Libra Challenges

Zheng Lei / Wen

Libra (scale currency) can be regarded as the hot words of the year. Will it become a giant toy of Zach Burke's home after being suppressed? The book "reading Libra" gives clues to this question. This book is published by CITIC publishing group. Its editor's lineup covers various aspects such as policy formulation, academic application, applied research and practical application. The viewpoint is very convincing, and the interpretation is in place and easy to understand.

The challenge of Libra. Data map

Libra is a digital currency. Facebook, who has 2 billion 700 million users worldwide, claims that "Libra's mission is to build a simple, borderless currency and a financial infrastructure for billions of people." The future digital economy is inseparable from digital money, which is well known to all governments. The vision of Libra clearly enhances the vigilance of some countries that are important in the current international financial order. Under the objective and subjective pressure, it is obvious that the main countries should speed up the launching of their own digital legal tender, which is the central bank's digital currency (CBDC).

For Libra, IMF will never sit idly by. The birth of IMF is the result of competition and compromise between big powers after World War II. When the US dollar crisis broke out in 1960s, IMF tried to launch the super sovereign world currency SDR, which was linked to the main countries' currencies. But in the end, it could not become the widely used world currency because it was difficult to get the support of the United States that had veto power in IMF. It was only a kind of government reserve asset which was complementary to the nature. This also reflects the fact that in international trade and economic interaction, which currency can become the currency of valuation and liquidation depends on the comprehensive national strength and international influence (or hegemony) of the currency issuing country, as well as the powerful financial system.

Libra now wants to occupy the dominant position in the international economic and trade valuation and liquidation. Although Libra has a very small opportunity to become a super sovereign currency, relying on its huge commercial network to try to win the global monetary hegemony in the future digital economy world itself poses a great challenge to the existing international financial order.

Let the centralization of the world become completely decentralized, which in itself is a paradox. Whether sovereign or super sovereign currencies are built on the centralization of social, political, economic and cultural traditions, centralization is not only a technical issue, but also a matter of technology alone. Based on this understanding, we can be sure that the digital coins that will be launched by various countries will not be completely decentralized. It may only be part of the block chain technology to improve the security and efficiency of the financial system and better play the role of monetary policy.

Free issuance and currency stability are difficult to reconcile. It is unrealistic for the financial system to rely on the natural equilibrium mechanism like the free market. Currency stability requires external intervention and regulation by centralized authority. Whether the encrypted digital currency wants to become a currency or Libra wants to become a super sovereign currency, the issuer of the former must be able to integrate financial and tax power, and the latter needs a super sovereign body that can coordinate the main countries, that is to say, the fiscal and monetary policies of all countries should be unified at the super sovereign level. Money and finance are always the central institutional structure with centralization. Obviously, it is an unfinished mission for any private organization or individual to issue encrypted digital coins or loose associations such as Libra Association.

The encrypted digital coins and Libra, which are full of centralization and ideal, can not avoid direct competition with sovereign currencies. Libra will divert and replace some sovereign currencies and form a competitive relationship with the latter. The use of sovereign money may gradually decrease, which will reduce the ability of sovereign currency to regulate, affect the effectiveness of monetary policy and distort the transmission mechanism of monetary policy. When Libra reaches a certain level, the monetary policy effect of a basket of reserve currency countries may be weakened. The independence of monetary policy of non reserve currency countries will be more influential, and its position in the international monetary system will be in jeopardy.

Of course, Libra has positive significance and value, especially the inclusive financial thought contained in it. "We hope to create more perfect and affordable open financial services. People can enjoy this service regardless of status, status, occupation, wealth and wealth." However, Libra may not effectively reduce the cost of financial services, and some countries' own conditions will also affect the effectiveness of Libra services. Libra has a long way to go before it can be launched smoothly. Libra needs to meet the different regulatory requirements of the United States, the European Union and other countries. In the current preparation situation, it is difficult to meet the requirements in the short term.

The concept of "de centralization" of the supporters of block chain technology is of progressive significance, but the application process is slow. This is a core criterion that must be understood and adhered to in the application of block chain technology. In the era of digital economy, everything will be digitalized, and asset digitalization is imperative. But for Libra, no one can predict its fate. This is an important game in the international financial field.