
Under pressure from regulators, Facebook is rethinking Libra's design - jackalo
https://arstechnica.com/tech-policy/2019/07/facebook-is-backpedaling-from-its-ambitious-vision-for-libra/
======
Animats
Maybe that's what Facebook wanted. I can see it going like this:

"OK, Zuckerberg wants us to come up with a payment system that can dominate
payments the way WeChat/WePay does in China. How do we do that?"

"The banking system and the credit card companies are going to fight us. How
do we bypass them?"

"Bitcoin? That bypasses the banking system."

"We wouldn't be in control. Our own crypto coin, maybe?"

"OK, let's brainstorm that a bit."

"So we have our own coin, and we issue it. What happens?"

"Probably it doesn't get used much outside Facebook in-app purchases, like
Microsoft's old tokens."

"Apple Pay and Google Pay never really got scale."

"We're not the first mover here. We need something that pulls in some big
financial players."

"What if we open it up more, so we head a consortium that issues our tokens".

"Who can we get? Visa would be great."

"Yeah, we need somebody who's already in the payment system."

"The important thing is that you pay through Facebook, and we get a cut."

"Right, that gives us a controlling position, like WeChat has."

"OK, that's the basic concept. How do we make it work?"

"Who stands behind the token? What backs it."

"We set up some organization that holds the value that backs it."

"You mean like E-Gold did?"

"Shut up."

"We don't need to steal the backing. Just keep the profits from investing it."

"That works."

"OK, what about compliance?"

"If we make it too open, anti money laundering won't work."

"If we make it too closed, we won't be able to get the banking people on
board."

"Hmm. How about this. We start out claiming it's really open. Then the
regulators get upset, because it looks un-regulatable, like Bitcoin. So we
change the plan. We tighten up our control, and collect lots more data about
users, to make the regulators happy."

"Collecting lots more data about users. I like that part."

"OK, looks like a plan."

~~~
Spivak
> "The important thing is that you pay through Facebook, and we get a cut."

> "Right, that gives us a controlling position, like WeChat has."

I feel like this is where the story gets a little lost from reality. If you
believe Facebook's own design documents they would have no more control than
any other member of the consortium. What Facebook has is the initial control
while it's being developed and the public mineshare that Facebook is leading
the project.

I wouldn't necessarily say that members of a payment processing consortium
taking a cut to process payments is inherently evil -- if if you think it is
at least no more evil than Visa or MasterCard.

~~~
Animats
_" Today we’re sharing plans for Calibra, a newly formed Facebook subsidiary
whose goal is to provide financial services that will let people access and
participate in the Libra network. The first product Calibra will introduce is
a digital wallet for Libra, a new global currency powered by blockchain
technology. The wallet will be available in Messenger, WhatsApp and as a
standalone app — and we expect to launch in 2020."_[1]

Facebook controls the consumer-facing side, the "wallet". Other people get to
deal with the merchant side.

[1] [https://newsroom.fb.com/news/2019/06/coming-
in-2020-calibra/](https://newsroom.fb.com/news/2019/06/coming-
in-2020-calibra/)

~~~
Spivak
Facebook controls one implementation of a consumer wallet -- you don't think
everyone in the consortium is going to want a piece of that pie? That Visa --
the people who would brand air if they could -- wont want their name on a
wallet product?

~~~
Animats
Visa might have a wallet. But it won't be the one that you reach from Facebook
posts and ads.

------
the_pwner224
So a Libra wallet will be no different than an international 0%-interest
checking account, with transaction fees. Seems like FB could have just
announced that to avoid being slaughtered by every news outlet and regulator.

They've already shifted their plan by a huge amount from decentralization to
centralization and succumbed to the power of governments. No reason to believe
it will not continue to happen in the future.

Party's over, goodnight, go home. Maybe Western Union will lose some profits
though.

Though I do wonder how rules for international (country A => country B, or
country C => country C, where C != the US) transactions will be applied. Since
FB is a US company does that mean every single Libra user will be subject to
US restrictions - even those which are legal in their country? Will Iranians
be able to use Libra? What about Canadians using it to buy marijuana?

They said they will vet the people allowed to mine / process transactions on
the network, so it seems like FB could easily be required to shut down a miner
if the US government says they're doing money laundering or allowing people in
Iran to buy medical supplies or allowing Canadians to buy weed or assisting
with other illegal activities.

I'm sure banks have already dealt with this problem extensively. Libra seems
like a very non-innovative solution - just another bank, by Facebook this
time.

~~~
PeterisP
That's probably inevitable - just as you can't have your cake and eat it too,
you can't have a payment network that's freely usable by major companies who
do business in USA and also by those under USA sanctions such as Iranians.

If a system is truly permissionless and decentralized so that everyone who's
willing can technically participate without restrictions, then all first world
companies will be prohibited to do commerce in that system (unless it's for
trivial amounts or they do their own KYC/customer analysis to implement the
restrictions), and if some system is going to be implemented by first world
companies, then they'll be required to ensure that it's not truly
permissionless and can keep certain actors out of it.

~~~
A4ET8a8uTh0
You are absolutely correct about first world companies. What about non first
world? Truly open systems do not seem to pop up anywhere though. I personally
think that a critical mass could be achieved beyond which governments would be
hard presses to flex its muscles.

------
phlip9
Did we watch the same hearing? David Marcus was pretty explicit about wallets
and exchanges (i.e. on/off-ramps) being regulated but never mentioned (rather
successfully dodged questions about) the Association facilitating on-chain AML
and instead pointed out that law enforcement could do their own on-chain
analysis.

To be honest, the whole money laundering point is so overblown anyway. For
comparison, Bitcoin's transaction history is totally transparent and fairly
simple to run basic clustering and taint analysis algorithms for
deanonymization. People trying to avoid AML need perfect OPSEC and extreme
discipline not to recombine change outputs. In Libra the privacy is even
worse, since it uses an account-based model. I greatly suspect that it is
easier to avoid AML in our existing system than it would be in a Libra world.

FWIW, if you're trying to avoid AML today, then you should use ZCash or
Monero. Both have cryptographic privacy that hides both the amount and
sender+receiver.

------
Barrin92
What I don't get about this is why this entire blockchain and foundation thing
was part of Libra to begin with. They could have gone with a plain database
and copied WePay or somehting and they wouldn't have the headache of fighting
with regulators over illicit use of the network and rogue wallets.

~~~
opportune
They want to pretend that it's not a banking service

~~~
Spivak
I mean it certainly doesn't look like a banking service any more than my
matress stuffed with cash looks like one.

There could certainly be banks that hold your Libra but I don't think it's
fair to say that the Libra network itself is a bank.

------
infruset
We get a spectacular view of what would have happened had Satoshi tried to
create Bitcoin through official channels.

~~~
torified
This is so different to bitcoin. It's a centralized service. There's no reason
for them to not just use an SQL database instead of a completely neutered
blockchain. The whole point of bitcoin was to avoid that centralization.

I know you probably know that, but we need to nip in the bud any suggestion of
anonymity because cryptocoin.

"At the core, we believe that a network that helps move more cash transactions
— where a lot of illicit activities happen — to a digital network that
features regulated on and off ramps with proper know-your-customer (KYC)
practices, combined with the ability for law enforcement and regulators to
conduct their own analysis of on-chain activity, will be a big opportunity to
increase the efficacy of financial crimes monitoring and enforcement"

------
ilaksh
It was never actually going to be decentralized. You could tell because there
was no way their design could actually handle that without a total rewrite. It
never was an actual cryptocurrency from a technical standpoint.

What it's going to be is a payment system in WhatsApp that pretends to be a
cryptocurrency but is really just an attempt to limit the popularity of
Bitcoin, Ethereum and other real cryptocurrencies.

I mean, there are plenty of people who believe the government should be able
to track and intervene in all transactions at all times. I am not one of those
people and that's why I support the existence of real cash and real digital
cash (cryptocurrency).

~~~
simonebrunozzi
I completely disagree.

Nothing in the design prevented the system from shifting to a staking
mechanism, or some other form of decentralized governance.

Edit: to be clear, I have other issues with the proposed design, and I am also
skeptical about FB's intention.

------
clamprecht
Here's my litmus test: If you want to see how free Libra is, try donating to
Wikileaks using it.

------
Lucadg
Or maybe this shift was planned from the beginning.

They couldn't possibly expect any other reaction from regulators.

I think they're planning a long game.

Bottom line: they are more powerful than many governments and probably think a
currency is their right.

------
civicsquid
This sounds like good news.

While there is always the argument that innovation is stifled by regulation,
sometimes you do actually need regulators and experts to step in and point out
where issues may lie. With a system like Libra, this seems like one of those
times.

------
MaupitiBlue
Dipshits.

They should have moved fast with a sensible crypto and dealt with a divided
Congress and regulators later. They’ve blown their chance to be the bank of
the internet.

