House lawmakers ask Facebook to put Libra cryptocurrency project on hold(theverge.com)
theverge.com
House lawmakers ask Facebook to put Libra cryptocurrency project on hold
https://www.theverge.com/2019/7/2/20680230/facebook-libra-calibra-crypto-maxine-waters-congress-regulation-investigation-halt
81 comments
This might depend on what you consider a “regular bank” but every bank and exchange I’ve ever come into contact with requires documentation and vetting to ensure that I am who I say I am and that I’m not not laundering money, and if the police come with a warrant they get everything they ask for.
I think you might be thinking of specific banks and shell company schemes in Panama and not what most people would describe as a regular bank.
I think you might be thinking of specific banks and shell company schemes in Panama and not what most people would describe as a regular bank.
Bank Secrecy Act (BSA) and Know Your Customer (KYC). I'm going out on a limb to say that most tech companies have no idea what BSA or KYC means and the paperwork involved.
Facebook Payments Inc is a state licensed Money Transmitter in all states, and is registered with FinCEN as a Money Services Business so they would certainly understand the requirements as they're subject to audits by State regulators.
Source: https://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPAN...; https://www.fincen.gov/msb-registrant-search
Source: https://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPAN...; https://www.fincen.gov/msb-registrant-search
As someone who works for Google (opinions are my own) on the payments team, I disagree. :)
Due to P2P, and disbursements we do for Play developers and AdSense, we are heavily invested in KYC. And we have to comply with the regulations of all countries we do business in, not just the US.
Due to P2P, and disbursements we do for Play developers and AdSense, we are heavily invested in KYC. And we have to comply with the regulations of all countries we do business in, not just the US.
Just curious, do you have to deal with OFAC controls?
U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the United States, all U.S. incorporated entities and their foreign branches.
Source: https://www.treasury.gov/resource-center/faqs/Sanctions/Page...
Source: https://www.treasury.gov/resource-center/faqs/Sanctions/Page...
Facebook already knows more about you than KYC requires.
That said, according to Forbes (https://www.forbes.com/sites/francescoppola/2019/06/30/the-r...), they'll comply with KYC/AML. I can't find a statement direct from Facebook on that, though.
That said, according to Forbes (https://www.forbes.com/sites/francescoppola/2019/06/30/the-r...), they'll comply with KYC/AML. I can't find a statement direct from Facebook on that, though.
Facebook only knows what I put into my Facebook registration form. Did they verify anything? No. Email me for government identification? No.
Can Facebook comply with KYC/AML type regulations? Yes. But that I'm aware of, they currently don't do anything of the sort with all their users.
Can Facebook comply with KYC/AML type regulations? Yes. But that I'm aware of, they currently don't do anything of the sort with all their users.
They know what you put in the registration form, every device and IP address you've ever used, who your friends are, who you parents are, who your coworkers are, what websites you visit, what stores you shop at, who you're likely to vote for, and a whole lot more.
I think they can verify my identity without a copy of my driver license.
I think they can verify my identity without a copy of my driver license.
If you are doing something illegal, I doubt you would connect with all your friends and family. If you do, you deserve jail time.
True. But I wouldn't be surprised to see additional verification required for new Facebook accounts (or those with little to no history/network) to use Libra. We shall see.
> and if the police come with a warrant they get everything they ask for.
Banks requiring warrants is exactly my point.
The Libra text makes no mention of any safeguards with regards to law enforcement. On the contrary.
Banks requiring warrants is exactly my point.
The Libra text makes no mention of any safeguards with regards to law enforcement. On the contrary.
Actually, a bank is obligated to report suspicious activity, no warrant is needed. If you walk into a bank in the USA and deposit irregular amounts of money or a large sum of cash, they can and will report you to the Treasury and banking regulators.
> Actually, a bank is obligated to report suspicious activity, no warrant is needed.
Warrants are issued all the time.
You're erroneously assuming that banks can detect all possible suspicious activity on their own.
Warrants are issued all the time.
You're erroneously assuming that banks can detect all possible suspicious activity on their own.
You're erroneously assuming that banks can detect all possible suspicious activity on their own
You're right, that's probably not possible to begin with.
However, if a bank spots patterns, which don't smell quite right they are obliged by law to report it to regulators.
Another reason why Deutsche is yet again in so much hot water[1]. Essentially they refused to report suspicious activities, which was flagged by a compliance officer.
[1] https://www.vanityfair.com/news/2019/06/donald-trump-deutsch...
You're right, that's probably not possible to begin with.
However, if a bank spots patterns, which don't smell quite right they are obliged by law to report it to regulators.
Another reason why Deutsche is yet again in so much hot water[1]. Essentially they refused to report suspicious activities, which was flagged by a compliance officer.
[1] https://www.vanityfair.com/news/2019/06/donald-trump-deutsch...
> This basically bypasses all privacy safeguards that clients would enjoy at a regular bank.
Once again a shift in technology is used to throw away old privacy safeguards and consumer rights and protections.
Once again a shift in technology is used to throw away old privacy safeguards and consumer rights and protections.
This gets it all wrong, IMHO.
An "official ask" rather than actual laws or regulations comes across as silly, self-serving and grandstanding -- although it is in Facebook's self-interest to work with Congress.
The problem here is the potential for uncompetitive dominance -- just like Google or Apple can unfairly favor their own products in Search or apps, what does it mean for Facebook to favor or only allow its own currency option in transactions/marketplace/etc.?
Far better would be Congress ensuring freedom of choice -- let Facebook develop its own currency, but make sure that anywhere it's provided as an option on Facebook/Instagram/etc. there's also an equivalently frictionless way to use Apple Pay, Google Pay, PayPal, MasterCard, etc.
Force payment methods and currencies to compete on a level playing field, instead of by which mega-company forces them as exclusive options.
An "official ask" rather than actual laws or regulations comes across as silly, self-serving and grandstanding -- although it is in Facebook's self-interest to work with Congress.
The problem here is the potential for uncompetitive dominance -- just like Google or Apple can unfairly favor their own products in Search or apps, what does it mean for Facebook to favor or only allow its own currency option in transactions/marketplace/etc.?
Far better would be Congress ensuring freedom of choice -- let Facebook develop its own currency, but make sure that anywhere it's provided as an option on Facebook/Instagram/etc. there's also an equivalently frictionless way to use Apple Pay, Google Pay, PayPal, MasterCard, etc.
Force payment methods and currencies to compete on a level playing field, instead of by which mega-company forces them as exclusive options.
> An "official ask" rather than actual laws or regulations comes across as silly, self-serving and grandstanding
Libra was announced extremely recently. Do you really expect lawmakers to push laws or regulations through the system that fast? Surely not.
If anything, an "official ask" like this is one of Congress' many tools.
Libra was announced extremely recently. Do you really expect lawmakers to push laws or regulations through the system that fast? Surely not.
If anything, an "official ask" like this is one of Congress' many tools.
>Do you really expect lawmakers to push laws or regulations through the system that fast? Surely not.
The GP's expectation aside, I don't want the government to be able to make laws that quickly. Knee jerk laws rarely work well.
The GP's expectation aside, I don't want the government to be able to make laws that quickly. Knee jerk laws rarely work well.
I think they are asking them to delay development so they can do proper investigation into possible effects before regulating
How will Libra cut into the US credit card processing margins? Stripe will charge small customers 2.9% + $0.30 per transaction, and I'm sure large customers get as low as 0.9%.
Does Libra stand to cannibalize that margin/business model over night?
Does Libra stand to cannibalize that margin/business model over night?
>“Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these risks and take action,” the letter says.
We're scared that you have the ability to disintermediate our control of the financial system just like you did to publishers.
We're scared that you have the ability to disintermediate our control of the financial system just like you did to publishers.
Forced to choose between Facebook and a government controlling anything, I'd rather have the government at the wheel. For me this is a "devil I know" type of thing.
Facebook does not have a licit right to first use of force. I'll take it any day over government.
With government, you also get periodic opportunities to vote on whether or not it should change course. It's hard to change a government's direction with the ballot box, of course, but it's not impossible.
Contrast this to Facebook, which is structured specifically to prevent even large shareholders from having a say in its operations. Facebook is the Empire of Zuck, and the only factor that matters in its decisionmaking are the whims of its boy king.
Contrast this to Facebook, which is structured specifically to prevent even large shareholders from having a say in its operations. Facebook is the Empire of Zuck, and the only factor that matters in its decisionmaking are the whims of its boy king.
I don’t think the interest of other large shareholders would be more aligned with the interest of the general population though.
I’m probably reading too much into your comment, but there’s a big difference between “a” government and “the” government depending on where you live. I don’t trust Facebook at all, but I trust them more than I trust certain governments around the world. At least they don’t have a military. Sometimes assholes without guns are better to have in charge than anyone with guns.
Facebook is just as much protected by people with guns as any government.
I don't think I'd hold the position I do if protecting was all that the guns were used for.
Sure, my point is not to defend governments use of guns, but to point out that facebook’s power derived from its relationship with governments and hence that same power. It isn’t an alternative, but rather a part of the structure.
Thankfully there's a third option of society itself controlling everything. This post is talking about whether government or Facebook controlling money but the third decentralized option of cryptocurrency is far more appealing to me.
"Society" is not a thing that can wield control. Or rather it can, by forming into things like governments and corporations. It is not parallel to those things, but their substrate.
I'm with you that seeing power concentrated in those places seems worse than spreading it out. But the way it looks to me now, people aren't going to generally mind their own bitcoin wallets, and will tend to use centralized brokers.
I think that's human nature, specifically some algorithm for operating in a group. If I don't feel confident doing X, maybe X is not my strong suit, and I should trade jobs with another person. If I mess up my crypto wallet, my money could almost literally disappear, so my confidence is low.
People are afraid to control their own destiny, and that's at least somewhat rational.
I'm with you that seeing power concentrated in those places seems worse than spreading it out. But the way it looks to me now, people aren't going to generally mind their own bitcoin wallets, and will tend to use centralized brokers.
I think that's human nature, specifically some algorithm for operating in a group. If I don't feel confident doing X, maybe X is not my strong suit, and I should trade jobs with another person. If I mess up my crypto wallet, my money could almost literally disappear, so my confidence is low.
People are afraid to control their own destiny, and that's at least somewhat rational.
After 2008, that's a very reasonable worry. I'm happy for the government to prevent behavior that can cause that much harm.
Pretty much.
That said, anyone in a position of power generally acts to defend their own power. It's not like we should not have expected this from the government. Bitcoin, Ethereum, whatever type kooks are one thing. Grandma and her book club are never going to use that stuff to buy pies at the church's bake sell. Facebook offering Libra or, God forbid, Walmart offering "Wally Bucks", is an entirely different matter.
That said, anyone in a position of power generally acts to defend their own power. It's not like we should not have expected this from the government. Bitcoin, Ethereum, whatever type kooks are one thing. Grandma and her book club are never going to use that stuff to buy pies at the church's bake sell. Facebook offering Libra or, God forbid, Walmart offering "Wally Bucks", is an entirely different matter.
Official Facebook summary of the past two weeks, responding to many criticisms: https://www.facebook.com/notes/david-marcus/libra-2-weeks-in...
Most amusing to me is the question "Can Facebook be trusted to manage financial services?" to which Facebook's own answer is not an emphatic "yes", but an explanation that they will not control it.
I don't see how the only reasonable response to such a stupid question amuses you. If they had responded with an emphatic yes they would have been crucified in the media immediately.
Not GP, but I find it amusing that anyone is even paying attention to facebook's response to the question. Of course they're going to give a muted, unemphatic yes (as you said), and the public seem to believe them and end all questioning there. Luckily the US government is not giving up so easily.
Link to the Full text and release here:
https://financialservices.house.gov/news/documentsingle.aspx...
PDF: https://financialservices.house.gov/uploadedfiles/07.02.2019...
PDF: https://financialservices.house.gov/uploadedfiles/07.02.2019...
Thanks. How does one cease a plan. Can imagine ceasing the implementation itself, but a plan ? Why don’t they just ask Mark to stop thinking for a while...
But it makes sense, they probably want to learn from tether first.
But it makes sense, they probably want to learn from tether first.
“These vulnerabilities could be exploited and obscured by bad actors, as other cryptocurrencies, exchanges, and wallets have been in the past.”
Says one bad actor to the other bad actor.
Says one bad actor to the other bad actor.
I really want to see what happens if Facebook says no.
It's not a law, it's a request. You just acquiesce without making any concrete commitments and carry on as if the request was never made.
It would not go well for Facebook. Their lawyers won't let them say no.
Zucks the boss tho. I'd like to see it too. And I don't even use Facebook.
Maybe Facebook doesn't say "no".
Maybe Facebook says "How about if we share all the data with your agents real time through an API."?
BTW Maxine, isn't your re-election coming up? We really like what you are doing in Washington here's a check for some signs.
(or something along these lines)
Maybe Facebook says "How about if we share all the data with your agents real time through an API."?
BTW Maxine, isn't your re-election coming up? We really like what you are doing in Washington here's a check for some signs.
(or something along these lines)
Years of market manipulation is fine as long as you're a federal agency with the backing of major banks. It's like the US complaining about Russia proxy wars and election interference - who do you think they learned those techniques from?
People here are talking like the government is trying to do something bad. If this were goldman sachs instead of facebook, we'd be cheering. The financial system is complex and having the wrong incentive systems (regulations) in place can lead to trememdous harm throughout the world. If you were working when the 2008 recession hit, you're familiar with the kinds of issues that financial regulation works to deter.
> People are talking like the government is trying to do something bad.
Based on 1 article you read
Based on 1 article you read
You missed an important word in your quotation.
Could the government effectively regulate/curtail libra by essentially telling Facebook's financial partners like Visa, Mastercard, PayPal, Stripe, etc that they risk losing their licenses by promoting/handling Libra?
In theory maybe, but I don’t think you’d find a politician willing to risk their reputation to pull the plug on Visa. Not only would it be a major blow to the economy but it would be a giant pain in the ass for their constituents. When’s the last time you went into a bank to take out cash? When’s the last time you had cash in your wallet at all?
Visa wouldn’t be the biggest loser in that scenario, the politicians/regulators would.
Visa wouldn’t be the biggest loser in that scenario, the politicians/regulators would.
They don't have to go that extreme, they could just tax Libra coins like securities. That would create a huge burden on their use as currency in the US.
Think of how much personal data Facebook could gather on you if it knows 'EVERYTHING' you purchase or at least a huge part of what you purchase.
They've already been busted selling personal data under the radar to third parties.
It's less 'omg control of the financial system' and more 'you're not exactly the exemplar of trust with peoples personal data'
I'm all for crypto making the lame financial system we currently have obsolete but I don't know if Facebook are the most trustworthy people to do it.
They've already been busted selling personal data under the radar to third parties.
It's less 'omg control of the financial system' and more 'you're not exactly the exemplar of trust with peoples personal data'
I'm all for crypto making the lame financial system we currently have obsolete but I don't know if Facebook are the most trustworthy people to do it.
Please read the Libra whitepapers and organizational notes. You don't need a Facebook account to use it and they wouldn't have control of the personal data on your spending...
Imo, Facebook released its plans in the last minute, so that it can have time to launch before regulator catches up. The later they catch up, the more likely Facebook is going to dominate the market and become harder to roll back the currency.
Facebook is probably aware of government regulators looking to control it more and certainly anxious about voices looking to break it. The Libra coin being established as a pseudonymous crypto-currency in Switzerland will give it some time to figure stuff out.
Facebook is probably aware of government regulators looking to control it more and certainly anxious about voices looking to break it. The Libra coin being established as a pseudonymous crypto-currency in Switzerland will give it some time to figure stuff out.
How is a year ahead of launch "last minute"?
This is not surprising. The minute Libra starts operating it becomes the main money laundering tool in the world. Depending on how it's implemented it could easily topple the economies of smaller countries, and significantly increase funding for terrorist organizations and garden variety criminals.
I don't see how any government, and especially the US government, agrees to any of that anytime soon.
I don't see how any government, and especially the US government, agrees to any of that anytime soon.
How will it become a main money laundering or terrorist tool? Can you elaborate?
A launderer or terrorist (actually ANYBODY - good or bad) would have to be the biggest fucking idiot to use Libra and expect the transaction to be anonymous or private.
I sincerely hope you were just whipping out the typical ML/T FUD and don't believe that yourself.
A launderer or terrorist (actually ANYBODY - good or bad) would have to be the biggest fucking idiot to use Libra and expect the transaction to be anonymous or private.
I sincerely hope you were just whipping out the typical ML/T FUD and don't believe that yourself.
What does libra do for money laundering that other currencies like zcash and nano don't already do much better?
Guessing here, but potentially allow you to actually mix fraudulent funds into real (or seemingly real) transactions? Assuming people actual use Libra to buy stuff. To use a Breaking Bad example, the car wash cashier says 100 people paid $30 each for a car wash (and generates receipts for those) when only 10 cars actually showed up.
Zcash is great for anonymously moving money, but you can still trace the inputs and outputs since you ultimately need fiat to buy weapons and such.
Zcash is great for anonymously moving money, but you can still trace the inputs and outputs since you ultimately need fiat to buy weapons and such.
Libra will almost surely be fungible on Facebook marketplace. I can easily think of a scheme to list fake stuff and use the money to buy it between two complicit parties or one. Do it at scale with bots, you have a great, completely automated way of squirrel away tons of money $10-15 at the time. Nobody would be able to effectively trace all those transactions if it's done well enough, and budget is not exactly an issue for the people involved in this kind of stuff.
Pretty sure the USD will remain the main money laundering tool in the world. The USD as cash is partly fungible, whereas Libra is not.
The only reason the Russian agents involved in the 2016 misinformation campaign got caught was because they used Bitcoin to purchase their equipment.
The only reason the Russian agents involved in the 2016 misinformation campaign got caught was because they used Bitcoin to purchase their equipment.
lol.. I don't think people realize how the legacy banking systems already facilitate this activity
HSBC was recently fined for laundering billions for the cartels. This activity happens on an industrial scale and a Facebook cryptocurrency isn't needed for these groups to move money.
HSBC was recently fined for laundering billions for the cartels. This activity happens on an industrial scale and a Facebook cryptocurrency isn't needed for these groups to move money.
The Financial Times speculated that Libra transactions - because they involve some currency risk - will incur capital gains taxes (CGT). Although the CGT absolute amounts are likely to be very small, and in some countries will be covered by a personal allowance, this will still cause tremendously fiddly problems when filing taxes. I'm afraid the link to the FT article is behind a paywall, but this blog post summarises it: https://www.taxresearch.org.uk/Blog/2019/07/01/facebooks-lib...
It's not even the amounts that would be the killer if it's capital gains taxed really, it's the overhead come tax filing time for the average American.
Except Facebook can just write an algorithm to calculate it all for you, and then say "write 16.47 in box 18".
Facebook could even promise to cover all the taxes owed, which would give them an incentive to keep the currency value stable.
Facebook could even promise to cover all the taxes owed, which would give them an incentive to keep the currency value stable.
> Facebook could even promise to cover all the taxes owed, which would give them an incentive to keep the currency value stable.
Stable compared to what?
If the Euro falls relative to the Libra (same as Libra gaining against the Euro) then Europeans owe capital gains tax. Same goes for USD/Americans, CNY/Chinese people, etc.
Stable compared to what?
If the Euro falls relative to the Libra (same as Libra gaining against the Euro) then Europeans owe capital gains tax. Same goes for USD/Americans, CNY/Chinese people, etc.
The fact that this is centralized, based on fiat, easily connected to social media accounts, actually makes it the best way for governments to combat real cryptocurrency.
But I hope they don't figure that out, and give Ethereum and Bitcoin time to finish their scaling efforts.
But I hope they don't figure that out, and give Ethereum and Bitcoin time to finish their scaling efforts.
The government hates it when you try to make a new ponzi to replace the one they have got going.
Alongside their Ponzi. It wouldn't really replace anything, any more that BTC has replaced Dollars. The only thing anyone cares about with respect to BTC is how many dollars they are worth.
That's been key all along - as long as cryptocurrency remains anchored in real currency value for the majority of exchanges, then it will fail to stand on its own, as the cost of transfer to and from BTC will be too steep to warrant.
aside from the volatility, one of the major reasons it hasn't attained wide adoption is simply friction. the average consumer or small business doesn't want to think too hard about how to pay or receive payment for things. if Facebook released a simple libra api and many merchants adopted it, we might see it get used a lot more than btc.
Good.
Dan Larimer's EOS functions very similar to Libra, with Delegated Proof of Stake. EOS' DPOS encountered much of the same criticisms around centralization when it was launched, but many people swear by it just because it is good enough. Delegates ("block producers") do reverse transactions on EOS and they consider it a feature. EOS is not immutable, but it does have faster transaction capacity than incumbent chains like Ethereum and Bitcoin.
If Dan Larimer had launched Libra instead of Zuckerberg even with the same corporate block producers, a lot of the crypto community would be loving it. Governments would have ignored it.
This is all about the messenger itself. Zuckerberg deciding to crucify himself and be the focus of society's disdain.
Nice to see the state's monopoly on money evaporating overnight. Its not about whether this iteration would be better for society, its more about the competition existing.
If Dan Larimer had launched Libra instead of Zuckerberg even with the same corporate block producers, a lot of the crypto community would be loving it. Governments would have ignored it.
This is all about the messenger itself. Zuckerberg deciding to crucify himself and be the focus of society's disdain.
Nice to see the state's monopoly on money evaporating overnight. Its not about whether this iteration would be better for society, its more about the competition existing.
[deleted]
This was inevitable, but it's surprising to see them acknowledge it.
> combined with the ability for law enforcement and regulators to conduct their own analysis of on-chain activity [...] Libra should improve detection and enforcement, not set these back.
I expressed concern that this would happen a while ago [1]. This basically bypasses all privacy safeguards that clients would enjoy at a regular bank.
[1] https://news.ycombinator.com/item?id=20263861