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The Ghost of Libra: A Cautionary Tale
The ambition was grand: Facebook’s 2019 announcement of Libra, a stablecoin project envisioned to revolutionize global digital payments. With a projected $1 billion investment from 100 global companies, Libra aimed to reshape the financial landscape. Though, this vision quickly encountered fierce resistance.
Governments and central banks worldwide voiced concerns, especially regarding the potential for a private entity to undermine monetary sovereignty. The U.S. goverment’s strong regulatory stance ultimately led to Facebook abandoning Libra, rebranding it as Diem, which eventually dissolved quietly. This episode serves as a stark reminder of the tensions that arise when private technological innovation clashes with state control over currency.
hypothetical Scenarios: Diem in the Korean Context
Let’s consider a hypothetical scenario: What if a resurrected Diem,or a similar digital currency initiative,were to target the Korean market? How would Korea respond? The regulatory landscape has shifted as Diem’s initial demise,particularly with evolving views on virtual assets. Examining potential scenarios is crucial for preparedness.
Scenario 1: Diem as a User Reward
Imagine Facebook distributing Diem to Korean users based on their tenure on the platform – for example, 5 Diem for 5+ years of membership, 10 Diem for 10+ years. Could Korean authorities legally prohibit such a payment?
Given that Diem,in this context,functions as a reward token rather than legal tender or a listed investment asset,a legal prohibition would be challenging. It resembles a form of digital points or private bonds.
Scenario 2: Diem Transfers and Donations
Could Korean citizens be restricted from sending or donating Diem to other users, both domestically and internationally?
Similar to the previous scenario, restricting the transfer or donation of assets functioning as digital points or private bonds would be challenging due to the lack of a clear legal basis.
Scenario 3: Diem for E-commerce Transactions
What if korean consumers could use Diem to make purchases on Facebook Shopping Mall or affiliated e-commerce platforms?
If Korean users engage in transactions on global platforms that accept Diem,intervention by the Korean government would be complex. The moment diem gains traction as a functional currency, it raises a host of issues related to consumer protection, online shopping regulations, electronic financial company oversight, and digital asset regulations.
Scenario 4: Diem Conversion and Cryptocurrency Swaps
Could Korean users cash out their Diem or exchange it for other cryptocurrencies?
Diem cash-out or cryptocurrency swap transactions would likely fall under the purview of virtual asset transaction regulations, specifically the specific financial details law. Though, if these transactions occur through overseas operators, Korean financial authorities would face significant challenges in oversight, possibly leading to reverse discrimination issues for domestic platforms.
Korea’s Position in the Evolving Digital Asset Landscape
These scenarios highlight the critical need for Korea to define its position in the global digital asset market. are Korean governmental bodies and financial authorities adequately prepared for the rise of digital currencies? Is the industry ready? Proactive planning is essential to transform potential challenges into opportunities.
Korea must carefully consider its response to various digital currency experiments, including Central Bank Digital Currencies (CBDCs), global stablecoins, and the emergence of “Big Tech” money.The future belongs to those who are prepared.
The Broader Context: The Rise of Digital Currencies
The discussion surrounding Diem and similar initiatives underscores a larger trend: the increasing prominence of digital currencies. According to a recent report by the Bank for International Settlements, 86% of central banks are exploring CBDCs. Furthermore,the global stablecoin market is projected to reach $200 billion by 2028,highlighting the growing demand for digital assets.
The rise of digital currencies presents both opportunities and challenges for nations worldwide. It is indeed imperative that governments and regulatory bodies proactively address the potential implications of these technologies.
Bank for International Settlements