Posted on

Libra Is Like Sending a Friend Request to Terrorists, Politician Says

In a fiery tweet, US Congressman Brad Sherman has claimed Facebook’s Libra could benefit oligarchs, terrorists and drug kingpins.

A United States Democratic congressman has claimed “Mark Zuckerberg is sending a friend request to oligarchs, drug dealers, human traffickers and terrorists” by launching Facebook’s Libra cryptocurrency.

In a combative tweet on July 17, Brad Sherman described Libra as the “Zuck Buck” and he accused the Facebook CEO of deliberately attempting to circumvent America’s anti-money laundering laws.

Sherman’s post was accompanied by a mock Facebook screenshot that showed Zuckerberg sending drug kingpin Joaquin “El Chapo” Guzman a friend request.

Underneath, the billionaire’s other friends are listed as the Palestinian group Hamas (which the US and the EU designate as a terrorist organization), North Korean leader Kim Jong Un, Russian President Vladimir Putin, and registered sex offender Jeffrey Epstein.

A fiery hearing

Sherman took David Marcus, the CEO of Facebook’s Calibra crypto wallet, to task during an explosive hearing about Libra in Congress on July 17.

The congressman warned the Financial Services Committee that Libra was “the biggest thing this committee will deal with this decade” and rejected Marcus’s assertions that there was a distinction between Facebook and Libra.

Sherman demanded that Zuckerberg appeared before lawmakers, and even claimed that Libra had the potential to endanger America more than the 9/11 attacks orchestrated by Osama bin Laden. He went on to say:

“If cryptocurrency is used to finance the next horrific terrorist attack, 100 lawyers standing in a row, charging $200,000 an hour, are not going to protect his [Zuckerberg’s] rear end from the wrath of the American people.”

Posted on

Wiki’s Co-Founder Larry Sanger on Internet, Blockchain and Knowledge

From Wikipedia to Everipedia, along with blockchain — interview with Larry Sanger.

Intellectual of the innovative industry, innovator of the concept of intellectuality, experimentator with technologies and educator by dedication, before co-founding Wikipedia in 2001, Larry Sanger studied and taught philosophy, being interested especially in epistemology — i.e., the science of knowledge. 

It was in college that he started thinking of the internet as a potential way of decentralizing knowledge. His early project in this regard was a web forum for discussions between tutors and students, who could thus communicate outside the usual academic environment. Sanger explained:

“The thing that drives me forward is all of the possibilities that the internet makes possible for organizing people to create a new knowledge resources. Just think of how the Oxford English Dictionary was createdL When I read “The Professor and the Mad Man,” I was surprised at how similar it seemed to be to the early years of Wikipedia, and that vision of organizing people from all around the world to create shared knowledge resources is really what drives me forward. That’s the vision that inspires me. It has nothing to do with making money. There’s much more important things at stake here.”

Decentralization

Sanger conducted his first “fork” in 2006 when he launched an alternative to Wikipedia, Citizendium, which rejected anonymous editing and introduced an expert review process. The project was ultimately unsuccessful, but Sanger kept developing educational projects as well as a crowd-sourced news portal before becoming the chief information officer of Everipedia in 2017 — an encyclopedia of unrestricted topics, based on blockchain technology.

As of 2019, the project has almost completed phase one of its move to the blockchain.

A year ago, the iOS mainnet was launched, an airdrop was conducted and now the project is ready to launch. Sanger spoke about Everipedia, saying:

“I think it’s going to take several years before there are mature decentralized apps that a lot of people are able to use. We’re still figuring out a lot about blockchain. Yes, there are DApps that will work pretty well, but I I think, ultimately, the mature blockchain technology of the future is still quite a ways off.”

The idea of decentralized information is evident throughout all his projects. Thus, on the eve of the Fourth of July — the United States’ Independence Day — Sanger wrote the “Declaration of Digital Independence,” calling for a social media strike via Twitter aimed at decentralizing social media platforms.

Complementing the internet with blockchain

According to Sanger, the internet of today could not have been created by any modern executive in Silicon Valley — and no, Mark Zuckerberg is not an exception. Sanger went on, saying: “They wouldn’t be capable, they don’t have the temperament. They’re too controlling. They don’t understand the whole idea of bottom-up.” 

And the power of the internet is enormous. As Sanger said, Blockchain technology is adding “transparency, accountability and, of course, the incentives that are provided by tokenization,” but “there is nothing magical about a blockchain technology that makes it the only way to decentralize online activity.”

However, the qualities of blockchain consist for Sanger of “being a way of giving financial incentives to open-source developers.” These concepts have not really gone mainstream “because most of the work done on open-source software is done by volunteers. There isn’t a lot of money involved. Blockchain makes it possible for us to have the same sort of decentralized development and participation that open-source software allows, but it adds onto that financial incentives for users — and that’s pretty exciting.”

Blockchain in 10 years

To Sanger, the blockchain industry needs to pay a lot more attention to user experience. He said, “It has to be made just as simple as any ordinary app or website.” And it is when out-competing traditional apps on their own terms that people can start caring about the fact that these apps are built on a blockchain. Sanger explained:

“Most people just don’t care about blockchain at this point. Maybe they should, but they don’t. And that’s just a fact that we have to deal with.” 

He continued:

“We haven’t figured out what the best ways of using the technology are. We haven’t established systematic programming languages. We don’t know what the biggest companies are going to be. There is so much that’s up in the air at this point. I think the world of blockchain is going to look very different in 10 years and we have no idea what that could be like.”

Where there is blockchain, there is crypto. Thus, commenting on Donald Trump’s recent tweets about crypto, Sanger left a meaningful “booooo.”

Twitter

Sanger concluded by saying:

“I’m not a crypto investor, really. I’ve done a little bit of that just in order to understand what it’s all about. I believe in them. I really do want the monetary system — or rather the monetary systems — of the world to be decentralized and taken out of the hands of government. I think that would be fantastic.”

The interview was conducted in collaboration with Ana Dawson, Cointelegraph’s head of events and communications. The interview was edited and condensed.

Posted on

Top-6 Issues Experts/Entities Have With Libra

Experts and Lawmakers call for caution over potential risks of Facebook’s Libra cryptocurrency to the global financial industry.

Facebook’s unveiling of its Libra cryptocurrency has generated a lot of attention in the financial world, as well as in the crypto space. So far, the company has announced that its Libra blockchain network will be launched in 2020 and backed by a separate entity, the Libra Foundation. The cryptocurrency is set to enable users to make faster and cheaper international payments online, using platforms such as WhatsApp or Facebook Messenger.

The Libra currency

Just like any other cryptocurrency, Libra is set to have its own wallet called Calibra. Users would be able to send and receive Libra through this wallet by converting fiat currency from their credit cards into Libra coins. Third-party operators would also be allowed to sell the Libra cryptocurrency to users, and the entire process is set to be as simple as buying data for a mobile phone.

Facebook claims that the Calibra wallet “will have strong protection in place to keep your money and your information safe.” This claim has raised a lot of concern about data privacy and security, considering Facebook’s history of mishandling the data of its users. The company says that it plans to use the same verification and anti-fraud processes that are used by traditional credit card issuers and banks.

Libra is more of a stablecoin than an actual cryptocurrency in that its value will be pegged to several trusted currencies to prevent violent price fluctuations. Furthermore, Facebook plans to cede control of the Libra network to the Libra Association Council. The Libra Association Council is an organization that comprises founding members who operate the nodes of the Libra network.

This is not the first attempt by Facebook to create an in-house currency. In 2010, Facebook made moves to become a player in the digital currency space with Facebook Credits. Some reports believe that Facebook Credits were shut down due to an internal decision even though the company first intended for them to be used to pay for day-to-day activities, such as buying meals.

Related: Libra, TON and JPMorgan Coin Compared: Are They Heroes or Villains?

As it seems, Facebook is at it again with ambitious claims of using the Libra cryptocurrency to enable financial inclusion, potentially for billions of unbanked users in developing countries. The social media giant has, however, come under scrutiny from people who believe that Libra is a disaster waiting to happen. Furthermore, several countries have issued inquiries and even hearings regarding the regulatory repercussions of the use of Libra in their respective territories. 

U.S. lawmakers are skeptical of Libra

On July 2, Maxine Waters, a United States congresswoman and chairwoman of the House Financial Services Committee, wrote a letter to Facebook calling for the immediate cessation of any further development on Libra. According to the open letter, Facebook and its partners should pause any further development on Libra until the Financial Services Committee and affiliated subcommittees determine the possible risks Libra poses to the global financial system. The letter also referenced Facebook’s recent privacy scandals that involved data harvesting of over 50 million Facebook profiles. The letter stated: 

“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 issues and take action.”

On July 16, the Senate Banking Committee is planning to hold a hearing that will address the concerns over data privacy and the potential risks of the Libra project. Right after that, the House Financial Services Committee will also have a chance to examine Libra’s case on July 17. When asked whether Libra can actually cause a global financial crisis if left unchecked, Gregory Klumov, the CEO and founder of the euro-backed stablecoin issuer Statsis, told Cointelegraph that Libra cannot cause a financial crisis: “Most of the negativity comes from politicians. They’re afraid of losing their monopoly on financial oversight.” He further explained:

“The balance sheet of the association will not be leveraged. A financial crisis is impossible without excess leverage. Also, Libra’s coin might be recoverable if someone’s password is lost or stolen, similar to e-money like with PayPal or Skrill.”

While offering his response to the matter, Andrew Adcock, the CEO of Crowd for Angels, came out with a different opinion: 

“Libra, however, are seeking to utilize multiple assets as coverage, not just one type and are not seeking to be pegged. This could cushion a financial crisis if managed well with transparency and trust.”

Adcock, however, also believes that “the US congressman has shared the concerns and that Libra was launched when the US markets were sleeping probably shows the weight of their potential punch.”

History of Facebook scandals

Several experts recommend caution, considering Facebook’s history of mishandling user data — as was the case with Cambridge Analytica. Now that money is involved, people fear that Facebook could sell user spending and transactional data to banks and other interested third parties. After all, Facebook’s business model is to advertise by routinely allowing researchers to access user data.

According to Forbes contributor Enrique Dans, who is also a senior advisor for digital transformation at IE University, the Libra initiative has the potential to do well. However, he believes that if it were in the wrong hands, it could cause serious damage when it comes to trust. According to Dans, Facebook “has the worst reputation for privacy, along with ethical standards that have seen it involved in accusations of electoral manipulation and even genocide.” Although the company claims to be committed to securing user data, experts believe there is nothing stopping it from monetizing such data.

Facebook started off with a pledge to make the world more open and connected. But like many other experts, Dans believes that the only reason Facebook is planning to launch the Libra coin is to “capitalize on its huge user base.” According to the Libra white paper, Facebook will outsource the management of Libra to the Libra Association Council, an independent nonprofit foundation. However, David Marcus, the Libra head at Facebook and former president of PayPal, explained in a post:

“Facebook will not control the network, the currency, or the reserve backing it. Facebook will only be one among over a hundred members of the Libra Association by launch. We will not have any special rights or privileges.”

He also confirmed that, even though Facebook owns the Calibra wallet company, Calibra’s financial data will be inaccessible to Facebook. But, in response to this move to restore trust, Dans says that Facebook’s “malign philosophy is contagious“ and that it will eventually drag every other partner in the association “down to its murky levels.”

Libra security risks

According to Libra’s white paper, the Libra blockchain is set to be an open-source blockchain initiative that will offer developers a prototype in a prelaunch testnet. This will give developers an enhanced beta bounty program to identify bugs, vulnerabilities and flaws in the system before the official launch of Libra in the first half of 2020.

However, Facebook’s attempts to outsource Libra’s management and development — by allowing anyone to build products with access to billions of users — put a huge target on Libra that can be exploited by bad actors. Making Libra open-source will introduce security risks. These risks can potentially allow a black-hat developer to easily create a wallet that steals funds from users’ accounts. Even though Facebook claims that it will bear the cost of hacks on Calibra wallets, in the event of significantly large losses, the Libra white paper has not yet stipulated a system to solve such a problem. 

The letter from Congress also points out evidence of hacked crypto wallets, which has led to billions of dollars in loses. Therefore, Libra’s Calibra wallet also presents a huge risk to users and investors, who might end up using it. The lawmaker also highlighted how Libra’s white paper provided “scant information” about the project’s security features.

Lack of censorship resistance

In terms of technicality, Libra’s white paper also leaves many questions unanswered, especially when it comes to censorship resistance of the Libra blockchain. In fact, Mustafa Al-Bassam, one of the co-founders of Chainspace — the blockchain startup that was acquired by Facebook to scale research and development for Libra — points out some of the technical loopholes in the Libra white paper.

Al-Bassam is the only researcher on the Chainspace research team who did not join Facebook after the acquisition. According to a tweet thread he shared: 

“Libra could end up creating a financial system that is *less* censorship-resistant than our current traditional financial system.”

Libra’s technical philosophy attempts to solve the problem of scalability by first becoming a private blockchain with a select group of entities managing the Libra coin. However, Al-Bassam says that this presents a challenge when it comes to achieving censorship resistance. Most of the companies partnering with Facebook to form the Libra Association Council are U.S.-based companies, which include MasterCard, Paypal, Stripe, Visa and eBay, to mention only a few. According to Libra’s white paper, these entities will control the Libra network through an association-based model. Al-Bassam argues that this model of control on a blockchain network does not provide sufficient levels of censorship resistance. 

Related: Facebook’s Libra Coin: Initial Reactions Mixed

A spokesperson for MakerDAO, a blockchain-based company, told Cointelegraph that “Libra is built on a permissioned blockchain, which effectively means Facebook and its investors have a certain amount of centralized control over access, transparency and all data.” Even though Libra promises to switch to a permissionless network down the road, Al-Bassam says that, by the time the switch to a more censorship-resistant and open platform is implemented, the main central banks will have full control of the network. Klumov also agrees with Al-Bassam, arguing that: 

“Five years in the crypto industry might as well be an eternity. Both the technology and the market are developing so quickly, that no one can say for sure what will happen in five years. That’s as true of Libra as it is of any other crypto project.”

Libra is not a real blockchain

Despite the hype around Facebook getting into blockchain, the Libra coin has been criticized for not being a “real” blockchain in the true sense of the word. The Libra white paper ignores the decade-old blockchain research that has been achieved by the likes of Ethereum and even Chainspace and payments platform Algorand. 

The Libra blockchain does not have any benefits of distributed governance that is common with most blockchain platforms. Instead, Libra promises to be fully permissionless in about five years. Basically, most of the features that make up a blockchain seem to be missing with Libra. At its best, the single data structure that Libra possesses can be compared with Ripple.

Libra may not really help the unbanked

Facebook claims that it will use Libra to help the unbanked, who live in developing countries like Nigeria, Mexico, Bangladesh, China, Indonesia and India. However, Facebook is forbidden in places like China, and even jurisdictions like Indonesia, Bangladesh and Pakistan have previously put temporary bans on Facebook. In addition, developing countries and their governments have been hostile toward cryptocurrencies, with laws that seek to halt the use of cryptocurrencies. 

Basically, even as Facebook tries to launch a cryptocurrency that will give the unbanked inclusion in the global financial industry, its biggest threat remains to be the government authorities in those developing countries. Furthermore, individuals without access to bank accounts in developing countries are typically those with bad credit history or those who fail to comply with Know Your Customer (KYC) and other anti-fraud and Anti-Money Laundering (AML) requirements.

Realted: XRP, Libra and Visa to Fight It Out for Cross-Border Remittance Crown

Therefore, if Facebook is looking to be an alternative solution, it must ensure that the unbanked are compliant with KYC and AML procedures, otherwise Libra could be shut down. With a user base made up of billions of people from all over the world, it will be difficult for Facebook to completely verify the authenticity of its users.

In addition, Libra’s white paper does not seem to fully rationalize its claim to help the unbanked. The paper cites the World Bank’s data, which shows two-thirds of people globally do not have access to bank accounts. Conversely, the research also shows that the majority of the unbanked actually do not need bank accounts. In developing countries like Kenya, the so-called unbanked are still able to access the convenience of low transaction fees with instantaneous mobile payments without a cryptocurrency while using mobile payment services like M-Pesa.

It comes down to this…

The big question about Libra is whether people will actually use it once it launches. A spokesperson for MakerDAO also told Cointelegraph that it is too soon to predict whether Libra will cause a revolution: “Libra is in the white paper phase so the decisions about how this manifests — and whether they keep it truly open-sourced — will determine whether this is a transformative stablecoin or just another PayPal.” 

There is an argument that Libra can make international payment exchanges in emerging markets much cheaper and quicker. However, with Facebook’s data harvesting incidents in the past, even Marcus admits that convincing people of Facebook’s intentions will be “by far the most difficult, intellectually stimulating and challenging thing.”

While answering a question to lawmakers about how Libra would respond, Marcus admitted that, if regulation is not done right, “it could definitely present systemic risks.” He said:

“This is why we believe in and are committed to a collaborative process with regulators, central banks, and lawmakers to ensure that Libra helps with the kinds of issues that the existing financial system has been fighting, notably around money laundering, terrorism financing, and more.”

All in all, experts in the crypto space are of the opinion that, unless the issues discussed above are addressed in time, Libra could potentially dominate the crypto space and kill competition. Others believe that concerns about Libra are overblown and that Libra’s only real threat is that of digital identity and privacy.

Posted on

US Congress Requests Moratorium on Facebook’s Libra Stablecoin

The U.S. House of Representatives Committee on Financial Services requested Facebook to immediately stop the development of the Libra stablecoin.

The United States House of Representatives Committee on Financial Services requested Facebook and its partners to stop the development of the Libra stablecoin.

In a July 2 letter addressed to Facebook CEOs Mark Zuckerberg and David Marcus, and COO Sheryl Sandberg, the lawmakers request that Facebook and its partners immediately agree to a moratorium on the development of Libra and its dedicated Calibra wallet. 

The committee claims that the project may lead ”to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar.” The committee notes that it believes such an endeavor could have serious implications:

”This raises serious privacy, trading, national security, and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers, and the broader global economy.”

The letter claims that it foresees cybersecurity vulnerabilities, which could potentially lead to trillions of dollars of uninsured deposits being lost, and that consumers could be exposed to severe privacy and national security concerns. 

The committee also notes that Facebook’s troubled past with user data further exacerbates those concerns. The letter claims:

“If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability.”

The committee claims that “it is imperative that Facebook and its partners immediately cease implementation plans” until regulators explore the issues above. During the proposed moratorium, the regulators intend to hold public hearings on the risks and benefits of the system and explore legislative solutions. The letter concludes:

“Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail.”

As Cointelegraph reported yesterday, over 30 advocacy groups have appeared as signatories on a request that Congress and regulators implement an official moratorium on Libra development.

Also yesterday, Nobel prize-winning economist Joseph Eugene Stiglitz published an article claiming that “every currency is based on trust, but only a fool would trust Facebook’s Libra.”

Posted on

Steve Forbes Tells Zuckerberg: Use Gold to Back Libra, Call It the ‘Mark’

Steve Forbes claimed that gold backing is the basic condition for Libra to become “one of history’s truly seminal creations.”

Steve Forbes, Chairman and Editor-in-Chief of Forbes Media, published on June 25 an open letter to Mark Zuckerberg, advising to back Facebook’s cryptocurrency Libra with gold.

In the letter, Forbes strongly encouraged Facebook’s crypto initiative, emphasizing Libra’s potential to become one of the greatest inventions in the world, which eventually “could replace the U.S. dollar as the global currency.”

At the same time, to become “one of history’s truly seminal creations,” Libra has to be backed by gold as a basic condition, Forbes argued in the letter, opposing it to the current Facebook’s plan to back the coin by a basket of currencies.

The major American publishing exec explained that yellow metal would fit this function best in Libra’s mission to provide a “truly stable cryptocurrency.” Forbes wrote:

“For a variety of reasons gold holds its intrinsic value better than anything else. It’s like a measuring rod. It no more restricts the money supply than the 12 inches in a foot restricts the size of a building you might wish to construct. All it means is that the Libra will have what no other currency has today: a fixed value.”

According to Forbes, Libra’s “fixture” will the actual thing that will make it the “most desirable medium of exchange around the globe,” since it can be used in day-to-day transactions, as well as in long-term investing.

In his message, Forbes has also warned Zuckerberg that Libra’s consultants will most likely be criticizing the gold-backing idea, still arguing that it would “actually be an advantage” as it will keep away “well-capitalized imitators.”

Concluding his letter, Forbes eventually urged Zuckerberg to consider changing Libra’s name to the “Mark,” referencing the bad luck history of the “Libra” term. Specifically, he reminded that the “Libra” was used to refer to a measure of the weight from the destroyed Roman Empire. On the other hand, the Mark of the German Empire, which was abandoned for the euro 20 years ago and now is “up for grabs,” notes Forbes. 

Meanwhile, in a recent conversation with Harvard Professor Cass Sunstein, Zuckerberg stressed the collaborative nature of Libra, saying that the association behind the project will “hopefully” grow up to 100 founding partners from the current 27 companies, including Visa and Uber.

According to a report by The New Yorker, major American banking institutions including Goldman Sachs, JPMorgan Chase and Fidelity have denied to join Libra association so far.

Posted on

How Facebook Globalcoin Will Make Private Money Work After Hiring Bank Lobbying Supremo

Facebook Globalcoin

With the Facebook Libra / Globalcoin set to launch as soon as Tuesday 18 June and news that the social media giant has just hired a Standard Chartered bank lobbying supremo, interest is reaching fever pitch.

Some have questioned why Facebook is launching a crypto
product at all, while others says it will probably not be a “real” crypto.

But both of those viewpoints miss the real import of what Mark
Zuckerberg is up to.

From Cincinnati Time Store to Bitcoin to Facebook Libra Coin

Before the invention of bitcoin – and its necessary
precursor the internet – the possibility of sustaining a private money form was
limited, and not just by states that jealously guard their monopoly over the
money supply.

A brief glance at the various utopian schemes proffered in
the US in the early nineteenth century, before industrial capitalism had a sure
footing, provides legion examples of the difficulties.

Chief among them was the Cincinnati Time Store venture EWN covered a few months back, that lasted three years and was a success in the localities in which it operated.

Let’s not delve further into the radical anarcho Ricardian
roots of the ideas of Josiah Warren (the time in question was labour time), but
instead home in on its inability to roll out its local success at national
scale.

Its national scale was a part of the secret of the success
of the US as the economic powerhouse it is today – the lack of regulatory
frictions, notwithstanding state laws, provided an accessible home market. But
things were not so straightforward for money.

Many banks competed with issuing their own paper bills (of
exchange) but none held national sway.

Warren’s scheme could not escape the same parochialism borne
of technological limitation. In Warren’s day there was no way to effect a
one-to-many relationship in the fashion of the 21st century
internet.

There were many competing forms of money in the US at the
time, which was partly because of the vast distances that made interconnectedness
before the telegraph and the railway impossible at any faster rate than the
horse.

Facebook Libra coin’s universality

In addition to well-attested properties that money must have
to fulfil its necessary function as a standard of measure, means of exchange
and store of value, there is one that tends to be overlooked or at any rate
subsumed in the others.

Alongside acceptance (trust), portability and divisibility, is
an underlying assumption that the functionality money delivers will be applicable
to the entire universe of all exchange values.

The Cincinnati Time Stores needed a national network that
was available to all – or a large majority – of consumers and producers for it
to establish a hegemonic presence. That was technically not possible; no matter
how much loved the stores may have been in Cincinnati, their impact was
limited.

There was no point in a merchant or service provider marking
up prices in labour-time expended in the production of a good or fulfilment of
a service if there was no market in which such a standard was used. Similarly,
there was no incentive to accept the stores’ notes.

A Facebook global coin makes 21st century private money easy

Enter Facebook’s Libra coin, although the name that was
previously doing the rounds – Globalcoin – illustrates our universality imperative
much better.

Facebook, as the world’s most pervasive social network, is,
privacy doubts aside, the most perfectly suited issuer of private money in the
21st century.

Unlike the Cincinnati Time Store Facebook has the ability to
launch its money simultaneously everywhere if it so wishes. Even if it chooses
a staggered rollout, this potential of universality would still work its magic,
forcing others to respond to its gravitational force.

That’s why it has been so easy for Facebook to do deals (to be
precise, bring in as members of the “independent” foundation governing the
Libra coin) with supposed payment rivals such as PayPal, Visa and Mastercard.
It’s why it has been able to bring service providers such as Uber on board to
accept its private money.

It’s why, after its discussions with the US Treasury and the
governor of the Bank of England, it is presumably fairly confident that it will
be able to comply with regulations, such as they are.

FATF finalises recommendation on global crypto on 21 June –  is Facebook Globalcoin launch timed wrong?

However, we should add a caveat, or at least further
explanation, on the regulation issue.

The Facebook Libracoin/Globalcoin whitepaper is set for release three days before the Financial Action Task Force (FATF) finalises its recommendations for what it calls virtual asset service providers (VASPs) on 21 June.

Facebook is well aware of the impending global crypto
regulations rollout and knows that each jurisdiction will interpret the rules
differently. But its strategy is unlikely to be to play one country’s
regulators off against another, in a sort of whack-a-mole play.

Alternatively, Facebook may seek to argue for laxer
regulations for the unbanked and those not seeking to interact directly with
the fiat financial system – users may be granted a certain amount of currency
or could earn it through various activities such as watching video adverts.

The FATF recommendations as they relate to crypto have been finalised with one exception and this is it: the all-important paragraph 7b, with the salient part highlighted below:

7 (b) R.16 – Countries
should ensure that originating VASPs obtain and hold required and accurate
originator information and required beneficiary information on virtual asset
transfers, submit the above information to beneficiary VASPs and counterparts
(if any), and make it available on request to appropriate authorities.
It
is not necessary for this information to be attached directly to virtual asset
transfers. Countries should ensure that
beneficiary VASPs obtain and hold required originator information and required
and accurate beneficiary information on virtual asset transfers, and make it
available on request to appropriate authorities.
Other requirements of R.16
(including monitoring of the availability of information, and taking freezing
action and prohibiting transactions with designated persons and entities) apply
on the same basis as set out in R.16

It is likely that Facebook is pre-empting this by building
in the necessary “bank wire level” reporting compliance.

To do that it will have to introduce KYC/AML onboarding for
existing Facebook/WhatsApp/Instagram/Messenger customers to gain access to the
Libra Coin.

But to get traction with such an approach means we come back
to the problem of trust, but given that people provide their details to
merchants of all types on the internet and Facebook’s reported partnerships
with existing players, at least partly with an eye to ameliorating such
concerns, this is not necessarily the insurmountable barrier it might appear at
first sight to the social network’s payment and marketplace ambitions.

Facebook’s Project Libra know what regs are coming, or are pre-empting

Alternatively, Facebook, if it hasn’t factored in the
unknown regarding which direction the FATF will move in on paragraph 7b next
Friday, then it would be wise to wait until that is clear.

That’s unlikely to happen at this late stage which does
suggest Facebook knows what’s coming down the line.

And the news today, reported by the Financial Times, that Facebook has hired Standard Chartered’s head of corporate and public affairs, Ed Bowles, to be its director of public policy, suggests it is preparing in advance for the regulatory tussles to come.

Facebook, some existing regulated firms and cryptocurrency industry main beneficiaries

Actually, Facebook would probably be a beneficiary of new
expensive regulatory hurdles to entry, as would existing regulated VASPs and
non-crypto financial services companies.

But these are really side issues. Facebook’s global reach
means its coin will have the universality and the convenience that comes with it.
That will likely trump trust fears for many consumers, if not for government regulators
concerned about privacy and monopoly practices.

The banks and regulators are behind the curve and Facebook
and those crypto firms that can navigate the new regulations will be the winners.

Bitcoin – the one coin to rule them all

So too will bitcoin (if not XRP) and other decentralised (mined) digital currencies that can operate independently of states, even if on and off ramps become policed more vigorously – market activity will simply be transferred to over-the-counter trading.

The post How Facebook Globalcoin Will Make Private Money Work After Hiring Bank Lobbying Supremo appeared first on Ethereum World News.

Posted on

Project Libra: What We Know About Facebook’s Forthcoming Cryptocurrency

Social media giant revealed to be rather close to creating its own crypto token.

Over the past few months, it appeared that Telegram has been comfortably leading the clandestine race between major social platforms that have been quietly working on their native crypto tokens, with its Telegram Open Network (TON) making strides toward its October 2019 launch deadline. The latest avalanche of news from Facebook, however, makes this lead look less convincing, as it becomes apparent that the social media giant’s blockchain project is also well underway.

After a series of indirect cues suggesting that Facebook’s long-rumored fintech initiative is in motion, a massive breakthrough came with a detailed report from The Information, which mainly relied on anonymous sources to unearth many newsworthy particulars related to the forthcoming token. A European Facebook executive validated some of the details shortly after, confirming that a white paper outlining the cryptocurrency’s essentials is set to be published on June 18. Here is what we know of the future coin’s design and governance, as well as its potential implications for the digital economy, according to some leading voices in the crypto space.

Buildup

According to The Information’s report penned by Alex Heath and Jon Victor, Facebook’s crypto project kicked off roughly a year ago when the company brought in David Marcus, former president of PayPal, to lead the charge. The e-payments giant would go on to become a major source of manpower for the initiative, enhanced with some additions of Coinbase alumni on the compliance side. In early 2019, Facebook incorporated the entire team previously employed by a blockchain startup Chainspace. MIT professor Christian Catalini has been reportedly appointed as the project’s chief economist.

Overall, staff deployed on the project is estimated to be at least a hundred strong, with some more open positions still up. In contrast to Facebook’s normally open-space culture, employees working on the blockchain initiative are reportedly concentrated in a separate building behind closed doors.

Despite earlier reports by the BBC suggesting that Facebook’s prospective cryptocurrency has been known internally as GlobalCoin, The Information’s dossier makes no mention of this label. The publication’s sources insist on another codename that has also previously been circulated in the media, Libra.

In addition to registering a company called Libra Networks in Switzerland in May, Facebook bought out the trademark from a namesake blockchain startup. TechCrunch’s Josh Constine hypothesized that the name could be wordplay on the abbreviation LIBOR, which stands for the London Inter-bank Offered Rate, a benchmark for interbank borrowing. Constine said, “LIBOR is for banks, while Libra is meant to be for the people.”

The Information’s sources revealed that Facebook’s CEO, Mark Zuckerberg, has taken a great personal interest in the crypto project, while some others among the firm’s C-suite, such as chief operating officer Sheryl Sandberg and chief financial officer David Wehner, remained skeptical.

The Libra team reportedly presented three possible investment scenarios to Facebook leadership, ranging from low to high commitment, and Zuckerberg ultimately opted for the maximum investment route. Facebook CEO’s attention to building a payment system on top of the platform fits well into the proclaimed turn toward facilitating more personal and small-group forms of communication.

Token properties and uses

As a borderless currency with no transaction fees when used within the Facebook ecosystem (Messenger, WhatsApp and Instagram), the prospective coin is poised to make a considerable impact in developing countries, where the company is looking to primarily market it, according to The Information’s report.

While the social platform’s existing user base exceeds 2 billion people globally, a significant portion of it come from regions where traditional financial institutions are not quite reliable, and fees on cross-border remittance payments are often exorbitant. If users come to associate the digital coin in their smartphone messaging app with real value, Libra could become a game-changer in areas such as cross-border payments, casual Venmo-style transactions within friend groups and e-commerce generally, as more and more merchants join the realm of Facebook-powered social platforms to sell their goods directly.

Prominent blockchain advocate and Wall Street veteran Caitlin Long, who was among the first to share her vision of Facebook’s cryptocurrency in light of the latest news, wrote in a Forbes op-ed that “Facebook’s cryptocurrency will be a powerful force for good in developing countries.” Long argued that, by providing a more reliable store-of-value than central banks, Facebook’s stablecoin would pressure financial authorities into monetary discipline.

In order to maintain value, according to The Information investigation, Facebook’s coin will be pegged not just to one currency, but to a basket of several currencies and low-risk securities. The company’s head of financial services and payment partnerships for Northern Europe, Laura McCracken, has also confirmed this in an informal conversation with a reporter from German magazine WirtschaftsWoche, although nothing is known yet about the basket’s composition.

The Information’s report also specifies that Facebook plans to provide physical infrastructure — in the form of ATM-style terminals — to enable users to exchange the digital asset for fiat currencies. In addition, Facebook employees will be reportedly given an option to receive part of their salaries in the token, a detail that Gizmodo’s Victoria Song called the resurgence of the “company town dream” in the digital age.

Governance and decentralization

These days it is difficult to find a person who is not alerted to Facebook’s control of (and, sometimes, questionable practices of handling) user data. The fact that the company’s ambitions now extend to a comparable degree of control over online payments might appear sinister. Anticipating pushback from vigilant users and regulators alike, the company seems to have introduced a degree of decentralization into the way its cryptocurrency governance model is laid out.

According to The Information’s report, for the past few months, the social networking company has been talking to dozens of financial institutions and tech companies, soliciting their participation in an independent foundation tasked with the new crypto payment system’s oversight. The measure should promote trust in the system, as well as pacify antitrust regulators. Sunita Parasuraman, who has worked as Facebook’s corporate head of treasury operations, will reportedly manage the foundation’s treasury.

Unsurprisingly, the privilege of validating transactions on Facebook coin’s ledger will be reserved for a selected few. A license to operate a node on the network will reportedly cost outside entities $10 million each, and will come with a right to delegate representatives to the foundation and participate in the network’s governance. The network is expected to launch with 100 nodes, possibly with a prospect of further decentralization as more nodes join in. The Information’s sources claim that Facebook will use licensing fees to establish the initial pool of value for the coin.

It is not yet clear how node operators will be rewarded in the absence of transaction fees and The Information’s claim that Facebook is not planning to use the payment system for ad targeting. The latter notion can strain skeptics’ credulity, given the company’s business model and the wealth of valuable data on purchasing habits that the currency use will generate. One of the possible answers is the interest that will accrue from the assets underlying the token — and node operators will likely hold a lot of it.

Furthermore, Long predicted that Facebook will share the generated interest profits with all users and holders of its token in order to avoid high-profile accusations of simply pocketing it, which would immediately follow otherwise. As a collateral effect, Long writes, this might turn public attention to the issue of corporate welfare in the U.S. banking system: The Federal Reserve, it turns out, pays its member banks 2.35% for interest on excess reserves.

Regulation

Having learned the hard way how much of a trouble regulatory scrutiny can present, Facebook has been working closely with financial authorities across the board to ensure compliance. The new cryptocurrency is believed to incorporate solid identity verification and have fraud prevention mechanisms in place.

According to Long, it means that Facebook will leverage a massive “tax data honeypot” for multiple governments, which may attempt to trade regulatory latitude for a certain degree of access to this data. In the big picture, the project will likely highlight the archaic character of many extant financial regulations and set in motion processes of gradually making them more up to date. The ride, however, will be bumpy, as the launch of Facebook’s payment system will spark heated debates about privacy and corporate power in the context of money.

What to make of this?

Over in the crypto Twitter-sphere, intense debate immediately broke out, as opinion leaders began to figure out who the new coin’s immediate competition might be and whom it will obliterate. Charlie Shrem, a founding member of the Bitcoin Foundation, opined that Libra is a direct threat to Ripple’s XRP:

Long-time Ripple investor Kieran Kelly differed, suggesting that it is bitcoin that is now on the line:

Yet another opinion, perhaps more optimistic than most of the crypto industry, came from Mati Greenspan, a senior trade analyst at eToro, who contended that it is traditional currency that is threatened here:

Weiss Ratings’ lead cryptocurrency specialist, Juan M. Villaverde, formulated the central question somewhat differently in an email to Cointelegraph:

“Is Facebook really moving into the cryptocurrency space? Or is it merely porting some crypto technology over to the traditional fintech industry?”

Villaverde sees all indications that it is going to be the latter. However, it is not necessarily a bad thing, as Facebook seems to be serious about delivering user-friendly financial services to millions of users who have virtually no other access to banking.

The fact that deployment of the company’s cryptocurrency is set to start from India, the nation with the second-largest unbanked population in the world, suggests that Facebook is ready to go in that direction. However, we should make no mistake with regard to Facebook coin’s relation to decentralized digital currencies, Villaverde said:

“Facebook is looking to provide payment services to its customers. To do so, it must act as a counterparty and custodian for every payment that goes through its platform. It must have the last word on any payment users make or seek to make. Just like a bank, credit card company or PayPal. In sum, the Facebook coin will compete with established payment processors. Cryptocurrencies, like Bitcoin or Ethereum, are built from the ground up to disrupt them. The Facebook coin will be another layer built atop the existing financial system — another intermediary, another counterparty, plus all the corresponding risks. Bitcoin and other cryptocurrencies are slated to render every one of those layers obsolete.”

In her op-ed, Long offered a somewhat more optimistic vision of the Libra project. She thinks that Facebook’s cryptocurrency will become a Trojan horse that will eventually benefit bitcoin:

“Facebook’s foray into cryptocurrency will likely end up being a beneficial detour on the path to broader bitcoin adoption. Bring it on!”

Facebook’s initiative, Long predicts, will dramatically increase the pace at which people learn about cryptocurrency in general, and when the general public becomes educated enough, it will likely opt for bitcoin, which is scarce, rather than Facebook’s token, which is not.

Posted on

Aging FB Users and Low-Income Teens Unlikely to Embrace Facebook’s GlobalCoin, Report Says

An analytical report says that massive adoption of the
soon-to-be-launched Facebook’s GlobalCoin will not be as easy as everyone may
think

On May 28, an analytics company Diar published its weekly report which says that Facebook’s coin aimed at the market of remittance and online payments may have serious difficulties due to the demographics of Facebook users.

Even though Facebook is one of the largest social media platforms in the world, aging FB users may become a significant barrier in GlobalCoin’s mass adoption.

Amount of retirees on FB has been doubling

Diar’s study demonstrates that among people who regularly use Facebook there are less than half younger than 35. As for retirees on Facebook, their number has been growing more than double since 2012 (people over 65).

As many researches have shown earlier, elderly people (from the Baby Boom generation) are the smallest group to make cryptocurrency investments, let alone understand how Bitcoin and other virtual coins work.

So, the report points out, they are highly
unlikely to change their attitude once GlobalCoin appears, since this age group
is a major barrier in crypto adoption, even from a popular social media
platform.

The study says:

“Facebook will be facing an uphill battle on multiple fronts, primarily starting from an aging user base whose knowledge of cryptocurrency likely to be near nil.”

It adds:

“Educating 25% of the world’s population about current cryptocurrency infrastructure that requires private-key management and the glaring reminder of the possible ultimate loss of funds is also unlikely as it would result in the project’s near instant failure.”

Facebook is losing battle on the teenage field

Apart from getting the majority of its users aging, Facebook is also noticed to be losing its teenage audience.

A recent study by the Pew Research Centre believes that Facebook has lost its attractiveness to teenagers as opposed to its rivals.

85 percent of US teen audience prefer making and watching YouTube content. Even SnapChat has got more teenage users than Mark Zuckerberg’s platform.

The study states that currently the growing dominant group of Facebook users are households with low income, including teens. That seems to be a poor basis for adopting GlobalCoin which Facebook has global plans for.

Contradictory data

On the other hand, a recent study by LendEDU reveals quite an opposite thing. As per the research, adult US population believes Facebook’s GlobalCoin to be an even more attractive investment than Bitcoin, XRP and other similar assets.

Many who took part in the LendEDU poll believe
that ‘Facebook Coin’ will be used not only for remittance to India via WhatsApp
but will generally transform the crypto market.

As previously reported by Ethereum World News, Facebook has set up a startup in Switzerland (a country with a ‘crypto-friendly’ attitude) to work on its upcoming stablecoin.

The post Aging FB Users and Low-Income Teens Unlikely to Embrace Facebook’s GlobalCoin, Report Says appeared first on Ethereum World News.

Posted on

Facebook Launches Swiss-Based Startup to Develop Its Crypto

The social media heavyweight has recently set up a company in Switzerland to focus on its stablecoin and blockchain-based payment system

Citing a Swiss news website, Handelszeitung, Reuters reports that Mark Zuckerberg’s social media has chosen the local jurisdiction for making its plans regarding its USD-pegged coin come true.

Choosing the most crypto-friendly country

Facebook is dead serious about its plans to give users a new digital coin and has chosen the best place for creating it. The company is registered in Geneva and the Crypto Valley located in Zug is also close by. As of last year, Switzerland has adopted a friendly approach towards crypto, ICOs and cryptocurrency startups.

As per the news report, Facebook has launched Libra Networks to produce the payments system on DLT which was announced earlier. The secretive project of the company is already known under the title Libra Project.

Libra Networks runs under the ownership of Facebook Global Holdings II, Ireland-based. Apart from cryptocurrencies, the startup will be dealing with other areas closely related to crypto – DLT, analytics, data processing and identity management.

Facebook has not commented on the situation yet.

Investors are looking forward to ‘Facebook Coin’

Previously, Ethereum World News reported that many of US citizens are willing to invest in ‘Facebook Coin’, rather than Bitcoin, and use it on the social media platform and other platforms owned by Facebook, such as, WhatsApp and Instagram.

LendEDU conducted a survey on a thousand adult US citizens, eager to study their trust to the crypto area and the previously announced ‘FB Coin’ in particular.

The report shows that just 7 percent of
respondents have ever invested in crypto, e.g., Bitcoin, XRP, Ethereum. However,
18 percent are looking forward to buying ‘Facebook Coin’ as soon as it is
launched and open for usage.

Facebook works hard on its crypto product

Recently, Mark Zuckerberg’s giant took two former Coinbase top management employees on its payroll. One of them, Mikheil Moucharrafie, left Coinbase for Facebook in April this year.

The other, Jeff Cartwright, has been with Facebook since March, after working for almost five years for the major crypto exchange.

As reported by Ethereum World News previously, Facebook is in negotiations with a great number of large VC firms in order to raise $1 bln to back its cryptocurrency.

‘Facebook Coin’ has also provoked certain concerns of US authorities, who have recently published an open letter to Mark Zuckerberg, demanding that the company discloses more details about the Libra Project.

The post Facebook Launches Swiss-Based Startup to Develop Its Crypto appeared first on Ethereum World News.