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July 20, 2019 02:34 pm

Facebook Backpedals From Its Original Ambitious Vision for Libra

An anonymous reader quotes Ars Technica:David Marcus, the head of Facebook's new Calibra payments division, appeared before two hostile congressional committees this week with a simple message: Facebook knows policymakers are concerned about Libra, and Facebook won't move forward with the project until their concerns are addressed. While he didn't say so explicitly, Marcus' comments at hearings on Tuesday and Wednesday represented a dramatic shift in Facebook's conception of Libra. In Facebook's original vision, Libra would be an open and largely decentralized network, akin to Bitcoin. The core network would be beyond the reach of regulators. Regulatory compliance would be the responsibility of exchanges, wallets, and other services that are the "on ramps and off ramps" to the Libra ecosystem. Facebook now seems to recognize its original vision was a non-starter with regulators. So this week Marcus sketched out a new vision for Libra -- one in which the Libra Association will shoulder significant responsibility for ensuring compliance with laws relating to money laundering, terrorist financing, and other financial crimes... [T]here's a pretty fundamental tradeoff between network openness and effective enforcement of regulations governing payment networks. If the Libra Association doesn't have a way to enforce compliance by wallet providers, criminals are likely to flock to wallet services that don't strictly enforce the rules -- or to download open source wallet software and use non-custodial accounts. But if the Libra Association does have a mechanism for forcing compliance, that inherently raises the bar for entering the market and makes the Libra network look more like conventional financial networks -- with all the red tape that entails. This could be particularly harmful for marginalized people in developing countries, since developers in those markets will have the fewest resources to jump through regulatory hoops.

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