
Facebook’s Cryptocurrency: Stop It Before It Starts - smacktoward
https://www.lawfareblog.com/facebooks-cryptocurrency-stop-it-it-starts
======
camjohnson26
People who think the government should have the technological power to decide
who pays who in the world need to ask themselves this. Do you think that there
should be a hardware filter on all internet fiber cables that allows the
government to filter that traffic?

Banning cryptocurrencies because they physically allow money laundering is as
logically indefensible as banning internet fibers because they physically
allow illegal content. The solution is to make the transactions illegal but
physically possible. I’ve seen no reasonable people saying that all
transactions should be legal, but I’ve seen a lot of people here saying that
technology which allows illegal transactions should be banned. This is mind
boggling to me and seems like a dangerous precedent.

After all cash physically allows money laundering, should we ban cash?
Cryptocurrencies are baby technologies, why would we make innovating on them
illegal before we even know what they’re capable of?

~~~
Mengkudulangsat
I foresee money laundering eventually getting decriminalized, much like drugs
are right now. The pretext of the offence always felt strange to me.

If I robbed a bank, did a getaway drive but got caught afterwards, I expect to
be charged with robbery, not driving.

~~~
tim333
The trend seems the other way if anything, that its being more clamped down
on.

If you rob a bank and make off with $10m in banknotes the kind of offence
would be your lawyer certifying it came from honest sources and letting you
buy a mansion with it.

The argument for criminalising it is the lawyer would be assisting in your
operation and effectively encouraging you to rob more banks which is not
victimless in the way smoking a joint may be.

~~~
tenpies
Yes, the desired outcome by the governments seems to be:

> You rob a bank and make off with $10 MM in bank notes

> They strike those bank notes' serials from a central database and you are
> now holding a duffel bag of paper.

Fiat currency is just make belief paper. It's backed by nothing but hopes and
dreams at this point, so the actual paper you hold is really just a
manifestation of that. It has no inherent value beyond what the government
says it's worth.

If we move to centralized ledgers it becomes even easier for them to decide
which transactions are legitimate and which are not. Of course this then
extends to:

> You tried to give $5 to a government critic's podcast

> The transaction was flagged as illegitimate and cancelled. Your $5 was
> returned to you.

~~~
Gibbon1
US Fiat currency is backed by nuclear weapons.

------
55555
You all need to read the following excerpt from Matt Levine's thoughts on
Libra:

> So, first, Libra will be a “stablecoin,” in the sense that its value will be
> pinned to conventional financial assets. Unlike most stablecoins, though, it
> will be pinned to a basket “of low-volatility assets, including bank
> deposits and government securities” in different currencies, so it won’t
> consistently be worth one dollar or one euro or anything else. “As the value
> of Libra will be effectively linked to a basket of fiat currencies, from the
> point of view of any specific currency, there will be fluctuations in the
> value of Libra.”

> This strikes me as very annoying, but it has some obvious advantages for
> Facebook/Libra. For one thing, they’ll only need to manage one general
> Libra, rather than having different stablecoins corresponding to different
> national currencies. For another thing, if Libra gains widespread
> acceptance, its lack of one-to-one correspondence will give it a tendency to
> displace national currencies. If you mostly spend dollars, and Libra is
> always going up and down against the dollar, that will be annoying and you
> won’t want as many Libras. But if you mostly spend Libras—if Facebook is
> successful at making this the main currency of the internet—then that
> dynamic will reverse. If the dollar is always going up and down against the
> Libra, that will be annoying and you’ll want more Libras. The dollar will
> start to seem unstable and useless. If you buy most things online, and if
> everything online is priced in Libras, then you’ll end up living your life
> denominated in Libras, and only converting your Libras into dollars on your
> occasional touristic visits to the physical world.[4] The goal is for Libra
> to be more useful than any national currency, accepted in more places and
> with fewer complications; pegging it to a single national currency would
> only hold it back.

~~~
treis
>The dollar will start to seem unstable and useless. If you buy most things
online, and if everything online is priced in Libras, then you’ll end up
living your life denominated in Libras, and only converting your Libras into
dollars on your occasional touristic visits to the physical world.[4]

This is so off the mark. Governments require taxes to be paid in their
currency. So at minimum 30-50%, depending on the country, of all economic
activity is guaranteed to take place in the local currency. Second, if the
Libra fluctuates wildly with the local currency little will be priced in it.
You don't want to sign a contract that could befome 20% more expensive because
of a currency swing.

~~~
cujic9
Ohio Becomes First US State to Allow Taxes to Be Paid in Bitcoin

[https://www.coindesk.com/ohio-becomes-first-us-state-to-
allo...](https://www.coindesk.com/ohio-becomes-first-us-state-to-allow-taxes-
to-be-paid-in-bitcoin)

~~~
treis
>which will convert bitcoins to dollars for the Treasurer’s office

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ThrustVectoring
Cryptocurrency has a pretty big problem: "dollars, but without US Government
oversight" is _exactly_ what money launderers and other financial criminals
want to have. The closer any cryptocurrency gets to being this, the more
illegal activity it will facilitate and the more risk the project takes on of
getting the entire operation seized and the principals arrested and extradited
to the US (see also: Liberty Reserve).

~~~
darawk
You could equally say "Speech, but without US government oversight, is
_exactly_ what the pedophiles and terrorists want to have".

~~~
ThrustVectoring
True. I'm not making a moral judgement here - merely stating that flouting
anti-money-laundering laws and facilitating financial crimes has severe legal
risks.

I'm honestly not even worried that Facebook is going to flout AML laws. I'm
more worried that they'll use the fact that they're using newfangled
technology and the political and economic weight of their crypto consortium to
get favorable legislation passed. And then, because of said crypto features,
we'll end up undermining laws that fight money laundering and other financial
crimes.

~~~
weddpros
"undermining laws that fight money laundering and other financial crimes": do
these actually work? 5% of the time? 95%?

------
plankers
>It is not live yet, giving governments the opportunity to kill this project
before it actually gets off the ground and gives rise to cybercriminals that
couldn’t capitalize on existing cryptocurrencies.

Excuse me, I need a minute to stop laughing... Ahem, alright. In what world
are criminals going to prefer using a cryptocurrency overseen by Facebook
(however directly or indirectly) to using coins like Monero or Zcash, which
have been built with privacy-enhancing feautures? And who are these criminals
who couldn't figure out how to use these coins who are suddenly going to be
enabled by this new blockchain?

I should have stopped reading there, this guy has no idea what he's talking
about.

~~~
jddj
The ability of criminals to capitalise also depends on the people being
exploited, no?

When the proverbial Nigerian Prince's legal fees are denominated in Monero
there's a much higher barrier to entry for the average scammee. One could see
this lowering significantly with the adoption of Libras.

Although to me it also seems possible that in the face of government KYC-style
opposition, Facebook will use their Libra to advance their Real Name policy,
bringing them one step closer to being the true 1:1 online representation of a
person, essential for more and more services and tracked in higher and higher
fidelity.

------
jameslevy
"But since Libra pegged is to a basket of currencies, it is not actually
stable."

A weighted basket of the top 5 currencies by market capitalization should be
more stable than the dollar.

The point about taxable income is true, although if I would rather pay tax on
income I made from Libra than not had earned the income at all. Unless the
dollar crashes hard I wouldn't expect this to be a meaningful amount of
income.

~~~
berns
> Nobody wants to receive $10 from a friend only to have it turn into $9.80.

The author thinks that the USD is the unmovable absolute and it's everything
else that changes in relation to it.

~~~
aaronharnly
I think the point is more profound than that — for all the reasons that local
currencies are useful (and the flowering of many cryptocurrencies has
happened), one’s local national currency is itself an incredibly useful thing
to have. If your friend is in the same country or currency zone as you, which
statistically they are very likely to be, a national stablecoin is more useful
than one that drifts.

(Conversely, for international remittances, an international basket stablecoin
might indeed be a useful thing to have!)

------
fnord77
> Fortunately for the rest of the world, Libra may well fail. People prefer
> assets that hold their value relative to either the local currency or, in an
> unstable situation, dollars or euros. Nobody wants to receive $10 from a
> friend only to have it turn into $9.80. But since Libra pegged is to a
> basket of currencies, it is not actually stable. Like other
> cryptocurrencies, every Libra transaction thus involves exchange rate risk,
> and the only way Libra can succeed is if Facebook makes a concerted effort
> to force its adoption.

~~~
solveit
>the only way Libra can succeed is if Facebook makes a concerted effort to
force its adoption.

But... Facebook obviously will?

------
kkempster
I wish people would proofread their articles. How can you not notice a glaring
error in your first paragraph? "the coin really a Facebook project." Geez.
Just take a minute and review.

------
mevile
Facebook doesn't have anyone but themselves to blame for poor reactions to
Libra. I think it's a cool idea with interesting tech and I'm interested to
see what happens with it. I want to be optimistic, but I am not surprised at
the backlash.

~~~
buboard
facebook couldn't possibly do anything that wouldn't be painted in a bad light
in the current year. They could literally shut down their site and the world
would be up in arms that they cut their access to their audiences. It's a
moral panic, it will pass.

------
malandrew
Government should have no involvement in stopping a technological product
because it might be used for something illegal. The creators are just
producing a tool. The government should have no business stopping creators or
interfering in any way because they aren't committing any illegal acts.

------
vincentli2010
reads like a sample SAT essay

------
unicornherder
Crypto just seems to be an endless lesson of people realizing why regulations
exist.

------
verdverm
Poorly written and argued, while I agree with the title, the rest is garbage
by someone who should not be talking about this

~~~
chris_wot
What precisely have they gotten wrong? From my point of view, the article
looks spot on.

~~~
IAmEveryone
The article’s objection is probably relevant, but not necessarily the most
important. It’s almost guaranteed that this con (edit: “coin” was intended,
but “con” works even better) will end up governed by existing KYC laws, just
as has happened with BTC.

The more interesting objection is about Facebook “disrupting” not the payment
processing business, but the international monetary system (national banks
etc.). There is ample reason to be concerned about this possibility, most
prominently the fundamental idea that this system should be governed
_democratically_ , and not by industry, and certainly not by Facebook. Bitcoin
was bad enough, with your power correlated with your wealth like a dark age’s
feudal system. Restricting control further to a Silicon Valley Oligarchy is
just dystopian.

The article may have ignored this line of argumentation because the system as
it is currently planned just doesn’t really do anything to that effect: it
uses existing currencies as the backend, does not (yet) involve any of the
usual mechanisms of monetary policy (policy-based control of currency creation
etc.).

Bloomberg’s Matt Levine had a long article on this yesterday, including a
discussion how the basket-of-currencies backing might be a play to actually
compete with these existing currencies.

