Facebook Backpedals From Its Original Ambitious Vision for Libra (arstechnica.com) 77
An anonymous reader quotes Ars Technica:
David Marcus, the head of Facebook's new Calibra payments division, appeared before two hostile congressional committees this week with a simple message: Facebook knows policymakers are concerned about Libra, and Facebook won't move forward with the project until their concerns are addressed. While he didn't say so explicitly, Marcus' comments at hearings on Tuesday and Wednesday represented a dramatic shift in Facebook's conception of Libra.
In Facebook's original vision, Libra would be an open and largely decentralized network, akin to Bitcoin. The core network would be beyond the reach of regulators. Regulatory compliance would be the responsibility of exchanges, wallets, and other services that are the "on ramps and off ramps" to the Libra ecosystem. Facebook now seems to recognize its original vision was a non-starter with regulators. So this week Marcus sketched out a new vision for Libra -- one in which the Libra Association will shoulder significant responsibility for ensuring compliance with laws relating to money laundering, terrorist financing, and other financial crimes...
[T]here's a pretty fundamental tradeoff between network openness and effective enforcement of regulations governing payment networks. If the Libra Association doesn't have a way to enforce compliance by wallet providers, criminals are likely to flock to wallet services that don't strictly enforce the rules -- or to download open source wallet software and use non-custodial accounts. But if the Libra Association does have a mechanism for forcing compliance, that inherently raises the bar for entering the market and makes the Libra network look more like conventional financial networks -- with all the red tape that entails. This could be particularly harmful for marginalized people in developing countries, since developers in those markets will have the fewest resources to jump through regulatory hoops.
In Facebook's original vision, Libra would be an open and largely decentralized network, akin to Bitcoin. The core network would be beyond the reach of regulators. Regulatory compliance would be the responsibility of exchanges, wallets, and other services that are the "on ramps and off ramps" to the Libra ecosystem. Facebook now seems to recognize its original vision was a non-starter with regulators. So this week Marcus sketched out a new vision for Libra -- one in which the Libra Association will shoulder significant responsibility for ensuring compliance with laws relating to money laundering, terrorist financing, and other financial crimes...
[T]here's a pretty fundamental tradeoff between network openness and effective enforcement of regulations governing payment networks. If the Libra Association doesn't have a way to enforce compliance by wallet providers, criminals are likely to flock to wallet services that don't strictly enforce the rules -- or to download open source wallet software and use non-custodial accounts. But if the Libra Association does have a mechanism for forcing compliance, that inherently raises the bar for entering the market and makes the Libra network look more like conventional financial networks -- with all the red tape that entails. This could be particularly harmful for marginalized people in developing countries, since developers in those markets will have the fewest resources to jump through regulatory hoops.
The question is... (Score:5, Insightful)
Re: (Score:2)
"... do we really believe anything Facebook tells governmental committees anymore? It is going to take a while before Facebook earns back the trust they lost."
I don't think there's enough time left in the universe.
Re: (Score:2)
Why "anymore"? Have they ever told the truth on anything where they could get some benefits from lying? Would surprise me.
I'm starting to think this was a distraction (Score:3, Insightful)
Re: I'm starting to think this was a distraction (Score:2)
That is the most cogent argument for Libra I'd heard.
I had been going with the theory that Facebook expected to be able to throw its weight around and avoid playing by the rules. Or grossly incompetent people not understanding the rules.
But this one is much better.
Re: I'm starting to think this was a distraction (Score:1)
This is how... (Score:2)
Doesn't work that way (Score:5, Interesting)
> They're trying to create a corporately controlled central bank. Currently they have some accountability for their debt obligations, which keeps their spending in check. Once they can print globally recognized money they will fund whatever the fuck they want
Several governments have tried that "print a bunch of money to fund things" idea. Most recently Venezuela, but going back to 3rd century Rome. Austria 1914-1923, Bolivia repeatedly, Brazil, France, interwar Germany ...
It turns out, it does not work. Ever. Because as it happens, the law of supply and demand applies to currency. If you print 20% more currency, you get 20% inflation - the total value of the currency doesn't increase by printing more.
Re: Doesn't work that way (Score:3)
It absolutely works for the United States. There are limits, but the ability to print your own global reserve currency is what makes America the top dog in the world.
How to not create a reserve currency (Score:2)
> the ability to print your own global reserve currency is what makes America the top dog in the world.
How do you figure one would cause a currency to become a reserve currency?
For those readers unfamiliar with the term, a reserve currency is money that other countries will hold as their financial reserves, because they know that particular currency is safe - it will more or less retain its value over
time.
If you're hoping to convince other countries to use your money as a reserve currency, you ha
Re: How to not create a reserve currency (Score:2)
America is more Terminator than Walker Texas Ranger. Our military strength directly derives from our economic strength.
Note that Bretton Woods system was pushed through with economic pressure, not military.
Somewhat interchangeable, you can buy military or (Score:2)
> Our military strength directly derives from our economic strength.
Yes, and they feed each other AFTER you get past a certain point. Note they are somewhat interchangeable - a government can spend on military or not. The US, under the policies in place 1942-1990, had enough economic strength to spare resources for military spending.
In a dangerous world, you want to be friends with either Walker Texas Ranger or Terminator. No need to make a moral judgement in order to recognize that it's good to have po
Re: (Score:3)
Several governments have tried that "print a bunch of money to fund things" idea ... It turns out, it does not work. Ever. Because as it happens, the law of supply and demand applies to currency. If you print 20% more currency, you get 20% inflation
It's convenient that you use that figure, as that happens to be roughly the amount of money, in relation to GDP, that both the Fed and the Bank of England created with their Quantitative Easing interventions over the last decade: about $3 trillion and £75 billion respectively.
Were your assertion the whole story I would wonder why central banks bothered with interest rate changes, their 'go to' lever for setting the rate of inflation, over that period.
I would also note that, for the UK at least, only 3
Read your question very carefully (Score:2)
Let's take some time to think about what you. Just said, because you answered your own question.
I said:
>> Creating excess money increases inflation
> Were your assertion the whole story I would wonder why central banks bothered with interest rate changes, their 'go to' lever for setting the rate of inflation
So assuming that easy money increases inflation, you're wondering why central banks use easy money to effect inflation?
> The rest was created by privately owned banks. A similar situation exis
Re: (Score:2)
I said:
>> Creating excess money increases inflation
Actually you said 'creating money creates inflation'
So assuming that easy money increases inflation...
Well, this is your contention, but nothing you've said actually demonstrates this as an immutable economic law...
... you're wondering why central banks use easy money to effect inflation?
No. I was talking about interest rates, as set by central banks. You're still talking about money supply. The two are not the same thing.
The government and fed decide how much is created, by way of setting reserve requirements. In other words, the Federal Reserve tells the banks how many dollars they can create via fractional banking. The banks are just the grunt workers carrying out the decisions of the Fed.
In a sense you're right, but the reality is rather more complicated. Certainly reserve requirements do, in theory, tell the banks how many dollars they can create, this is the entire basis of fractional reserv
Re: (Score:2)
I see, you're one of those. Someone who learned a lot - from conspiracy theory web sites. It's a shame, because you're smart and you put in a lot of time learning. What a waste to spend all the time and brainpower learning essentially pseudo-science.
Here is a hint - whether dollars are handed out on printed paper or as entries in an account database, it's the same - more dollars. A computerized loan (to the bank) at roughly 0% interest is handing out money just as much as delivering a truck load of cash
Re: (Score:2)
I see, you're one of those. Someone who learned a lot - from conspiracy theory web sites. It's a shame, because you're smart and you put in a lot of time learning. What a waste to spend all the time and brainpower learning essentially pseudo-science.
Um... Thanks for the backhanded compliment, at least.
Here is a hint - whether dollars are handed out on printed paper or as entries in an account database, it's the same - more dollars. A computerized loan (to the bank) at roughly 0% interest is handing out money just as much as delivering a truck load of cash is.
I'm not sure why you feel the need to state the bleeding obvious in response to a post that clearly doesn't state the opposite. It's like you're seeing the words I wrote, and yet reading something completely different. I'm reminded of the studies demonstrating that one's ideological standpoint actually causes one to see things that didn't actually happen.
Easy money is easy money, whether you measure it in the interest rate charged by the fed, or by the total number of dollars in circulation. Two measurements of the same thing.
Allow me to quote Wikipedia [wikipedia.org]:"Monetary policy is referred to as being either expansionary or contractio
Subtract economic growth and viola (Score:2)
Wanna see a cool trick? Subtract economic growth rate from the monetary growth rate and voila - a straight line. More or less. Because inflation over the medium term will be equal to the excess money supply - increasing the money supply in order to fund expenditures.
It's really not complicated. The dollars are with X amount. They are worth the same amount no matter how the are divided up, how many bills are printed. Obviously prices don't change instantly, or even with 24 hours; in the medium term prices
Re: (Score:2)
Don't attribute to malice what can be attributed to straightforward avarice, they just want to make money from the advertising potential of your buying habits. With the same low cost regulatory system the world has allowed other cryptocurrencies.
Now they are being effectively forced to set up an entire paypal competitor instead to get at your transactions, which is a lot more costly.
Time to fork to Libra ZV (Score:2)
No company can start another Bitcoin (Score:2)
Ironically, Libra shows us the true value of Bitcoin.
Anything like Libra that is a product of, or controlled by a company is inherently beholden to governments that can impose rules or fines on the business if the "currency" gets out of hand. Libra is basically stillborn precisely because of this, with every government on earth deathly afraid of a bitcoin controlled by Facebook and so they will kill it before it begins.
Bitcoin is as free as anything can be - governments can and will try to regulate it but
Yes, just anonymous enough (Score:2)
My problem with bitcoin is the difficulty in making truly anonymous transactions.
Yes that is true, for most people the permanent record of the blockchain means purchases can be easily tracked back to them if they are using something like Coinbase. But for those willing to go with more primitive methods of managing a bitcoin wallet, you can still find some anonymity, enough anyway that unless you warrant serious scrutiny no-one is going to bother putting in the work to figure out who you are.
To me that's ni
Re: No company can start another Bitcoin (Score:2)
Nothing's perfect, but if you run your own full node (the Bitcoin Core desktop software), and do a Coin Join (essentially grouping your transactions with those of others to generate enough ambiguity about source and destination to thwart heuristic analysis), you're getting pretty close to anonymous.
It won't save you from the NSA if you're funding terrorism, but it will provide enough fuzz to make the info inadmissable or useless in court, and your blockchain-savvy spouse will not be able to track your payme
Re: (Score:2)
If the US and/or the EU tomorrow cuts off exchanges from credit card and banking transactions bitcoin is kill.
The interaction between electronic banking in real currencies and exchanges is essential.
Can still carry on (Score:2)
If the US and/or the EU tomorrow cuts off exchanges from credit card and banking transactions bitcoin is kill.
That would drop the value for sure but bitcoin can still carry on via local cash transactions between holders.
However too man big players are in bitcoin for what you are saying to realistically occur. Sometimes it's nice having slightly corrupt governments.
Re: (Score:1)
Anything like Libra that is a product of, or controlled by a company is inherently beholden to governments that can impose rules or fines on the business if the "currency" gets out of hand.
And anything that is not centralized, is inherently volatile due to the unpredictability of the mob mentality determining its value. Pick your poison.
Most financial services used by average Americans are highly regulated, because people generally aren't fond of getting screwed out of their money. It's very likely Facebook is being muscled out of creating their own stablecoin [wikipedia.org] by existing big banks who have told their congress critters to play ball.
David Marcus? (Score:2)
I thought he already died in the future...
Whats the point (Score:2)
If it must have all the same regulations and laws as original currency then it is simply another PayPal or Venmo. Absolutely no reason for a consumer to use it over one of the others. And actually a huge negative with privacy and data tracking. Therefore it will never go anywhere. It will probably not fail because of FB huge influence, but if they make it the de facto standard in FB for paying, regulators will step in, so they canâ(TM)t even do that.
Re: (Score:1)
If it must have all the same regulations and laws as original currency then it is simply another PayPal or Venmo.
It's likely it would have lower or no transaction fees, since Facebook's primary business is social media and not a payment processor. Kinda like how Google gives away Android because they're actually an advertising company.
Most people aren't concerned about the privacy implications, because who really cares if Facebook knows you sold your old iPhone to some dude in the marketplace section? We're not all trying to buy contraband, pay ransoms, fund a hate speech blog, or whatever it is people need anonymou
It's Ripple for the poors (Score:2)
This all sounds like a hail mary attempt by Facebook to figure out a new business model before their current one collapses.
At this point, Libra does nothing not already done by Ripple with XRP. The only difference is Ripple is targeting banks as customers and Facebook is targeting third world poor people.
Only now, it looks like that won't work, so what? Pivot to become a shitty also-ran behind Ripple and the real trans-national cryptocurrencies?
Re: (Score:2, Funny)
Re: (Score:1)
Wait a minute... (Score:2)
So... Is Facebook really the puppetmaster behind Libra or not? They went to great lengths to try to convince us that Libra governance was largely independent of Facebook, but at a snap of their fingers, they certainly seem to be capable of shifting its design direction. One would think this has to dispel any notion about a significant separation between the two - not that many of us believed that to start with.
Re: (Score:2)
International money transfer is expensive, cryptocurrencies can do it cheaper because they are allowed to avoid a ton of regulations but the ease of use and security leaves something to be desired.
If facebook could do it as cheap as cryptocurrencies, but with better ease of use and better security (ie. some centralized ability to hold transactions in escrow and reverse them) then for some people giving up some privacy might make it worth it.
Privacy for money can be a fair trade.
Facebook is toxic to humanity (Score:2)
Everyone knew the bit about decentralizing in 5 years was never going to happen.
What I find bizarre about this is Libra isn't even a cryptocurrency. There is no scarce resource to mine. All they are doing is building a currency and network to facilitate financial transactions. There is no actual need to have your own currency to simply create a platform for exchanging money.
What is particularly clever about Facebook is that not only are they using cryptocurrency/blockchain buzzwords as cover for somethin
Re: (Score:1)
They are going to the hill to push the idea they are the responsible "cryptocurrency" and all of these other cryptocurrencies are bad because they can't be controlled by someone like Facebook. Same as any well positioned player seeking government assistance to help them obliterate their competition.
What fictional reality are you living in where decentralized cryptocurrency is a real competitor to actual payment processors?
Take the largest marketplaces for selling things online and... oops, they don't even allow you to pay using crypto. Okay, scratch that, let's go with local trading on Craigslist/OfferUp/Facebook Marketplace. Chances are, the person interested in buying the thing you're selling or vise versa, has no idea what cryptocurrency is, or they've heard of it but have no idea how to use it.