© FACEBOOKThe Libra
Association
Facebook will not run Libra directly, but through its
subsidiary Calibra, it will be a partner in the body that does:
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organization dedicated to running, controlling, and
promoting Libra, as well as managing the reserve fund.
Facebook hasn’t gone alone for a number of reasons, trust
being one of them. As the project leader David Marcus
admitted, “If we were controlling it, very few people would
want to jump on and make it theirs.” The association has 28
founding members, and among them are such big names
as PayPal, MasterCard, Visa, eBay, Uber, and Spotify. There
are also some names you won’t know, unless you are
familiar with blockchain development and venture capital.
This is just the initial lineup – it is expected to grow to over a
hundred members by the time Libra goes live.
Each founding member paid in at least $10 million to get
a seat at the table. Decisions on the running of Libra are
made by voting, with no single member getting more than
one vote or 1 percent of the total votes (whichever is the
greater). The idea is that Libra cannot be dominated by a
few of the larger members (in theory, anyway). Each
founding member is responsible for running a validator
node, which maintains the integrity of the blockchain.
Members will also earn interest on cash held in the system- Libra coins, or tokens, created, but as yet unspent – which
could become a useful amount if the system grows as
hoped. It is also used to pay for running the blockchain:
server time costs.
The Libra Association is based in Switzerland. Why?
Because Switzerland is a major hub for international money
transfers, and Swiss banking laws are unlike any other, and
notorious for their secrecy. Swiss banks were also notorious
for money laundering, particularly after World War II.
Thankfully, the country has cleaned up considerably since,
but is still seen as one of the safest places in the world to
store money. It is estimated that a quarter of all global
cross-border assets are held there. Libra is expected to be
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in preliminary talks, and has yet to reply to the Swiss privacy
regulator when asked to provide details on its operations.
what does Libra have?
Promises – and rather
vague ones so far.
Although regulated by the
Swiss government, it says it
will comply with all US tax,
money-laundering, and
fraud regulations. These
include registering with
FinCEN (Financial Crimes
Enforcement Network),
which aims to stop terrorist
funding and money
laundering by analysing
data collected during
financial transactions. It will
also comply with the
international anti-money-
laundering regulations
(AML).These include
confirming people’s real
identities, and sending the
identity of wallet-holders
to the relevant government
agencies.
Facebook has also
applied for an export
licence, and jumped
through a number of other
legal hoops. This hasn’t
stopped calls for the
project to be stopped until
every concern has been
addressed, though.Outdated rules
Facebook claims that
outdated financial
regulations have restricted
commerce – for example,
the banning of the majority
of banks to trade in
cryptocurrencies. It says
that Libra offers real
innovation, freeing capital
quickly and easily
anywhere it is needed,
rather than being stuck in
the banking system, which
can take days to make a
simple transfer. Exactly
how Libra will be regulated
has yet to be resolved.
Whether or not it is treatedas a bank or as an
exchange-traded fund will
make a big difference.
Facebook says Libra will
complement existing
financial systems, and it
isn’t a bank, because it
does not interact directly
with its users. A moot
point, which will probably
require lawyers to unravel.
It will take more than a
few US Representatives
publishing open letters
calling for Facebook to
halt the project to stop
this train. However, this
is the biggest ever
company to get involved
in cryptocurrency, and on
such a large scale. We can
expect an unprecedented
level of scrutiny before
launch, which will have
ramifications right across
the world, and on any
future such project.
Cryptocurrencies
are often subject to scams
and hacks, which have cost
coin exchanges millions.
Libra will not be immune; it
uses open-source software
and allows for third-party
wallet applications, which
can cause problems. There
are already reports of
dozens of fraudulent
pages on Facebook and
Instagram offering to sell
Libra, often at a tempting
discount. Facebook is
taking them down, but it
is a game it cannot ever
really win.
It’s difficult not to see
the irony here – Libra
involves real money, where
trust is paramount, and the
world of Facebook is awash
with fakers of various hues.
The very platform that
Facebook uses to promote
Libra is not trustworthyThe Libra wallet app, Calibra, in action. You can send money as easily as a
text (almost, anyway).62 |^ |^ November 2019