Circle CEO: The Global Digital Currency War Has Formed Three Fronts

This article comes fromCoindesk, by Jeremy Allaire, Co-Founder, CEO and Chairman of Circle

Odaily Translator |

Odaily Translator |

Over the past few months, the cryptocurrency industry has seen rapid developments in terms of technology, market and regulations, as major global technology companies and some countries promote the development of digital currencies.

These new initiatives are forcing global leaders to pay attention to digital currencies, they want to understand what role digital currencies will play in the next decade, and what changes it will bring to the wider political and economic landscape. There is no doubt that these changes will reshape the future of the international monetary system.

The blockchain infrastructure is no longer limited to the service edge and early adopters, but has gradually expanded and attracted national attention. The digital upgrade of the deeper basic economic system is also in progress. Central bank currency tokens powered by cryptography, as well as smart contracts that can represent and tokenize other real-world assets and contracts, are also starting to emerge and are popping up around the world.

These changes are happening fast, with regulators around the world grappling with this entirely new economic system that is mirroring an open, interconnected global internet of information and communications.

If a new economic system is to be built on encrypted infrastructure, there may be three competing approaches:

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1. Open finance

Open Finance is subject to existing payment banking regulations in the US and EU, and based on private markets, this approach to digital currency is rapidly developing and helping to become the backbone of the Open Finance movement.

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2. Government-led national digital currency

While this approach may fit China's economic and political model, it does not appear to work in the face of an open Internet ethos, and is unlikely to receive an enthusiastic response from the broader Internet development community.

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3. Digital currency dominated by private consortia

In fact, Facebook's payment system is also based on a centralized authorization infrastructure. In this case, companies and developers who want to develop on this type of infrastructure will be limited, and the openness of this type of infrastructure And accessibility also has certain limitations.

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Overview of the competitive landscape

Among the above three digital currency approaches, we can deduce some basic competitive situations.

First, do we need to build an open financial system on the public Internet so that value can be freely and easily transferred anywhere in the world with strong privacy protections; or enable individuals and businesses to build cryptographically through public blockchains? Financial products, and use open financial infrastructure to realize business and transaction arrangements between people anytime, anywhere? In short, do we need an Internet-based global financial system?

Second, let's look at the second way again. If every country learns from China, it may mean that access to innovation in the financial system will be strictly controlled. Although this system can improve the efficiency of the RMB, it will also allow the RMB to cover to a global scale, but if individuals and businesses around the world want to do business with China, will this system provide equal terms?

Finally, Facebook and Libra have brought about a whole new kind of competition. They have built a new financial system that is controlled and operated by the largest private companies in the world. Facebook's digital currency structure is not based on existing sovereign currencies, and it tries to create a global currency based on national currencies. Do we need a global financial system built and controlled by large private corporations? Are they allowed to empower user participation and innovation on a closed infrastructure?

For some of the largest countries in the world, especially those governments that control global trade currencies such as the US dollar, they must now pay attention to all public cryptocurrencies covering the global Internet and fully understand the related innovations. The choices made by great powers, and ultimately the decisions made by relevant policymakers, will have a huge impact on the future of our global economic system.