In February 2019, Chainspace, the British Block Chain Consensus, was acquired, and recruitment in the direction of Block Chain was initiated.

In April 2019, Zuckerberg proposed that "I believe Facebook should enable payment function go as easily as sending photos." In May 2019, New York Times reporters reported that Facebook was seeking funding for projects in the payment area and subsequently poached two experts from Coinbase in the area of financial compliance. Meanwhile, encryption economist Christian Catalini joined Facebook. On June 14, the Wall Street Journal reported that Facebook had assembled a large group of companies to run its encrypted currency program.

We can see two logical lines:

One logical line is "Internet Payment Related". From this point of view, it can be seen that Facebook is trying to solve its internal payment ecology. Considering that its internal strategy is gradually aligning with Tencent (from social networks to communications applications), it can be seen that through such a solution to provide payment functions, a more diverse Facebook Internet Empire can be established, which is clearly profitable and controlled.

Another logical line is "blockchain", which is why people pay so much attention to this project. Many people think this may herald Facebook's acceptance of the virtual digital currency ecosystem of block chains and challenge the traditional financial order by turning it into a financial centre in the digital economy. In fact, my personal view is too naive. In fact, Facebook's stable currency ecosystem is essentially a private alliance chain that is completely private, controlled, centralized, validated and authorized by a few super nodes. The only thing that meets the geek spirit is that it will open source code according to Apache 2.0.

In short, although the industry is reveling, the application is essentially an attempt to solve the problem of payment (VISA and Paypal are the two biggest financial institutions among the founding members). Choosing stable currency anchorage can really bring forth innovative solutions in the payment field and expand the boundaries of Facebook ecology, and implement the financial system of social networking sites.

What most of the followers expect is breakthrough innovation in the area of block chains. At present, it seems more imaginative. We will see that the future alliance will be more an attempt by Facebook to bind a large number of well-known enterprises (especially large financial institutions) than a so-called subversion. Since the choice of stable currency ecology, no matter what anchored, it also chose to stand with traditional financial enterprises rather than become the financial industry's rival in the field of digital economy.

ChainDD: From the outside discussion, people think that Facebook will become the Central Bank of the global digital economy. What's the advantage of this? What impact will it have on global financial markets?

Liu Zhiyi: First of all, I haven't seen any reports about Facebook's desire to become the Central Bank of the global digital economy. As far as the actual white paper is concerned, Libra is a proprietary token used in a particular network or business ecosystem and is linked to legal tender. Secondly, we can think that this is just the application of transplanting encryption technology into the traditional financial operation system, and it does not really produce the so-called "central bank" role, and Facebook will not become the main body with independent monetary power.

If the advantage is that it has enough users and enough possibilities for business scenarios, there will be a lot of room for use. But it is because Facebook chose such a stable currency ecosystem that the traditional business world (including the traditional financial industry) does not recognize and accept the value of pure encrypted currencies such as Bitcoin.

Finally, for the global financial market, there is a new player from the Internet, but behind this player is a large number of traditional financial industry institutions, compared with other players there is no particularly significant difference, its effect compared with the past stable currency such as GUSD, JP Mcoin JPMorgan Chase can not see a particularly significant difference for the time being.

ChainDD: The centralized banking system has matured. Where are the obstacles for Facebook to challenge the traditional financial landscape?

Liu Zhiyi: Facebook has not challenged the traditional financial structure. If it chooses a stable currency scheme, it will be linked to the French currency. Its credit still comes from the traditional central bank and government agencies. It is only measured by digital tokens as intermediaries. Realistically speaking, only the state exists (which seems to be the case for a long time). Any attempt to replace national sovereign currency or legal currency is futile, and the issuance of network stabilized currency, no matter how its mechanism changes, is only a digital token applied in a specific scenario, which can not replace or subvert legal currency. The biggest problem lies in the set of stable currency mechanism designed by Facebook. We should learn how to integrate into the financial market, solve many problems such as the efficiency of online payment, the rules of token exchange rate, and more importantly, how to integrate the digital currency into the international financial system to promote the global unified payment and liquidation supervision system. Therefore, there will be more economists on Facebook in the future. Financial experts and jurists joined to solve this problem, rather than many people imagine relying on technological innovators to promote the process of its virtual digital currency. In short, only the central bank, whose national sovereignty is the endorsement of credit, has the credit of French currency. Any model of stable currency is only a "borrowing" and "combination" of such credit, and will not really challenge the existing global financial order.

ChainDD: Facebook, as an Internet giant, proposes to issue stable currency. What inspiration will it have for Chinese giants and policy regulation?

Liu Zhiyi: In China's regulatory policy and environment, such innovations involving the financial sector are strictly restricted. From the industrial level, there may be three enlightenments:

First, professional people do professional things, so innovation in the field of Internet finance, in addition to technical personnel, requires experts in the legal, financial and economic fields to be possible, the subversive model will not apply to every field.

Secondly, the premise of expanding digital economy is to deeply understand other industries and form alliances with senior players in this industry, which is also a key to promote industrial Internet innovation in China. Whether in the financial industry or in the traditional industry, it is better for Internet companies to try with modest and prudent conservatism, to join in the way of service and enabling, rather than simply consider the so-called business model innovation to seek new and fast.

Thirdly, the power of commerce is not without rules and boundaries. Especially when expanding the field of digital economy, we should take into account many factors, such as law, society and ethics. The future digital economy innovation is facing more complex environment and stricter supervision. For the protection of data security, the value measurement of digital assets and the ethical issues of digital society, it is the direction that needs to be studied, especially for large enterprises.

In short, the future of the digital economy will be better and better, but don't blindly believe the utopian optimism based on pure geek thinking, "You have your plan, the world has another plan." Instead of thinking about how to subvert it, it's better to push the society forward with a conservative attitude and earnest ownership in the process of creating value for the society.





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