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Gu Yanxi: The slow development of digital finance in the United States is creating conditions for Switzerland



The current development of digital finance in the United States can be said to lag behind some other leading countries in the world.

For example, in terms of digital assets, the Thai government has started selling government-issued digital bonds on the blockchain in June 2020. In terms of digital asset exchanges, the Swiss government-backed Swiss digital asset exchange SDX has been developing steadily and plans to go live in 2021.

SDX is a new type of digital asset product that uses digital currency to trade on a brand new financial market infrastructure. Due to the superiority of the underlying distributed accounting technology, SDX will use more transaction methods to provide transaction services. This includes centralized matching transaction services and point-to-point direct transaction services. Countries like Singapore and Thailand have been developing and testing central bank digital currencies over the past few years. In the above aspects, the progress of the United States in digital finance is relatively slow.

In terms of digital financial products, the business model of using tokens to represent physical assets and conduct financing was launched in the US market in a compliant manner in 2018. However, according to the regulations of the United States in this regard, security tokens can only be used to represent alternative assets at present. These alternative assets include real estate and private equity funds, among others.

Gu Yanxi: The tokenization of US real estate will become the first digital asset in circulation and trading in the world: On September 28, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published a column saying that in terms of the digitization of financial products, there is currently no What has emerged is a digital form based on physical assets, or tokenized assets. Among all the current asset types, the most likely physical asset to be tokenized first is real estate. And the first area to realize this must be real estate in the United States. Blockchain technology provides technical possibilities for the transaction circulation of real estate. In terms of compliance, the circulation of real estate in the US market needs to be carried out in the manner of alternative assets. In terms of technical system support, after two years of development, the underlying technical infrastructure services have been greatly improved, and market awareness has also been greatly improved. The product provider and market demand side of real estate tokenization have started to work hard to start their business again. Overall, from the perspective of technological development, compliance requirements, and market demand, real estate in the United States will be the first digital financial product to be tokenized and developed globally. Compared with the rest of the world, the US market is clearly leading the way. [2020/9/28]

In terms of digital asset exchanges, under the existing securities laws, the trading of security tokens can only be carried out on alternative trading platforms (ATS). Due to the small number of products traded and the small number of users who can participate in the transaction, the trading of security tokens has never been developed.

Gu Yanxi: Digital asset transactions on the future blockchain should be free: On July 24, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published an article "Digital asset transactions on the future blockchain should be free The" stated that based on the development of the Internet era, the current development of the securities industry, and the benefits that can be generated from the application of blockchain technology, future digital asset transactions should be free. He said that first of all, future digital asset exchanges must be based on distributed ledger technology. Distributed ledger technology will fundamentally change the securities industry. When blockchain technology and digital currency are used in securities transactions, transactions will be settled. Therefore, there is no need for clearing and settlement companies and registration companies in the current securities market, and the overall cost of securities transactions will therefore be greatly reduced. Trading commissions are therefore bound to drop significantly. Secondly, in the future securities market, DeFi applications will further reduce the cost of the securities market. Finally, since blockchain technology directly supports peer-to-peer transactions, many digital asset transactions in the future can actually be completed directly between the generator of the asset and the buyer of the asset. There is no need for a brokerage as a financial intermediary, and the cost of asset transactions will be further reduced. [2020/7/24]

At present, the Boston Securities Exchange, which is the first to apply for the establishment of a national security exchange in the U.S. market, after weighing various factors, the proposed exchange plan cannot give full play to the capabilities of blockchain technology and encrypted digital assets. value created. Therefore, this exchange program is in an awkward position.

Voice | Gu Yanxi: The future exchange model must be a combination of centralized matching and distributed clearing and settlement custody: Gu Yanxi, founder and director of CBX Research Institute, believes that the current exchange business is facing the blockchain And the huge challenges brought about by the digitization of assets and currencies. The future exchange model must be a combination of centralized matching and distributed clearing and settlement custody; the future transaction service will be an infrastructure service, just like the current telecommunications service and payment service; the organizational form of the future dominant exchange It must be a joint establishment model of financial institutions; future exchanges must operate globally, not within the scope of various regulatory jurisdictions; DeFi will be applied to various businesses related to transactions. [2019/11/26]

The SEC was supposed to make a decision on its filing on April 1, 2020. But the SEC delayed making a decision. In terms of USD CBDC, there are positive forces in the market that are promoting the development of USD CBDC, but the Fed holds a very cautious attitude towards this and is still in the research and evaluation stage. From the above aspects, it is clear that the United States lags behind Switzerland, Singapore and Thailand in the development of digital finance.

Voice | Gu Yanxi: Libra forces the central banks of various countries to coordinate their monetary policies and jointly deal with private stablecoins: Today, Gu Yanxi, director of the CBX Research Institute, stated in the article "Libra, the Pandora's Box of Central Banks" that Libra will Provide a financial market infrastructure (FMI) on a global scale and issue and circulate stable coins on it. Such an FMI and digital currency are a brand new financial system independent of the existing financial market. Given the global influence of the members of the Libra Association, this forces central banks to take seriously the various shocks brought about by Libra and formulate their own coping strategies. More critically, Libra forces the central banks of various countries to coordinate their monetary policies with each other to jointly deal with Libra and other private stablecoins that will surely appear in the future. [2019/7/15]

The main factor restricting the development of digital finance in the United States is the lag of regulatory policies, especially in the field of securities. The SEC resolutely regulates various innovations based on blockchain and encrypted digital assets in the market in accordance with existing securities laws.

For example, in terms of asset tokenization, the SEC insists that if a token product is identified as a security token, then the product must operate under the requirements of existing securities laws. For any project that the SEC believes deviates from the requirements of the securities laws, the SEC may take enforcement measures. The most famous case in this regard should be the prosecution against Telegram initiated by the SEC in October 2019. Although the Telegram project was launched in 2018 and operated in accordance with Reg D as much as possible, the SEC finally believed that Telegram’s operations violated securities laws and prosecuted it. Due to the SEC's strict enforcement in this field, the application of blockchain and encrypted digital assets in the securities industry in the US market is still limited to the very small scope of alternative assets.

From the perspective of US regulators, the current policy adopted by the SEC has its reasonable considerations. Because blockchain technology and encrypted digital assets will bring paradigm changes to the existing securities industry. This means that the operation of the securities market will be greatly affected. However, this change will not produce immediate and obvious benefits for the US securities market, especially under the premise that risks are controllable. So the SEC has no particular incentive to make this change happen. After all, one of the three responsibilities of the SEC is to ensure a fair, orderly and efficient market. Therefore, there is no need for the SEC to take great risks to affect its duty to maintain an orderly market with limited returns.

Likewise, the Federal Reserve must have had similar considerations in issuing a USD CBDC. The U.S. dollar dominates currency markets around the world. Therefore, the U.S. government and the Federal Reserve do not have a very strong incentive to introduce a new form of currency to have a possible negative impact on the existing circulation of the U.S. dollar.

The United States’ slow development in digital finance provides opportunities for countries such as Switzerland to develop ahead. The Swiss digital asset exchange SDX can be said to be the most standardized and orderly development within the existing country. The newly established SDX can be said to be the main organization promoting the construction of digital finance in Switzerland. Its parent company SIX Group is actually the operator of the Swiss state's financial market infrastructure. SIX Group specially established SDX, a wholly-owned subsidiary, to promote the development of digital finance. The first business application it has adopted for this purpose is a digital asset exchange. Through the construction of this digital asset exchange, it will drive the construction of the basic components of the future digital financial ecology.

In terms of financial market infrastructure in the digital financial ecosystem, it uses the open source Corda as its underlying blockchain technology application framework. On this framework, other basic components needed to build digital finance include digital identity, digital currency and digital assets.

In terms of digital currency, it initially plans to adopt a Swiss franc-based digital token. The Swiss Central Bank is currently testing the issuance of a Swiss franc CBDC on top of the same infrastructure. In terms of digital financial products, SDX expects its members to develop various innovative digital financial products.

All of the above development progress is carried out under the premise of close communication with and permission from Swiss financial supervision. Therefore, the development of digital financial technology and applications in the Swiss market is basically in sync with regulation.

The promoters of Swiss digital finance clearly recognize that the infrastructure work they are doing now will definitely not be limited to the Swiss financial market in the future. Due to the global application of the underlying blockchain technology, Switzerland's vision in this regard is to provide financial services on a global scale based on the financial market infrastructure it has built.

If other countries and regions start to participate in this financial ecology, due to the ecological network effect, it is unlikely to conduct business on top of other financial market infrastructure. Therefore, Switzerland will occupy a very strong market position in the future global digital financial ecology. As for the U.S. financial market, when more and more countries and regions participate in the digital financial ecosystem built by Switzerland, even if it later takes measures to establish very competitive services, but think again It will be very difficult to win back the market.


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