Han Feng Talks to Jim Glassman, JP Morgan Chief Economist

Glassman: In China, I think this may be the case. I have always been skeptical that cryptocurrencies can compete with traditional financial payment systems because the whole idea is like this, right? At first it was to conduct transactions more efficiently, and blockchain technology allowed you to do so. The problem is that regulators can have a major blow to the field. As our banks experience, because of these regulations, bank practitioners must know what your customer business is and who your customers are. So they are afraid to conduct (cryptocurrency) transactions and we do not understand these transactions. I am always worried about regulators: cryptocurrency is very powerful because you can avoid trading in the existing financial markets, but I heard that regulators have this ability to fight the cryptocurrency system if they think these transactions involve illegal finances. Activity words. So I was told that the cryptocurrency is under threat.

For me, the real benefit of cryptocurrency is not the effective way to pay, because we are developing blockchain technology so that financial institutions can use blockchain basic technologies to adapt to their work. But I think that because of the strict supervision of the financing system, you are fighting against it. That is dangerous. Although I do not think this is true, I have always believed that the main driver of cryptocurrency is Chinese investors. I don’t know if it’s because this is a way to get money from the renminbi and other legal currencies. Is there such a demand? So the Chinese government may feel very nervous about it. They don't like it. I do not know how much the Chinese government can restrain.


Feng Han: At present, I know that there may be some policies in China that will raise the price of electricity and limit the mining activities of Bitcoin.


Glassman: I guess there are different circumstances for different cryptocurrencies, right? What is a breakthrough factor? Is it the issue we are discussing now?

Perhaps the central government has issued some announcements that prompted local governments to raise electricity prices, leading Bitcoin miners to abandon their own mine pools. But I know that in some cases, some local governments actually like the bitcoin mine pool because it is an economic factor in the local area: the local can't transport electricity out through the power transmission line because the transmission cost is too high, and more A good choice is to allow Bitcoin mine pools to exist in their area.

Other countries I know, such as Canada, welcome Chinese miners because they have many power plants. There will be a large-scale Bitcoin mining conference in Vancouver this May, which is supported by the local government.

In the last century, the U.S. dollar gave up anchoring gold, and now you have become the largest credit resource maker in the global economy. After that, most of the credit resources were only controlled by the center, perhaps the Fed, perhaps the People's Bank of China. Some central institutions may be able to create credit resources for the global market, but there are also many problems: For example, China, most of the credit comes from the central government, and their interests are controlled by companies or organizations closely related to the government.

For example, large-scale state-owned enterprises or real estate companies have the most abundant credit resources, while small companies or ordinary customers have limited credit resources. This imbalance causes China to produce many, many commodities but it cannot be marketed in China. Digest inside, so they only seek to export. Why is the United States? Because the United States can create most of the world's credit resources: you have a US dollar banknote printing machine and can realize the future capital market, so the United States always has sufficient funds, so Chinese products are exported here.

However, I predict that in the future, blockchain technology will ensure that everyone's information will be guaranteed. Big data can become everyone's assets, and credit resources can be created at the most basic level of the market. Recently, Internet companies such as Facebook always collect their customer data and then use this data to make profits. In China, Alibaba and WeChat are doing the same thing: Almost all Internet companies around the world are using the same business model to get user data and sell it. Signing Bitcoin with a private key is the first digital asset that really belongs to you. It can use blockchain to exchange data. If each user's data can become their personal assets, I believe that such a credit-benefit system will be great.

In China, because the credit resources are only created by the central government and the central bank, we face many problems. Blockchain is not just to improve payment efficiency. Alipay and WeChat payment in China have been perfect. But Bitcoin has to solve another problem: It turns data into assets.

I remember a very primitive version. We used to have an academic community. All participants can see dynamic documents. Any changes you make are locked down. Some people can observe these changes. I was surprised to spend so much. It took a long time to develop this platform, so how can these files become assets?


Feng Han: To achieve this goal, I believe that in the future, the blockchain industry needs not only a certain kind of chain but also a trustworthy operating environment, so we need Elastos. The operating system was founded by Microsoft’s former engineer Chen Hao twenty years ago. He is also a Chinese, but he came to the United States 20 years ago to help Microsoft work on the Windows operating system for nearly a decade. Even twenty years ago, he gave Bill Gates some suggestions. An operating system like Windows is based on a PC or a mobile phone instead of the Internet. But how does Windows access the Internet? It only depends on each application, and then each application can become unreliable and they themselves can become viruses. If you get an email, it has a link and it is very likely a virus. Our internet is not safe at present, because the operating system is based on the PC, so this is why the information is controlled by the big companies in the center. Because everyone thinks we have no information security, we have no sense of security on the Internet, so I only believe in a few centers, Google, Facebook, and so on. The others can't believe it.

Chen Hao provided Bill Gates with a new cloud computing-based Internet operating system, but Bill Gates did not believe it, so Chen returned to China because he heard news that the Chinese government hopes to have its own operating system. Gou is the owner of Foxconn. He heard that some Chinese officials will allow the creation of a new operating system. Guo decided to invest 200 million yuan in the development of Elastos. Until 2015, a very large meeting was held in Guiyang City. Many central officials came here. Guo knew this information and introduced Chen into the meeting. He hoped to talk with those officials. He met with the Deputy Prime Minister and asked two questions.

The first question is: Are we Chinese? The answer is certainly yes. You are a Taiwanese, Taiwan is a part of China, so you are Chinese. Second question: Do you think that our Elastos is the Chinese's own operating system? The answer is: What is the third question? Then Guo was very disappointed. In Shanghai, he told Chen that he gave up investing in Elastos. But he is a good man. He did not withdraw his previous investment. So Chen continued his development work. A year and a half later he met the blockchain and me. We talked a lot about smart economy. We think smart economy needs a blockchain-driven operating system like Elastos.

What is a smart economy? Because in China, I talked with some Alibaba economists. One of them was Ali Zi, the financial consultant of Ali. He said: Alibaba’s success makes sense, because 200 years ago, the industrial revolution was very big. The changes, right? We have a big explosion of production. We can automate everything. Before such a revolution, people always do things by hand. Now it is much more efficient. But after the industrial revolution, humans can do everything with new technologies.

In order to solve the problem of one person's (productivity) scarcity, they have increased their production speed faster and faster, but they have not solved the second problem. Trade is still the same as traditional agricultural methods. He worries about how humans solve the trade problem together after the industrial revolution. This is the bottleneck of the global economy. But now Alibaba has automated trading through the Internet. We can continue to trade for 24 hours. We can trade everything and use Alipay and Wechat to pay for everything. We can even pay automatically. This is a smart economy.

So the problem is, we still remember that two hundred years ago, in the Industrial Revolution, we must have more trustworthy resources in the market because many products need to be sold. But historically, fortunately, in the silver mines found in Mexico and Central America, the Spaniards brought back many silver coins as a trusted resource. When Americans' railroads allow their economies to grow, you need more trustworthy resources. The second fortunate thing is that you have found a gold mine in California. Now the trade in China has become enormous, and we need more trustworthy resources.

So what is the new gold mine of the Internet economy? The answer is big data.


Glassman: I don't think that young people will have this relationship. I don't think people who use it will care.


Feng Han: But do they care if they know that big data can become their wealth? They will get used to it and no more customers care about their money.


Glassman: I think Facebook's problem is that they may not even understand themselves. Data is being collected and used to understand and build personal information for each of us, so they can more effectively understand what you like to do.


Feng Han: But do you think young people will care if they know how their data is used? Since they do not know the blockchain, the Internet giant collects data for everyone, but customers are unaware that they do not know that data can be turned into their assets through the blockchain.


Glassman: I'm not sure what the problem is because if you believe that you can make me think about the problem, then many people worry that the information about who I am is leaked, and its feedback will only strengthen my thinking path. This is my idea. But I don't think most young people are concerned.


Feng Han: Really?


Glassman: It feels like you were in Los Angeles. If you recommend people to do something, people will do it. I think young people like to help them understand the information they choose. I don't think they think it is manipulating their ideas. The problem is that the regulatory agencies are all old generations. They don't understand technology. They just compare and their ideas are different from what we see.


Feng Han: But do you think that JP Morgan will airborne the cryptocurrency market directly?


Glassman: What we are doing is jumping to the blockchain technology to develop our existing system. I think this is an efficient system, but I will connect it to some of Pennsylvania's capital, which takes a long time to complete the transaction. why? I will automatically get everything. It tells you that the financial system has become obsolete. What is happening now is that among all these fintech companies, there is concern that they will replace traditional financing because we are all regulated and we have a customer base. We use technology more easily than our customers. So I think that many of these technologies will be absorbed by these companies and they have to pay a lot of money. This is much easier than financial technology companies developing APPs. You have to deal with regulatory agencies and some regulations.


Feng Han: So some people think that blockchain technology will destroy Wall Street.


Glassman: Oh, I understand.


Feng Han: But this gives them more opportunities to manage customer digital assets. Data becomes assets means that Wall Street needs to manage many other types of assets and capital.


Glassman: The real value that Wall Street brings is trying to understand events and probabilities, and trying to deal with non-conventional things more effectively, so anything that provides more information can help you execute things faster. There are thousands of tools based on specific markets or specific assets that are always likely to understand what happened and how it should be. These technologies provide you with a better connection. Just like big data systems, it can find patterns. This is what the industry has done. This is not just a capital market. It tries to evaluate certain things and connections. It will replace a lot of work because it will create new opportunities. I visited Amazon, and when you walk in, they have your image, so when you take something from the shaft, you know what you are doing and it will be in your shopping cart. I went to the store, did not checkout, there was no reason to checkout, you just had to take what you wanted, then leave, then pay with virtual assets. Millions of people will lose their jobs, such as checkout accountants.


Feng Han: But some people think that the blockchain is decentralized, which means that future financial institutions may not need to make such business.


Glassman: No, because people have more and more data to manage. Financial assets reflect the value of people's future events, so technology can help you find patterns and become more complex. When people understand risk, the process will open up to capital and they will be willing to invest in their money. Anything you can do is to help people understand that it is to generate value for certain phenomena. This is the role of the financial system. Create a financial product with cooperation data obligations. You can see things and assign values ​​to them. Create security, then someone will buy it and trade it. I think this process just creates more value for the financial system because the financial system's economy has been growing over the past few decades, and many banks have created their own marketing tools that can provide more income from those who will purchase assets. The people there receive funds to those who need it, so it creates more opportunities.


Feng Han: Do you think regulators will use securities to monitor the digital currency market?


Glassman: I think its value lies in the fact that many financial activities are beyond their regulatory scope, such as illegal activities and terrorism. Regulators will feel uneasy about this. If we do not understand, we must ask our customers what kind of business you have and how you explain the nature of your business. Using financial systems to highlight illegal activities is easy, and regulators are dissatisfied with them. This is difficult to figure out. If there are activities beyond their supervision, we may worry about how to use our currency.


Feng Han: I just learned that you worked for the Fed for many years.


Glassman: Yes, but not the payment system. My friend Sam once worked in the payment system. Now he is a lawyer. He understands these steps more.


Feng Han: But what are your expectations for the future of the United States and the United Kingdom?


Glassman: I'm a little nervous about understanding and controlling this. If they think there is a way to bypass the regime and bypass capital, this is the problem. For the Chinese government, this may be an opportunity for people to make money outside and strengthen their capital restrictions.


Feng Han: As a dictator manipulates everything.


Glassman: As for the United States, it is more speculation because I don't really understand the mining process and I don't know how long it will take. You don't understand how the supply side is affected. It's hard to tell its value, and the miners are so excited about it. If the miners have been able to keep moving forward, you will worry that they have created a (new economics) nature at some point, and I think this is why economists do not know this.


Feng Han: I think he wants to express Bitcoin will realize digital assets from the Internet. But in the future, we need the trusted resources of digital assets. Bitcoin can provide such value.


Glassman: I would not be surprised if regulators are more involved.


Feng Han: This is a global issue. If a country controls it, then many people will leave. This is a simple matter: the most stringent economic control of the money control room for individuals.


Glassman: This is no different from this. We take this thing and supply will be weakened. But to a certain extent, it has a connection with a wide range of international policy goals, so we trust it. Like Germany 100 years ago, we trusted the Central Bank, but the problem is that if you understand how the mining process works and how the money supply works, it may generate confidence in the global community.


Feng Han: In short, we only trust mathematical and physical theorems. This is a hot topic at the moment.


Glassman: Technology is really interesting because you have to keep up with the development of technology. We have more people involved in this process. Perhaps the Americans do not like it because of fear of competition, but it is better to have influence than it is. Imagine what people knew 20 years ago and what people are talking about today.


Feng Han: Many people like me think that the blockchain will bring similar revolutions to the society like the Internet, and even over the Internet, it will change everyone's wealth and assets.


Glassman: I think you are right.