Libra USD Stablecoin's Potential Impact on USD CBDC

The Libra Association updated its white paper in June of this year. It can be seen from the new white paper that its products and business strategies have undergone significant changes. First, it will launch a series of Libra stablecoins based on a single legal currency. From this, we can predict that when Libra is launched, the most likely event is that it will first launch the US dollar-based Libra stablecoin. In terms of operation, it also pays more attention to compliance and communication and cooperation with financial regulatory agencies in various countries. The latest actions of the Libra Association also show that compliance will be the focus of Libra's operations. Its most recent hires of a CEO, chief compliance officer and chief legal officer all have extensive experience in financial industry compliance. From this point of view, Libra has returned to the normal development track.

At the same time, in the US market, there are also very positive forces promoting the development of the US dollar CBDC. If the USD CBDC is launched, what is its relationship to the Libra USD stablecoin? Will the Libra USD stablecoin be banned?

Bank of England deputy governor: Libra could become systemically important: Bank of England deputy governor Jon Cunliffe said Facebook's cryptocurrency Libra could become systemically important. (Golden Ten) [2020/2/29]

First of all, I think the two will coexist. The Libra USD stablecoin will be issued on a 1:1 basis based on the equivalent USD. Its issuance process will strictly comply with various US financial regulations, including user identity authentication and anti-money laundering. The Libra USD stablecoin is effectively a digital version of the existing U.S. dollar. According to the existing regulations in the United States, since it allows the issuance and circulation of USD stable coins like USDC and PAX, and the Libra USD stable currency adopts the same mechanism, there is no reason for the US financial supervision to prohibit the Libra USD stable currency. Even if the United States issues a USD CBDC in the future, there is no need to prohibit the issuance of other USD stablecoins in the market. Because the essence of these U.S. dollar stablecoins is the U.S. dollar already in the market.

News | The Libra Association is hiring a Technical Program Manager who will guide the product roadmap with the TSC: The Libra Association is hiring a Technical Program Manager who will be responsible for guiding the product roadmap with the Technical Steering Committee and helping to foster engagement with the developer community. As previously mentioned, the Libra Association announced on Thursday that it has established a Technical Steering Committee (TSC) to coordinate the design and development of the Libra platform. According to an announcement on the Libra developer page, this is the latest update to the Libra roadmap following the withdrawal of founding members last October. The newly announced group will oversee the project's technical roadmap, guide codebase development and attempt to build a developer community around the Libra project. [2020/1/17]

So, can we therefore conclude that the Libra USD stablecoin will not pose a challenge to the USD CBDC? I think it is impossible to draw such a conclusion. In fact, I have always believed that the Libra stablecoin is nothing more than a Trojan horse. Its biggest threat to the existing financial market is not its stablecoin, but the Libra blockchain that supports its operation. Libra's underlying blockchain is likely to have a disruptive impact on existing financial markets, including the US dollar CBDC.

Voice | Qin Chao, an early employee of Facebook: Marcus and Zuckerberg have a very good relationship. Coos team members have also been in contact. He revealed to China News Weekly that at the beginning of 2018, Marcus resigned from his post as Messenger and began to set up a project team within Facebook to study the blockchain, recruiting more than 100 engineers one after another. "Zuckerberg mentioned cryptocurrency in his New Year's wish in 2018, and Marcus has a good relationship with him. The Libra project was finally established after Marcus lobbied for a long time." Qin Chao believes that as a technology, the blockchain Chain The biggest problem facing the Marcus team is: thinking about how cryptocurrencies can maximize their value on the Facebook platform and solve trust issues. [2019/7/19]

The Libra blockchain can technically support the issuance of multiple types of stable coins. And the Libra Association is now planning to issue a series of Libra stablecoins based on a single legal currency. These series of stablecoins will obviously first include fiat currencies in the basket of fiat currencies currently serving as Libra's reserve. But the digital stablecoins it may support will never be limited to these types. It is possible for any sovereign country to issue its own digital stablecoin on the Libra blockchain. Since the Libra blockchain is available globally, various stablecoins circulating on it can be obtained and used globally. The various stablecoins are thus competing on an equal footing. If Libra Association members are indeed composed of 100 members worldwide. Then these members will have a great say in the circulation and use of Libra stablecoins. This naturally affects the global use of stablecoins issued on top of it. Any digital stablecoins, including U.S. dollars, issued on the Libra blockchain will be bound by the Libraries Association.

Voice | Starting Capital Kong Warwick: The U.S. government’s request to stop Libra’s work is a great appreciation of corporate digital currency: On July 3, the U.S. House of Representatives Financial Services Committee suddenly sent a letter to Zuckerberg and other Facebook executives, asking them to immediately Stop all work on the digital currency/wallet project Libra/Calibra. Kong Huawei believes that this is a great "appreciation" of "private/enterprise digital currency". Digital currency and blockchain are naturally autonomous and anti-regulatory. And this feature has two expressions, one is positive, it is a revolution in production relations, and the other is negative, it is anarchism. The latter opposes the monopoly system and the large centralized system. Therefore, for the regulators, the libra/calibra project is positive that I can control the world with long arms, and the negative is that there is nothing wrong with me, "I can't regulate it anymore." Unfortunately, this committee chose the latter. [2019/7/3]

Since various types of stablecoins compete on an equal basis on the Libra blockchain, any issuer of a stablecoin needs to establish its position in the digital currency market according to the market's operating mechanism . Various digital stablecoins are competing on an equal footing, which is not particularly good news for the U.S. dollar, which currently dominates the global market. Therefore, this will naturally also affect the market influence of the USD CBDC.

For the various stablecoins on the Libra blockchain, whoever can first gain more users in the Libra ecosystem will be able to establish an advantageous competitive position. The Libra USD stablecoin has an existing advantage in this regard, but this advantage is not naturally guaranteed forever. If a certain stablecoin is widely used because of a certain application or a certain region, it is likely to be more popular than the US dollar stablecoin in the Libra ecosystem.

USD CBDC is still in the research stage. It’s unclear what underlying technical foundation it would use to support the issuance of a USD CBDC. In this regard, a very critical factor is whether the underlying technology will be developed by the Federal Reserve itself, or will it be developed in cooperation with some other central banks, that is, using the same underlying technology infrastructure. I think it is unlikely that the Fed will adopt the first method, because such a method is not fundamentally different from the current clearing and settlement system that supports dollar circulation, so the dollar CBDC will not bring an obvious benefit. I think it is more likely that the Federal Reserve and some other central banks will adopt the same financial market infrastructure. Then issue and manage their own CBDC in accordance with their respective monetary policies. Such a method can well solve the current shortage of legal currency in serving cross-border transfers and transactions. If the Fed takes this approach, then the USD CBDC would be in more direct competition with the Libra USD stablecoin. If this is the case, then the demand for the Libra USD stablecoin in the market will be greatly reduced. The reason is obvious, since there is a US dollar CBDC directly issued by the Federal Reserve, why is it necessary to use a US dollar stablecoin issued by a private institution? If this happens, digital currencies other than the U.S. dollar will circulate in the Libra ecosystem.

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