Libra changed its name to Diem, currently only anchored to the U.S. dollar, and is expected to hit the top spot in the market value of stablecoins.

In the past, Facebook was unwilling to play with the RMB, but today the Chinese central bank’s digital currency advances ahead of Europe and the United States.

Since the establishment of the Bretton Woods system, the US dollar hegemony system has dominated the world for nearly 80 years. In order to maintain the global status of the US dollar, Libra is the shortest path in the new era.

Libra, which made a lot of noise last year, will finally meet with everyone next year.

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Libra with reduced ambitions,On June 18, 2019, Facebook released the Libra white paper.

On June 18, 2019, Facebook released the Libra white paper.

As a blockchain-encrypted digital currency, Libra will be a payment tool for daily transactions of enterprises/individuals. It is 100% linked to a basket of bank deposits and short-term government bonds. It has the advantages of stability, low inflation, global acceptance and interchangeability.

In version 1.0, Facebook intends to peg Libra to a basket of currencies such as the US dollar, of which the US dollar accounts for 50%, the euro accounts for 18%, the yen accounts for 14%, the pound accounts for 11%, and the Singapore dollar accounts for 7%.

Meanwhile, the Geneva-based "Libra Association" will manage the Libra project. The association itself is controlled by a council whose members each run a validator node on the network and require a minimum investment of $10 million to secure the position.

According to Facebook’s rules, every $10 million invested in grants an entity one vote to the council, although no council member can get more than 1% of the total vote.

Previously, the association had the first batch of 28 "founding members", covering industries such as payment, technology, telecommunications, blockchain and venture capital, including Mastercard, PayPal, Visa, Vodafone, eBay, Facebook, Lyft, Spotify, Uber, etc. , mostly American companies.

However, there are disputes in the world where there are people.

After the establishment of the association, Visa, MasterCard, eBay, PayPal, Booking Holdings, Stripe, and Mercado Pago withdrew one after another, while Canadian e-commerce giants Shopify, Temasek, Slow Ventures, and encrypted asset investment company Paradigm chose to join this year. Currently, the association has 24 member.

It is worth mentioning that, according to the white paper plan, the number of founding members of the association will reach about 100 when Lirba is officially released in 2020. Of the 100 Liangshan heroes, only 24 have gathered now, which shows the great resistance.

After all, with Facebook’s global user base of more than 3 billion, coupled with the huge strength of initial members, Libra was regarded as a potential competitor of the future super-sovereign currency from birth, and was constrained everywhere.

To this day, facing the regulatory dilemma brought by the US government, Libra has scaled back its ambitions. Libra, the super-sovereign digital currency that was originally planned to be launched, was renamed Diem and only anchored to the US dollar. This new name means "Day" in Latin, and it is hoped that the organization can enter a new stage after the name change.

Despite loud slogans, the hegemony of the U.S. dollar is gradually declining, and the euro has replaced the U.S. dollar as the world's largest currency, and the influence of the renminbi is getting stronger.

However, looking at the market value of stablecoins, USDT ($19.5 billion), USDC ($3 billion), DAI ($1.1 billion) and TUSD ($300 million) are supported by rich dads (business giants such as Facebook, Shopify and Temasek) Diem, once launched, is likely to win the first place in the market value of stablecoins.

We know that Tether has all the rights to issue or destroy USDT. In the absence of supervision, Tether has had many scandals involving opaque dollar reserves and random issuance.

For example, before September 15, 2017, Tether's bank account had a total of 443 million US dollars and 1590 euros. At this time, the issuance of USDT and savings assets are consistent with each other.

However, after October 28, the number of USDT issued has soared all the way, and the number of USDT circulating in the market has reached a record 2.2 billion. Behind such a large-scale additional issuance, Tether’s corresponding US dollar deposits have not increased, and USDT may be overissued by more than 16 One hundred million U.S. dollars.

In addition, Tether was once exposed to a hacking incident, claiming that USD 30.95 million in USDT was stolen, which has aroused widespread doubts. It is reported that this incident was purely Tether’s self-stealing. The management of Tether and the management of bitfinex overlap a lot, which further confirms the possibility of the scandal behind USDT.

Diem, on the other hand, adopts the "consortium chain + centralization" architecture. All transactions are initiated by the central authorized node, which generates a permanent record containing transaction time, place and method information, so it can support regulatory authorities to fight against money laundering, tax avoidance and other violations. At the same time, the issuing entities can restrict each other to provide internal supervision for the issuance and circulation of digital currency.

From the information on the official website, we can see that Libra will release a variety of single stable currencies in the future, including US dollars, euros and British pounds. The collateral of a single stablecoin is cash or cash equivalents, and ultra-short-term government bonds, and the issuance and destruction will be determined by market demand.

Libra will not directly contact consumers, but will provide liquidity through cooperation with designated traders such as wallets and exchanges.

In the specific application scenario, people can exchange legal currency with Libra, and then realize the functions of transfer and consumption in daily life.

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Libra is full of challenges,China's digital currency advances ahead of Europe and the United States

When Libra appeared last year, many people believed that it would pose a threat to the sovereign currencies of some countries and impact the global monetary and financial systems. Therefore, many countries expressed concerns.

For example, as a currency, Libra naturally faces risks similar to those of commercial banks, including risks of over-issuance, runs, and privacy leaks.

At the hearing, Libra’s father, David Marcus, spent more than two hours answering a series of sharp questions from the U.S. Senate Banking Committee.

"Facebook is dangerous", "No one likes Zuckerberg", "No one here wants to trust you anymore", "Facebook enters payments to make an already too powerful company stronger" and other words appear again and again.

The atmosphere full of gunpowder can be seen from this.

Secondly, as a blockchain-based digital currency, it is likely to impact the existing monetary system:

One is that Libra may replace the sovereign currency of some countries. The economies of small and medium-sized countries are relatively limited. be squeezed out.

The second is that the difficulty of foreign exchange control in various countries has greatly increased. Libra provides people in various countries with an indirect exchange channel (such as RMB-Libra-US dollar), which poses a challenge to the foreign exchange control of various countries.

Third, it is more difficult for various countries to implement monetary policies, and asset prices may be out of the control of the central bank.

The fourth is to increase the difficulty of anti-money laundering and anti-terrorism. Digital currency has concealed information, convenient transactions, and wide circulation. It is often used by criminals to carry out extortion or money laundering. For example, the previous outbreak of WannaCry ransomware demanded Bitcoin as a ransom. Although Libra permanently records detailed transaction information, the regulatory systems of various countries need to be optimized or even restructured, and the regulatory loopholes may be exploited by lawbreakers.

In terms of international organizations, the Bank for International Settlements (BIS) stated that technological financial projects such as Libra exceed traditional financial regulation and may pose challenges to the global banking system. If Libra cannot obtain the approval and support of regulatory agencies in various countries, its cross-border remittance business will be difficult to carry out smoothly, and the scope of flow and application scenarios will be greatly reduced.

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China: Steady Advancement of Digital Currency

Wang Yongli, vice president of the Bank of China, said after Libra was just released:

Today, China has conducted pilot projects in Shenzhen, Xiong'an, Suzhou, Chengdu, Shanghai, Xi'an and other places.

In the words of Yi Gang, the governor of the central bank, "promote the research and development of digital currency steadily, and carry out controllable pilot projects in an orderly manner."

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EU: Antitrust investigation into Libra

The attitude of the EU can be seen from two aspects:

First, just two months after Libra was launched, it was subject to antitrust investigations by EU antitrust regulators on the grounds that it has potential anticompetitive behaviors that may unfairly keep competitors out.

Second, last year France, Germany, Italy, Spain and the Netherlands worked together to oppose the launch of Libra in Europe.

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Japan: not really positive

When asked about Libra’s opinion, former Japanese Prime Minister Shinzo Abe once said, “Stable currency can make settlement services more convenient, and can also make cross-border settlement faster and cheaper. But on the other hand, stable currency has also been pointed out. There are all sorts of risks that could arise."

Japan at that time probably had a wait-and-see attitude.

However, a few months ago, the Bank of Japan newly established a "Digital Currency Group" in the Settlement Agency Bureau, which will focus on the digital currency (CBDC) issued by the Central Bank and explore how to build the best settlement system for the digital society.

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South Korea: Sorry, Libra was registered by us

why?

why?

First of all, the trademark rights of Facebook’s cryptocurrency “Libra” in South Korea have long been registered by LG Electronics.

Second, the South Korean giant started its own Libra. The South Korean instant messaging giant Kakao has recruited Samsung Group, LG Group, the top two banks in South Korea (Shinhan Bank, Woori Bank) and Binance Exchange to form a new memory block chain ecosystem - Klaytn. Libra is different from each other.

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plan ahead,Competing for Global Currency Hegemony

Although currently the world's major settlement currencies are the U.S. dollar, the euro, the renminbi, the Japanese yen, etc., and Diem is also a single stable currency of the U.S. dollar, once Libra, which is collateralized by a basket of currencies in the future, is widely circulated around the world, the central banks of various countries will reserve the collateral currency to Respond to the exchange rate shock brought about by Libra exchange demand.

In other words, once the renminbi is not included in the Libra collateral currency, the central banks' demand for renminbi reserves will decrease, and the internationalization of the renminbi will be hindered.

According to the white paper, Libra's initial plan is to be highly similar to SDR (Special Drawing Rights).

SDR is also composed of a basket of currencies in proportion. SDR can be used to repay domestic deficits and debts to the IMF. The only difference between it and Libra is that SDR is only used for trade and debt settlement between countries, and cannot be used as a means of payment for enterprises and individuals. .

The SDR was first issued in 1969. In November 2015, its value was determined by the current exchange rate of a basket of currencies consisting of the US dollar, the euro, the British pound and the Japanese yen. The weights of these four currencies were 48.2% and 32.7% respectively. , 11.8% and 7.3%.

On October 1, 2016, the renminbi officially joined the SDR. Its latest value is determined by the current exchange rate of a basket of currencies consisting of the U.S. dollar, euro, renminbi, Japanese yen, and British pound, with weights of 41.73% and 30.93% respectively. %, 10.92%, 8.33% and 8.09%.

It is worth mentioning that the inclusion of the RMB in the SDR has stimulated the demand for RMB reserves in various countries, and the process of RMB internationalization has accelerated significantly, accounting for 2% of global central bank reserves.

The impact of Libra on the internationalization of RMB can be deduced from the case of RMB being included in the SDR, that is, if Libra does not include RMB as a collateral currency, and Libra circulates globally, the internationalization of RMB will be hindered.

Since the establishment of the Bretton Woods system, the US dollar hegemony system has dominated the world for nearly 80 years.

During this period, even though Germany and France took the lead in establishing the euro in an attempt to compete with the dollar, but the euro was inherently deficient, and the United States obstructed it, so the status of the dollar actually rose again and again.

In previous economic crises and financial crises, no matter where the starting point was, the United States can take advantage of the benefits of the US dollar to disperse risks, gather benefits, and lead the world out of the gloom.

This time, the main issuer of Libra is Facebook, but what if the US private Internet giants use the guise of massive decentralization to exercise new currency hegemony on behalf of the Federal Reserve and the United States?

What's more, the relationship between the Federal Reserve and Libra is a relatively sensitive relationship. In a basket of currencies, the U.S. dollar is clearly dominant for Libra.

Having said that, who can cooperate with Libra to build the so-called single stable currency Diem?

Eurozone? Singapore? Japan? U.K?

Except for the United States, it is impossible, because it is impossible for a country with a normal mind to hand over monetary sovereignty to an American company.

The only thing Facebook can count on, in fact, is the Federal Reserve.

Therefore, it is not surprising that there are Diems that are only pegged to the US dollar.

A slap can't be heard, just as the Federal Reserve's attitude towards digital currency is undergoing a sudden change!

In June last year, Federal Reserve Chairman Powell revealed that he believes that digital currencies like Facebook have large-scale forward-looking applications.

In February of this year, the Federal Reserve announced that Libra has indeed added fire to the central bank's digital currency work, and the Federal Reserve should consider issuing a central bank digital currency to maintain the global dominance of the US dollar.

On May 4, 2020, Yi Gang, governor of the central bank, also said: "The United States, which had reservations about digital currency before, has changed its attitude after the outbreak of the epidemic. It is considering using digital currency to assist helicopters to drop money. Considerations of international status."

The Federal Reserve wants to make a U.S. dollar digital currency. If Libra wants to do it, it cannot bypass the Federal Reserve. Combining the needs of the two, the ideal state is that the Federal Reserve "incorporates" Libra.

For the Federal Reserve, the incorporation of Libra can not only reduce the cost of its own development and the exploration cycle, but also maintain or even expand the dominance of the US dollar with the help of Facebook's 3 billion global users.

To maintain the hegemony of the US dollar, Libra is the shortest path in the new era.

Zhou Xiaochuan said, "In the past, the dollarization process that occurred around the world was the erosion of the dollar on weak currency countries. From the perspective of weak currency countries, because of poor macro-control and high inflation, dollarization is prone to occur. The most typical The last one was Zimbabwe, which abolished its currency and ended up adopting the dollar and other currencies.”

Zhou Xiaochuan reminded that we must take precautions to make the RMB a strong currency.