(Tiểu luận FTU) libra currency and fed s reaction to its appearance

TABLE OF CONTENT ABSTRACT INTRODUCTION Necessity of the research .4 Objects of the research Research subjects and scope .6 Methodologies .7 Content of the research .7 Chaper 1:Overview about cryptocurrency Introduction to cryptocurrency Cryptocurrency’s characteristics Cryptocurrency’s effect on the economy 11 How Governments React to Cryptocurrency? 13 Chaper 2:Introduction to Libra currency .14 Definition of Libra currency 14 Libra currency’s appearance 15 Libra’s characteristics .17 Libra’s liberalization 19 Libra’s mobility in the economy 20 Chaper 3:The effect of Libra currency to the economy 22 Positive impacts of Libra currency 23 Negative impacts of Libra currency 24 CHAPTER 4: FEDERAL RESERVE’S REACTIONS TOWARD LIBRA CURRENCY APPEARANCE 28 US and Fed circumstances when Libra currency first appeared .28 Federal Reserve’s reactions toward Libra currency 30 CONCLUSIONS AND RECOMMENDATIONS FOR LIBRA .36 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT People who have witnessed the price of cryptocurrency bucking and rearing in recent years or seen Facebook attacked for its handling of private data might have been surprised to learn that the social media giant is releasing its own digital currency A tap on a smartphone or computer will make money change hands almost instantaneously even if sender and receiver are on different sides of the planet Libra is, in effect, an attempt to undercut existing payment services by re-inventing and improving bitcoin ten years after its launch Whereas bitcoin transactions may take minutes to confirm and can cost several dollars, Libra should move within seconds for negligible fees Whereas bitcoin’s price is extremely volatile, Libra’s swings should be minimal as it will be backed by a basket of currencies And whereas a transaction using bitcoin needs more than 1,000 kWh of computing energy, Libra transactions should consume no more energy than credit-card ones The currency will be offered to 2.4bn Facebook users, but to function effectively Libra also needs to be accepted by many businesses Facebook itself is likely to develop a suite of financial services, much as WeChat and Alibaba, two Chinese internet giants, have done in China Others have argued that such currencies are only there to support payments for illegal activities or simply waste resources Advocates point out, however, that – based on cryptographic principles to ensure security – these new currencies can support payments without the need to designate a third party that controls the currency or payment instrument, possibly for its own profit Much can go wrong The working prototype has yet to be tested It is not clear whether Libra’s impact on the financial system should be feared or welcomed LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com In this paper, we provide a comprehensive description on the details that make such cryptocurrency an interesting research topic recently Keywords: Libra, cryptocurrency, digital currencies and fintech, Fed's reaction LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com INTRODUCTION Necessity of the research Entering the 21st century, the world economy has never faced many challenges as well as development opportunities today Finance and money are among the most important and sensitive areas, having a detrimental impact on the economic development of each country Besides the great achievements in theory, management and creation of various forms of financial-monetary, undeniable that the fast growing and sophisticated pace of the financial and monetary market has set off many challenges and risks for managers and investors In the era of globalization, when the demand for investment, payment and transactions is increasingly high, monetary function as an intermediary exchange, plays an essential role for the development of sustainable development of each economy The history of currency has witnessed many changes in the morphology and function of the currency in general, are attached with every step of the world economy's development From commodity currencies (or commodity money currencies), including non-metallic currencies (commodities) and metal currencies (money copper, silver, zinc), to nominal money, including two main forms of money (money coin-coins and paper money Today due to the development of credit institutions technology, along with the great progress in the field of information technology and networks telecom, many new forms of money have emerged as credit money or electronic money (electronic money) In particular, to mention the strong development of cryptocurrencies in recent years With its outstanding cost advantages, transaction time, liquidity, convenience, compactness and ease of use, cryptocurrencies are increasingly proving their superiority over traditional paper money system and promises to be the currency of the future LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Introduced in 2019, Libra is said to have caused a lot of controversy Some argue that that Libra doesn’t seem very promising to those who understand the value of blockchain and decentralization That being said, Libra promises to be huge Now, while Libra itself is not intended to make money in its early stages, we also know that Facebook is creating a new subsidiary called Calibra This company will create products and services based around Libra that promise to generate significant revenue streams and profits for the social media giant Stemming from the arguments about Libra, our research team selected the topic “Libra currency and Fed’s reaction toward its appearance” in which detailed analysis of Libra currency are included Moreover, due to the importance of the Fed’s reaction to this cryptocurrency, our team also boldly proposed solutions how Fed can manage Libra LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Objects of the research The overall objective of the topic is to clarify the characteristics and mechanisms of virtual currencies libra, the effectiveness of the market as well as the state of the legal framework This paper also analysis Fed's reaction to the appearance of Libra and on that basis we would like to propose some recommendations for Fed Specific objectives:  Clarify the theoretical basis for cryptocurrency, the process of formation and development of Libra  Clarify the characteristics, liberalization and its mobility in the economy  Clarify Libra currency’s effects to the economy including advantages and disadvantages  Clarify the current use and management of Libra in the world, especially on regulatory framework for Libra currency management;  Analyse the circumstances when Libra appears in US and How Federal Reserve reacts to Libra currency appearance  Proposing solutions to manage and ensure the sustainable development of the market of Libra Research subjects and scope 3.1 Research subjects: Subjects of the research include Libra virtual currency, the market of Libra and the reactions of Fed of the appearance of Libra 3.2 Research scope: The scope of the research is limited to the following: 3.2.1 Geography: - Overview: Libra market in US LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3.2.2 Time: - Since Libra was formally announced on June 18, 2019 until the present Methodologies To study the theory, our team used the methods analysis and study at the desk (desk study) We also use conduction of previous researches, articles about cryptocurrency and Libra currency and base on secondary data to conduct our own model and conclusion Content of the research The study consists of pages, tables, charts and appendices In addition to the conclusion, self-abbreviation lists, table lists and charts, lists of documents, references and appendices, topics are structured into chapters as follows: Chapter 1: Overview about cryptocurrency Chapter 2: Introduction to Libra currency Chapter 3: The effects of Libra currency to the economy Chapter 4: How Federal Reserve reacts to Libra currency’s appearance LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPER 1: OVERVIEW ABOUT CRYPTOCURRENCY Introduction to cryptocurrency A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation Cryptocurrency’s characteristics 2.1 Trustless Cryptocurrency is trustless because it was designed in a way that nobody has to trust anybody else in order for the network to function Every form of currency before bitcoin required a central authority that you had to trust in order to use it In all cases, that central authority becomes the central weakness that leads to the demise of the currency With it, each part of the ecosystem validates what the other parts are telling it without needing to trust anybody If you broadcast a cryptocurrency transaction, all nodes receive it and verify that the signatures are valid If the signatures are not valid, they discard the transaction Everyone on the network has a copy of the ledger so we no longer need to trust a single entity/organization/third-party because there is no need to trust when you can just verify against this ledger because you have a copy of it The decentralized ledger is known as the blockchain The incentivization of individual network actors though the proof-of-work (PoW) consensus algorithm is one of the most groundbreaking ideas in modern economics The incentive may help encourage nodes to stay honest If a greedy attacker is able to assemble more CPU proof-of-worker than all the honest nodes, he LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins “He ought to find it more profitable to play by the rules, such rules that favor him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.” — Satoshi Nakamoto Although we are still figuring out exactly how we use cryptocurrencies and and what for, they are here to stay Aside from the other major benefits of cryptocurrencies and blockchain tech, solving the centralized trust issue alone is a big enough innovation to give crypto staying power 2.2 Immutable “Immutable”, in its simplest sense, means “cannot be undone.” Immutability regards to blockchain and cryptocurrency should follow principles:  It should be highly improbable or difficult to rewrite history  It should be impossible for anyone but the owner of a private key to move funds  All transactions are recorded on the blockchain (to guarantee the above principles) When we want to check how money has been spent from our bank accounts, we check our transaction history with the bank We trust our banks not to fabricate transactions or manipulate our money as we trust them to deliver our transactions to recipients If there are fraudulent transactions, the bank also needs to be trusted to change them and fix the situation As we have already seen that the elements of centralization and trust are removed from cryptocurrency, there is no longer a third party for us to trust to these things Therefore, transaction records are made public and unchangeable (immutable) Although it isn’t impossible to change the transaction ledger, cryptographic security LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com makes it extremely difficult It require you to compromise the entire network of cryptocurrency users 2.3 Decentralized Since “decentralization” is such a relevant buzzword in the crypto community, it’s important to define it well It can take on different meanings “Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer).” — Vitalik Buterin  Fault tolerance: decentralized systems are less likely to fail accidentally because they rely on networks of separate components  Attack resistance: decentralized systems are more expensive to attack and destroy or manipulate because they don’t have vulnerable central points that can be attacked at much lower cost than the surrounding system  Collusion resistance: it is harder for members of decentralized systems to act in ways that benefit them at the expense of others On the other hand, corporations and governments collude in ways that benefit themselves but hurt others all the time With central banks and governments, the supply and creation of money through mints and interest rates are controlled only by the banks Users of fiat currencies are at the mercy of the central banks’ money-printing whims “The problem in this world is to avoid concentration of power — we must have a dispersion of power “ — Milton Friedman If you are not yet outraged by the central banking money-printing scam, it is helpful to think of it as a hidden tax when they print 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Second, the appearance of the Libra raises the challenge of preventing money laundering and crime Poor management of the risks mentioned above could leave Libra vulnerable to fraud, fraud and lead to claims not supported by the issuer's existing assets In the context of rapidly developing technology, the risk of cybercrime, forgery and fraud is difficult to eliminate Besides, if the Libra with the ability to make unlimited transfers as originally desired can be used for money laundering, tax evasion, terrorist financing due to the anonymity of transactions and the ease and convenience of trading the Libra are being taken advantage of Third, the impact on financial intermediaries, Fintech and e-wallet: Telra money can directly threaten the existence of financial intermediaries, Fintech and e-wallet because individuals can transact directly with one another at a low cost and quickly based on the Libra block chain platform and the accompanying apps On the other hand, the policy of countries banning digital currencies in general and Libra in particular will create risks for financial intermediaries, Fintech if they accept them Fourth, the Libra has an impact on the policies of the central banks and regulators of the nations When the use of digital money in general and Libra in particular increases, it will have an impact on the payment system (as mentioned above), on the money supply, on the assignment of management, supervision and handling responsibilities handle system risks, spread risks, if a problem occurs A number of countries have studied to determine the approach, conduct and methods of management, monitoring, etc In addition, many experts point out that the use of digital money can lead to budget losses due to tax evasion, money laundering, or lack of proper taxation, etc CHAPER 3: THE EFFECT OF LIBRA CURRENCY TO THE ECONOMY 22 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Starting in 2020, users will be able to transact in Libra across the suite of Facebook’s social platforms, including Messenger, Whatsapp, and Instagram This stable coin is pegged to a basket of fiat currencies including the US dollar and the Euro, meaning that it will fluctuate less than traditional crypto, removing much of the currency risk that can be a real deterrent to non-speculative adoption The launch of Libra has both the financial and crypto communities abuzz Here are some of the arguments about why this powerful new currency will change the world, for better and for worse Positive impacts of Libra currency It is easy to see that Libra can fully perform the monetary functions, including: a measure of value, a means of exchange, a means of payment, a means of accumulation and international payment Although there are some points that need more information to define it, Libra's design is generally transparent, so it has advantages over all current cash in points: more stable, stored, convenient and cheaper transactions and programmable Referred to as ‘Stable coin’, Libra is brought into the digital currency line with the aim to transform the global economy by maintaining a stable value and avoiding the volatile swings and fluctuations experienced in the former cryptocurrencies like Bitcoin and Ethereum While existing cryptocurrencies are not tied to physical assets which not only makes them immune to the whims of national governments but also makes them prone to speculative bubbles and flash crashes then Libra, on the other hand, is going to be 100 percent backed by assets Every dime in Libra is going to be held by an equivalent basket of bank deposits and short-term government securities in various international currencies like the US dollar, the Euro, the yen, the CAD, the AUD The global citizens will be able to make digital version of these powerful currencies as an alternative to their local currencies As a result, Libra will not suffer wild price fluctuations 23 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com The second effect of being backed by assets is that it may help lower the risk of high inflation in countries across the world Nobel Prize-winning economist Friedrich Hayek made this very point in his book “The Denationalisation of Money.” Hayek believed everyone would be better off if people could pick among different types of private money, like Libra, instead of using government-issued money Hayek believed issuing private money would banish inflation from the world since people would only use the currency most stable in value Another economic benefit of Libra is that it will likely reduce the cost of transferring money around the world because the marginal cost of using it will be so low and Facebook is so prevalent, with about 2.4 billion users It is obligatory for travelers and migrants to pay extra fees to transfer money from one country to another but Libra is going to cut that transfer rate to zero It is going to be accessible to 2.4 billion Facebook users directly through the apps ‘Messenger’ and ‘Whatsapp’ Last but not least, Libra is working on the transition to a cash-less society where people can buy stuff and pay their bills by just a single tap on their smartphones But the group of people who can avail these benefits is rather small as Libra would target the people who have cell phones, an internet connection and bank accounts, leaving the third world countries somewhere far behind The Libra may “demote the power of nation states,” warned Claire Finkelstein, a national security researcher at the University of Pennsylvania Law School There is also a plethora of issues on taxation of money exchange through Libra in the developing countries Negative impacts of Libra currency Firstly, Libra will make it difficult for national monetary policy making due to unpredictable effects on the money supply and demand According to Mr Ly Xuan Hai, a person with a lot of banking experience, with the specification of cryptocurrencies, there 24 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com is a risk of bluffing Libra supply if there are deposit and credit transactions with Libra without the measures to manage the money multiplier On the other hand, with the participation of Libra, the risk of lacking capital for economic development will be much lower if the economy develops healthy In general, the central bank will find it difficult to regulate the money supply but it will not be so important as before To clearly understand, we analyze its effect on monetary multiplier Monetary multiplier measures the extent to which commercial banks increase the money supply This multiplier is the ratio of the total money supply to the base money supply The formula for calculating the money supply is as follows: m=1+(C+D+E)/(C+R)= ( (C+E)/D+1)/(C/D+ R/D) Assuming the amount of Libra circulating in the economy is E and the other factors remain constant, the total money supply (M) will include the amount of cash (C), the amount of digital money, and the amount of deposits (D ), expressed as the following formula M = C + D + E Whereas the denominator H = C + R does not change The stability of the monetary multiplier m is the premise for the Central Bank to control the money supply, assuming that with the widespread use of Libra in the economy, the monetary multiplier m will change and be difficult to predict guess The Central Bank will have difficulty controlling the money supply by controlling the legal currency Secondly, Libra will affect fiscal policy due to the impact on taxes and fees There will be potential for tax losses in the tourism, import and export industries For example, there was a press conference posting about a number of Chinese tourists coming to Vietnam to pay with Alipay Libra will cause the same phenomenon to repeat on a larger scale Software businesses can sell cross-border without the income tax return Smuggling and transfer of money abroad can also occur on a large scale without control because Libra is an anonymous payment channel 25 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Thirdly, Libra will surely affect the exchange rate policy It makes the government to bring the exchange rate closer to the market supply and demand because any party feels lost because the exchange rate will use Libra instead Fourthly, Libra also affects interest rate policy, banking regulation activities and the operation of the commercial banking system itself The reason is that when the entry barrier is removed, almost anyone can compete with the Libra-based bank In addition to the government having to lower the base rate so that local currency credit services can compete with Libra, banks must also change their products and services Imagine whether users will choose to bank with a mountain of processes, procedures and high interest rates or Libra loans on the global lending network with low interest rates Users will pay by Libra with super low and fast transfer fees like texting or using the current bank's payment service The answer is probably not too hard to guess Just look at the impact of Alipay and Wechat on China's banking and monetary systems and you will see the future with Libra immediately These two services are deeply rooted in every corner of the Chinese economy, with payment worth up to US $ 24 trillion Ant Financial, Alipay's company is the 10th largest bank in the world, owns the largest cash fund in the world named Yuebao with a total capital of up to US $ 170 billion The reason why Yuebao is popular is because it only needs to have a balance to generate interest, much more convenient than traditional banks In addition to borrowing / lending and payment activities, Alibaba is also engaged in investment and insurance activities with very innovative services Due to the growth of this system, the Central Bank of China had to build a separate clearing system called China Nets Union Clearing to control the payment activities via mobile Unfortunately, it will be difficult for countries to control payments by Libra in this way Fifth, Libra will affect the management, mobilization and control of capital flows Businesses can mobilize global capital better with Libra instead of having to 26 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com complicated procedures to raise domestic capital Startups and businesses with high digitalization will benefit if Raising capital by this channel In general, the degree of influence of Libra will depend on the health of the economy, the current situation of "controlling" money, the reliability of the government, the level of corruption, and the tax policy of taxes 27 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 4: FEDERAL RESERVE’S REACTIONS TOWARD LIBRA CURRENCY APPEARANCE US and Fed circumstances when Libra currency first appeared As having been discussed in previous sections, Facebook’s private currency, Libra, could possibly become one of the most profitable operation in history, yet at the expense of huge risk to the public and also central banks like Federal Reserve to be specific 2.45 billions users in the world with 244 millions in US alone, Facebook is regarded as the most popular social network in the US With the birth of Libra currency, everyone can get access to this currency at ease, just via “login” button on the most social network on Earth This also means that, Facebook has just offered all of its billions users a new bank with full functions like payment, saving, money transferring in a new currency accepted everywhere Facebook and their partners goes Moreover, if Facebook and all partners in Libra association were deemed as a nation, their population would be 2.5 billions, making them the largest nation in the world; and thus, Libra Association became a new central bank The threat imposing by Libra currency to central banks as a whole and Fed in particular is clearer considering the increasing amount of transaction being made with cryptocurrency these day This upward trend and its threat can be explained as follow: First, with cryptocurrency being globalized, Governments no longer have monopoly on currency issuance Which, now firms, and association can have their own private money used by literally anyone with appropriate device Without the position of the only one who can control the nation currency, Government will meet obstacles trying to control their economy and monetary policies due to the fact that, this is cryptocurrency with which monetary policies have yet to deal Slipping the authority out of Government hand’s is, to some extent, risky since there is highly likely to be an increase in crime such as money laundering, terrors etc 28 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Second, the world is now exchanging more and more with each other, thus, there is mounting evidence that they need a single monetary currency, systems which can help to boost trade and reduce transaction cost However, in the situation as mentioned, where is the role of government? How can they tackle their loss of voice if their currency being deteriorated in effect? Third, decentralized network is undeniably hard to stop, yet decentralization is greatly against what central banks and governments are for Lastly, programmable money is now the taste of the century All these reasons and dangers combined, it is hard to deny that the appearance and popularity of cryptocurrencies including Libra is a great a threat to governments and central banks as a whole, especially forking right to the core of Federal Reserve - one of the most powerful central banks ever walk the Earth that is now in control of the world economy As quoted: Libra is “stealing the Fed’s only trick” “The Federal Reserve is what it is because it can print USD, the de-facto currency of the world Without this trick, it would just be another bank with debt, assets” Though it may sound insanely inconceivable, Facebook’s Libra may potentially replace dollar as the reserve currency and the Libra Association may take the place of the US Federal Reserve In other words, Libra is putting a knife in the neck of Fed “This is why U.S regulators are in a frenzy about this topic This is also why the cryptocurrency community does not deem Libra a threat to their success.” What is more worth worrying for Fed when Libra appeared is that Fed is now experimenting and launching their real-time payment system: Fednow which offers firms international payment service with high speed and ease If Libra launched in 2020 and become a hit, it would be a direct opponent to Fednow being officially launched in 2024 Fednow would face the risk of being born after Libra and thus, might turn to be a much 29 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com less popular a tool for payment And again, Libra success bears a huge threat to Federal Reserve Federal Reserve’s reactions toward Libra currency Following discussions in the previous part of this research, it is undeniable the fact that Libra currency owns so many merit and demerits, making it a matter of aggressive debate all over the world This controversial cryptocurrency also raises a great deal of conflicts among opinions from Federal Reserve associates Here are some of the most constructive opinions from the so-called Central Bank of America 2.1 Opposing reactions It is hard to argue that the threats from Libra currency is dim, in fact, Libra is facing criticism in all fronts Knowing the negative influences that may be brought by this innovation, Federal Reserve had declared statements and taken some actions against Libra currency 2.1.1 A great deal of criticism in semiannual report to Congress, July 2019 Having been announced in June 2019, the launching of Libra has stroked a myriad of protests One of the first response made by Fed Chairman, Jerome Powell was that he was putting the “red flag” on this currency, and thus, launched a working group to examine the matters that might followed Stated by Powell in front of Congressional Committee: “Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability,” which led to his conclusion: these were the concerns that had to be addressed thoroughly and in public 30 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Another aggressive argument coming from that same hearing is from Rep Bran Sherman, D-Calif., among the most critical of Libra and its potentiality :“to transfer power from the United States government to sanctions and tax-evaders, terrorists, and drug dealers while reducing the importance of the U.S dollar as the reserve and trade currency.” Sherman spread the criticism to Facebook CEO Mark Zuckerberg, too “Ultimately, it is time to bring Mark Zuckerberg here,” Sherman said “He is the one that has made billions of dollars out of us, relies on the U.S government to protect his billions and now wants to undermine the system.” Reported from the hearing, it was said that Facebook should postpone the project until regulations and standards on cryptocurrencies circulations are met by Libra The criticism had not been put to a stop here yet, however, there is still an array of light for Libra when US and Fed have not completely disapproved of Libra As spoken by Mr Powell, considering and examining Libra before its launching is essential, and yet, Libra would have to face a mountain of regulations to climb Powell said the central bank already met with Facebook representatives in the months leading up to its launch, and has set up the working group to focus on the unanswered questions The Fed is “coordinating” with colleagues in other regulatory agencies and other central banks around the world, Powell said “We support responsible innovation in the financial services industry as long as the associated risks are appropriately identified and managed,” he said 2.1.2 Federal Reserve claimed to have no responsibility to control over Libra currency Much as the concern about the appearance of Libra currency that is aiming the knife at Federal Reserve’s power, and a variety of sectors in the economy like cryptocurrency (eg: Bitcoin), central banks, household (especially Facebook’s users), to be named but a few, as a whole, Fed’s Chairman, Jerome Powell still, passed up on every opportunity to assert Fed intention to regulate cryptocurrencies—by default suggesting that Congress can either allow patchwork regulation or pass legislation to enhance the responsibilities and powers of the Fed or some other regulator Powell also deflected questions about actions to other regulatory agencies and said clearly that without broad new responsibilities and powers, 31 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com the Fed was not the place Congress should look for answers about Libra or crytocurrencies in general This is the important takeaway from the testimony (Full disclosure: I own Bitcoin and other cryptocurrencies.) In conclusion, Mr Powell implied that, Fed only cared about the risk that potentially brought by Libra, not the currency as it was not controlled by any countries but an international organization called “Libra Association” As a result, Fed was considered to be irresponsibly as they only meet with Facebook regulator “a couple times” but not yet mentioned any more meetings in the future to come Powell also deflected questions about actions to other regulatory agencies and said clearly that without broad new responsibilities and powers, the Fed was not the place Congress should look for answers about Libra or crytocurrencies in general This is the important takeaway from the testimony (Full disclosure: I own Bitcoin and other cryptocurrencies.) Quoted by Powell “it’s still early day to discuss monetary impacts of cryptocurrencies” 2.1.3 Further comments from Federal Reserve Governors Although facing with opposing comments, there are still some key points stated by Fed’s regulators about the potentiality of Libra, however, its launching would have to face with more obstacles before being made official “It should be no surprise that Facebook’s Libra is attracting a high level of scrutiny from lawmakers and authorities,” she said, according to Reuters “Libra, and indeed any stablecoin project with global scale and scope, must address a core set of legal and regulatory challenges before it can facilitate a first payment.” “A global stablecoin network, if poorly designed and unregulated, could pose risks to financial stability,” the Fed November financial stability report says “The failure of a stablecoin to operate as expected could disrupt other parts of the financial system.” 32 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2.2 Supportive reactions Despite their statements made on Libra currency for the period from July up until November of 2019, in 17 November 2019, Fed finally admit the possibility of this project Libra like global stablecoin initiatives “have the potential to rapidly achieve widespread adoption,” said the central bank in its latest Financial Stability Report published Friday This conclusion were drawn from the fact that the potentiality of Libra and the power of Facebook, Calibri and Libra Association are easy to be seen and there is no rough enough obstacle that this launching is unable to overcome “As the Group of Seven has noted, ‘no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed, through appropriate designs and by adhering to regulation that is clear and proportionate to the risks,’” concluded the central bank Overall, the Fed's report seems fairly and increasingly optimistic, albeit with some warnings Notwithstanding, there is so little supporting or encouraging reactions for Libra coming from Fed in particular and other central banks in the world So the conclusion we can draw is that the challenges or subsidizes Libra currency will face or get from Federal Reserve remain unanswered a question Conclusion and Recommendation for Federal Reserve All in all, there is no denying the fact that the launching of Libra currency is promising yet threatening to the power of Federal Reserve, the use of USD and the monetary policy of not only the US but many other countries may also suffer This is not so beneficial to the economy and society as a whole if not being regulated with a great deal of care and tension due to associating risks from money laundering, financial instability, anti-trust, etc However, on the bright side, this currency under finest and strict regulation may bring back more goods than harms It seems that Libra is aiming at the de-facto position of 33 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com USD which place such burden on Federal Reserve especially among central banks all over the world Being criticized by members in Federal Reserve and receiving a neutral reaction from Mr Jerome Powell - Chairman of Fed, it is clear that there are still so many problems that needed to be tackle by Libra Association in general for their project to be in effect on time and on the global scale that they are intended to aim at However, as a response to the public about the intimidation from Libra currency directly to Fed, they remain disinterested in regulating cryptocurrency as they claim not to have any authority over these innovations Despite all this negative, disapproving, or uninvolved attitude, Fed’s chairman still admitted the possibility of mass implementation of Libra cryptocurrency yet with a condition: proper regulations must be adhered to and close supervision must be applied by Libra Association As for the present situation of Federal Reserve, it is a strongly held belief that actions from them still have to be taken, although these might not be directly aimed at Libra currency There are some suggestions made throughout our research and conducted from a wide range of articles, papers and opinions First, to keep standing in the most power position of all central banks, Fed should take its best possible part in establishing and amending laws, regulations that mitigate the risks that may be exposed to the economic sectors for example: anti - money laundering laws As mentioned, they not have the authority to manage Libra but they have to power to effect and cast their voice to the global organizations, the world economy, especially lawmakers Second, to control and compete in a fair and square playground, an advisable solution for Federal Reserve is to expeditiously launch Fed’s real-time payment service Fednow which may bring about more secure, speedy and trustworthy way to circulate cryptocurrency in international and domestic trade It is unarguable that the service offered by Fed would be deemed as safer and bears lower risk in comparison to an 34 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com associations of corporations regardless of their size of business; corporations are still corporations who are not backed by the government - the lawmakers and money printers Written by Federal Trade Commission (FTC) commissioner Rohit Chopra “Regardless of Libra’s ultimate fate, the proposal’s emergence underscores the appetite for real-time payments and the urgency of intervention by the Federal Reserve.” Third, Fed can also has its look back into its once project: Fedcoin - a cryptocurrency issued by Federal Reserve This may be already disapproved yet still an idea that can be developed and required more upgrades, changes and there are might be hopes to become true and again, compete against cryptocurrencies in general and Libra currency in particular to fight for the society advantages other than this corporations whose intentions are “increase shareholders’ value” Fourth, although Libra and Fed seem to be against each other, Libra is still an innovation that to some extent, fix the problems that striked by other cryptocurrencies, yet may boost to the financial - well - off of the US society In situation like this, Fed should not be an obstacle that stand in the way In fact, Fed should have more encouraging response and offer a hand to Libra Association It has been spoken by Mr Powell, "to see responsible financial innovation, so it's important that we be open" to Facebook's proposal Lastly, as Facebook is the corporation originated in the US, despite having been globalized, the responsibility to control over this firm’s actions This is suggested that Fed and US government should be the one who pay the most attention to regulate and supervising to ensure the stability and adherence to the laws of Facebook’s leaders and the corporation in general 35 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CONCLUSIONS AND RECOMMENDATIONS FOR LIBRA All things considered, Libra currency is, much as being threats, also own a promising future This is the invent that may make a change to our monetary systems due to new features that stab right into the most obvious flaws of other currency weather digital or fiat Thus, Libra is argued to disrupt the existing cryptocurrency models and the ecosystem they have created for a decade Facebook promotes Libra as a very stable digital coin contrary to peers (i.e Bitcoin), but Libra or its 28-member governing body the Libra Association will not eliminate all of cyberattacks or the default risk of securities and member-firms all which are for-profit companies Unlike Bitcoin and over 2,400 altcoins, not only Libra will be a liability of individuals and entities but also backed by a central bank like authority (the Libra Association) responsible for Libra’s stability in an ongoing basis; this will give Libra intrinsic value which will not be derived from belief or trust There is still time until Libra’s launch in 2020, but time is running fast and Facebook must resolve criticism from cryptocurrency investors and enthusiasts, opposition from major central authorities, and concerns from governments including the United States, France, England, Germany, and Japan In the face of Facebook’s troubled past regarding privacy and the exploitation of users’ data, Facebook assures that Libra will be operated by its subsidiary Calibra and the sensitive financial data including the Libra account holders’ transaction history will not be shared with Facebook unless authorized by account owners Although Facebook plans Libra to become permissionless in the near future, it must initially start as a permissioned network to support billions of potential transactions generated by a user base of close to three billion account holders across the globe In this vast scale, Libra’s closest competition Bitcoin and Ethereum are no comparison with less than 50 million combined users Time will show whether Libra will sputter out or become a reality 36 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ... 4: FEDERAL RESERVE? ?S REACTIONS TOWARD LIBRA CURRENCY APPEARANCE US and Fed circumstances when Libra currency first appeared As having been discussed in previous sections, Facebook? ?s private currency, ... Calibra will be responsible for developing e-wallets and products that use Libra, allowing users to send cryptocurrency to others via smartphones, similarly sending text message  Libra users... luanvanchat@agmail.com less popular a tool for payment And again, Libra success bears a huge threat to Federal Reserve Federal Reserve? ?s reactions toward Libra currency Following discussions in the previous part