Golden Observation丨In the world of central bank digital currency, Bitcoin and Libra may have a place

Golden Finance Blockchain, August 21st, the central bank of India - the Governor of the Reserve Bank of India (RBI), Raghuram Rajan (Raghuram Rajan) recently said in an interview with CNBC that in the future, central banks around the world will begin to issue In a world of digital currencies of their own, Bitcoin and the Facebook-backed Libra may play a role. Raghuram Rajan believes that Bitcoin is a "speculative asset" and Libra is designed for transactions. Therefore, when central banks start issuing digital currencies, Bitcoin and Libra may play different roles.

In a recent interview with CNBC's "Beyond the Valley" podcast, former Indian central bank governor Raghuram Rajan argued that Bitcoin and Facebook-backed Libra could be in demand in a world where central banks around the world are starting to issue their own digital currencies. Play a role. While both Bitcoin and Libra are currently facing a lot of criticism, Raghuram Rajan believes that as central banks enter the digital currency market competition, both digital currencies will definitely have a place, he explained:

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1. Grayscale’s total assets under management reached a new high of 4 billion US dollars, and more than 3.5 billion US dollars were deposited in its flagship fund Bitcoin Trust;

2. Guangming Daily: The scale of blockchain-related investment will reach tens of billions of yuan this year, and the demand for blockchain talents is urgent;

3. The Brave browser’s crypto exchange-related search-ethexc results will jump to the rebate invitation link;

4. 46% of people may deactivate their Coinbase account;

5. The proportion of demand for blockchain talents in large enterprises has increased this year;

6. The number of bitcoins mined by miners this week has exceeded the number of bitcoins sold; [2020/6/7]

"I think these cryptocurrencies are also competing with central bank digital currencies."

In Raghuram Rajan's view, digital currencies may have a major impact on the roles played by central banks and retail loan service providers around the world, and may change the entire financial system. Of course, whether this idea can actually become a reality is still being discussed, but central banks may issue digital versions of fiat currencies. digital currency.

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Bitcoin is a "decentralized" cryptocurrency, which means that it is fundamentally different from fiat money. Bitcoin has no central authority to manage its issuance, but is built on what is known as blockchain technology. , and the basis for supporting Bitcoin transactions is the immutable public ledger. However, Bitcoin has often been criticized as a speculative asset, with legendary investor billionaire Warren Buffett saying earlier this year that it is "worthless."

Libra, by contrast, takes a more centralized approach. This project is led by Facebook Inc. and proposed in 2019. But Libra soon drew heavy criticism from regulators, not least because of Facebook's past record with data privacy.

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The original idea for Libra was to be a so-called "stablecoin" that would be backed by a basket of global currencies. Compared with Bitcoin's volatility, this currency issuance model will keep Libra's value stable. However, the idea was opposed by regulators, after which Facebook had to "scale down" Libra's ambitions. However, in April of this year, Libra Association board director David Marcus (David Marcus) stated that Libra does not have to be linked to a basket of currencies as originally set, but can also be linked to a single national legal currency such as the US dollar.

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But now, Facebook's digital currency Libra has made many noteworthy changes. In addition to enhancing compliance procedures and addressing concerns that the network could be used to launder money or raise funds for illicit activities, Libra also transitioned from its original plan to be a "global currency" to one that is 1:1 with a single sovereign currency. Anchored stablecoins, and for different sovereign currencies, Libra will provide sufficient reserves. Finally, it is worth mentioning that Libra has given up the idea of creating a permissionless blockchain environment similar to Bitcoin or Ethereum, and has now turned to building a permissioned blockchain.

Raghuram Rajan sees Bitcoin as a "speculative asset" rather than one that can be traded on a large scale, arguing that investors tend to flock to it when traditional assets such as bonds are less attractive. Assets like Bitcoin. He explained:

"Bitcoin does look a bit like gold in that sense, and actually, gold has some value because we use it in jewelry, but bitcoin can't even do that. However, as long as someone thinks it has value , it has value. On the other hand, Libra is trying to create a currency that is used for transactions. Also, the whole idea is not to treat it as a speculative asset with increasing value... but to use it for transactions. Therefore, the final The underlying value will come from the central bank, and the central bank will retain the value, not the value of Libra, and the value of Libra is reflected in the value it can be exchanged for.”

Having a "monopoly" private digital currency will be problematic, so the market may end up with competing private digital currencies with different roles, Raghuram Rajan added :

"So I think the bottom line is that different private currencies are going to play different roles, and bitcoin has value that might just be a store of value or a speculative asset, whereas Libra could become more of a currency for transactions ,"

Data Concern

One of the biggest challenges facing digital currencies is what to do with the data that comes with them.

In response, Raghuram Rajan made the point that cash might be the true anonymous currency, explaining:

“Do you trust the central bank in the details of every transaction? Should the government know every transaction you make? The reason we have cash looks good is because it’s inherently anonymous. Even if you don’t Do anything illegal and probably don't want the government to see what you've done."

In fact, the same anonymity and privacy issues exist with private digital currencies, but Raghuram Rajan said there may be a need to "consolidate data" between these competing digital currencies because no one wants the whole thing to be balkanized. change.

But there are still several questions to be answered about how to protect that data, and Raghuram Rajan concludes that these include:

1. We need some kind of broader global game of thumb, what does a country do with data collected from abroad about who uses its currency?

2. When using digital currency, where are the conventional protection measures?

3. If someone uses foreign digital currency to purchase certain services that may harm their home country, are they likely to be monitored by espionage?

4. Will the use of digital currency be affected by illegal activities such as blackmail and cause losses to digital currency holders?

Don't be indifferent to these issues. Today, these issues are actually very close to us.

Part of this article is compiled from CNBC

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