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Facebook to launch digital currency, Libra, in effort to create new global payment system

Facebook to launch digital currency, Libra, in effort to create new global payment system

Postby smix » Wed Jun 19, 2019 8:02 pm

Facebook to launch digital currency, Libra, in effort to create new global payment system
NBC News

URL: https://www.nbcnews.com/tech/tech-news/ ... m-n1018576
Category: Technology
Published: June 18, 2019

Description: The project is the biggest step of any major corporation into the emerging realms of digital currency and blockchain technology.
SAN FRANCISCO — Facebook is going into the banking business. The social networking company on Tuesday said it plans to help launch a digital currency in 2020, marking one of the company’s most aggressive moves yet to push beyond digital advertising. A new nonprofit group based in Geneva, the Libra Association, will oversee the currency, called Libra. It will initially be backed by Facebook’s expertise but governed by 28 founding partners including payment firms Visa and Mastercard and internet companies eBay, Spotify and Uber. Facebook said that it wants the currency to be available starting the first half of next year and that it believes many of the 2 billion people who are already on the company’s services will one day regularly use the new currency to buy things or send money internationally. “The motivation for this is to effectively enable a simple global currency and financial infrastructure that empowers billions of people,” Dante Disparte, head of policy and communications for the Libra Association, told NBC News. The project would bring a consumer-friendly version of digital currencies to smartphones around the world, potentially creating a way for people to easily transfer money, build credit and pay bills while avoiding costly fees. Libra is open source, meaning any company or person can build a business within its framework. For example, a consumer could buy some Libra using dollars and save them in a digital wallet. That Libra could then be sent to a family member via WhatsApp messenger or used to pay a bill in a foreign country without having to worry about an exchange rate. The project is the biggest step of any major corporation into the emerging realms of digital currency and blockchain technology, representing a vote of confidence that experiments in new forms of digital payments could be more than a passing fad. Blockchain is a decentralized system in which computers each contribute to a shared public ledger, allowing for secure transactions without a central authority. Libra, named partly after a Roman unit for weight and currency, will have echoes of bitcoin, the popular cryptocurrency, but also some key differences — most notably that it will be governed by a central authority and that its value will be tied to other assets. Facebook said it plans to offer financial services, possibly one day including loans, through a new subsidiary that specializes in Libra. The price of bitcoin has rallied above $9,000 in recent days, the highest in more than a year, as news reports about Facebook’s plans raised expectations for digital currencies. "Any cryptocurrency needs critical mass to have success, and you can't have more critical mass than Facebook,” said Jamie McCormick, managing director of Bitcoin Marketing, which helps companies launch products and services using cryptocurrencies. McCormick called Libra, “a very interesting development that will legitimize the industry.” Facebook said it would keep data about people’s financial transactions separate from data about social networks, so that Libra information would not be used to target advertising on Facebook or Instagram. Libra will not be exactly like bitcoin or other so-called cryptocurrencies that began emerging a decade ago. Cryptocurrencies are known for their decentralized nature, existing outside any central authority such as a government or large, corporate association. And the Libra value will be pegged to a reserve of real, low-volatility assets, making it relatively stable compared to the notoriously fluctuating value of bitcoin, according to Facebook and the Libra Association. The reserve, or “basket,” will have assets “like bank deposits and government securities in currencies from stable and reputable central banks,” Facebook said. The Libra could be useful to people who don’t have easy access to banking services or cash, such as people in crisis immediately after a natural disaster or other unstable situations, said Pete Lewis, a spokesman for Mercy Corps, a humanitarian organization that signed up as one of the 28 founding partners for the Libra Association. “A low-volatility currency could provide financial stability for people struggling with conflict,” Lewis said in an interview, adding that the Libra could give people an alternative to currencies that are experiencing hyperinflation in a crisis. Some people, though, may not want to keep their savings in a currency outside their local one. New York University economist Nouriel Roubini said on Monday that there would be “significant currency risk” for people using the “FB Coin.” “Most consumers are local and think/pay local and don’t want currency risk related to using a coin that is a basket of global currencies,” Roubini wrote on Twitter. Facebook investors and others who watch the company closely have expected the company to consider a digital currency or something like it since at least May 2018, when the company opened a division to focus on blockchain, the technology that makes cryptocurrencies possible through records kept on far-flung computers. Transactions made with Libra will be recorded in a blockchain designed to handle billions of possible accounts, according to a 12-page white paper outlining the plan. Facebook engineers designed the blockchain, but the technology will be open-source, meaning others may contribute to it, the white paper says. Central to the thinking behind Libra is that a wide array of companies, not just Facebook, will be involved in decision-making and begin offering for-profit services related to the currency, Disparte said. “This will start to develop a wave of responsible financial innovation,” he said. Money transfers, though, have become a competitive business. In addition to established players such as Western Union, apps like Venmo, TransferWise and Remitly offer ways to send money overseas, at various speeds and costs. Facebook said it plans to begin offering accounts next year through a new subsidiary called Calibra, echoing the name of the new currency. Calibra will be a digital wallet that will allow people to send money in the form of Libra “at low to no cost,” the company said. Calibra will be integrated into through Facebook’s WhatsApp and Messenger services. WhatsApp and Messenger are central to Facebook’s future, as CEO Mark Zuckerberg tries to respond to a shift in how people spend their time — away from public news feed posts toward private messaging. “We want sending money to be as easy as sending a text message,” Kevin Weil, vice president of product for Calibra, said in an interview. He said the average cost now to send money worldwide was 7 percent, and that a lower transaction cost could eventually mean lower prices for services such as Uber rides. Facebook declined to say how much the company has spent on the digital currency effort, but Weil said financial services could be an important part of Facebook’s business if Libra proves popular. Initially, “the whole goal will be around driving adoption,” he said. “If we’re successful at that, we think there will be other opportunities to provide financial services to people that would be a business to us.” Disparte said that the Libra Association wants to have 100 organizations as partners by the time the digital currency debuts. Each of the partners will have equal voting power, although Facebook “is expected to maintain a leadership role through 2019,” according to the white paper. In addition to the Roman unit of measure for weight that was associated with coins, the name, he said, also comes from the astrological sign represented by balanced scales and partly by the French word “libre,” meaning freedom. “You have money, justice and freedom, and that really is the spirit of this new project,” Disparte said. Facebook is offering employees working on Libra the option of being paid in the currency, The Information, a tech news website, reported this month.
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Facebook reveals Libra cryptocurrency, with lofty goals

Postby smix » Fri Jun 21, 2019 11:38 pm

Facebook reveals Libra cryptocurrency, with lofty goals
Reuters

URL: https://www.reuters.com/article/faceboo ... SL8N23O1GU
Category: Business
Published: June 18, 2019

Description: SAN FRANCISCO/NEW YORK, June 18 (Reuters) - Facebook Inc revealed plans on Tuesday to launch a cryptocurrency called Libra, the latest development in its effort to expand beyond social networking and move into e-commerce and global payments. Facebook has linked with 28 partners in a Geneva-based entity called the Libra Association, which will govern its new digital coin set to launch in the first half of 2020, according to marketing materials and interviews with executives. Facebook has also created a subsidiary called Calibra, which will offer digital wallets to save, send and spend Libras. Calibra will be connected to Facebook’s messaging platforms Messenger and WhatsApp, which already boast more than a billion users. The Menlo Park, California-based company has big aspirations for Libra, but consumer privacy concerns or regulatory barriers may present significant hurdles. Facebook hopes it will not only power transactions between established consumers and businesses around the globe, but offer unbanked consumers access to financial services for the first time. The name “Libra” was inspired by Roman weight measurements, the astrological sign for justice and the French word for freedom, said David Marcus, a former PayPal executive who heads the project for Facebook. “Freedom, justice and money, which is exactly what we’re trying to do here,” he said. Facebook also appears to be betting it can squeeze revenue out of its messaging services through transactions and payments, something that is already happening on Chinese social apps like WeChat. The Libra announcement comes as Facebook is grappling with public backlash due to a series of scandals, and may face opposition from privacy advocates, consumer groups, regulators and lawmakers. Some Facebook adversaries have called for the company to incur penalties, or be forcibly broken up, for mishandling user data, allowing troubling material to appear on its site and not preventing Russian interference in the 2016 presidential election through a social media disinformation campaign. It is not clear how lawmakers or regulators will react to Facebook making a push into financial services through the largely unregulated world of cryptocurrency. In recent years, cryptocurrency investors have lost hundreds of millions of dollars through hacks, and the market has been plagued by accusations of money-laundering, illegal drug sales and terrorist financing. Facebook has engaged with regulators in the United States and abroad about the planned cryptocurrency, company executives said. They would not specify which regulators or whether the company has applied for financial licenses anywhere. Facebook hopes it can bring global regulators to the table by publicizing Libra, said Kevin Weil, who runs product for the initiative. “It gives us a basis to go and have productive conversations with regulators around the world,” said Weil. “We’re eager to do that.”
MAJOR PARTNERS
Bitcoin, the most well-known cryptocurrency, was created in 2008 as a way for pseudonymous users to transfer value online through encrypted digital ledgers. Early developers believed that the world needed an alternative to traditional currencies, which are controlled by governments and by central banks. Since then, thousands of bitcoin alternatives have launched, and Facebook is just one of dozens of blue-chip companies dabbling with the underlying technology. But its status as a Silicon Valley behemoth that touches billions of people around the world has created significant buzz around Libra’s potential. Partners in the project include household names like Mastercard Inc, Visa Inc, Spotify Technology SA , PayPal Holdings Inc, eBay Inc, Uber Technologies Inc and Vodafone Group Plc, as well as venture capital firms like Andreessen Horowitz. They hope to have 100 members by Libra’s launch during the first half of 2020. Each member gets one vote on substantial decisions regarding the cryptocurrency network and firms must invest at least $10 million to join. Facebook does not plan to maintain a leadership role after 2019. Though there are no banks among the inaugural members, there have been discussions with a number of lenders about joining, said Jorn Lambert, executive vice president for digital solutions at Mastercard. They are waiting to see how regulators and consumers respond to the project before deciding whether to join, he said. The Libra Association plans to raise money through a private placement in the coming months, according to a statement from the association.
PRIVACY, REGULATORY CONCERNS
Although Libra-backers who spoke to Reuters or provided materials are hopeful about its prospects, some expressed awareness that consumer privacy concerns or regulatory barriers may prevent the project from succeeding. Calibra will conduct compliance checks on customers who want to use Libra, using verification and anti-fraud processes that are common among banks, Facebook said. The subsidiary will only share customer data with Facebook or external parties if it has consent, or in “limited cases” where it is necessary, Facebook said. That could include for law enforcement, public safety or general system functionality. Transactions will cost individuals less than merchants, Facebook said, though executives declined to provide specifics. Each Libra will be backed by a basket of government-backed assets. The company plans to refund customers who lose money because of fraud, Facebook said. Sri Shivananda, Paypal’s chief technology officer said in an interview that the project is still in its “very, very early days,” and there were conversations in progress with regulators. Mastercard’s Lambert characterized Libra similarly, noting much needed to happen before the launch. If the project receives too much regulatory pushback, he said, “we might not launch.”



Swiss regulator says in contact with initiators of Facebook's Libra
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TJ16Q
Category: Business
Published: June 18, 2019

Description: (Reuters) - Switzerland’s financial regulator FINMA said on Tuesday that it is in contact with the “initiators” of Libra, Facebook’s planned cyrptocurrency. A FINMA spokesman confirmed to Reuters it was in contact but declined to comment further on whether the project was in the process of obtaining any specific regulatory permissions. Facebook revealed its plans for Geneva-based Libra earlier on Tuesday.



Factbox: Facebook's new cryptocurrency Libra and digital wallet Calibra
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TJ0U3
Category: Business
Published: June 18, 2019

Description: SAN FRANCISCO/NEW YORK (Reuters) - Facebook Inc revealed plans to establish a cryptocurrency called Libra on Tuesday. It will be run by an association comprised of other corporate investors and non-profit members, with an expected launch in the first half of 2020. Here are some details:
THE COIN
Libra will be a digital currency backed by a reserve of real-world assets, including bank deposits and short-term government securities, and held by a network of custodians. The structure is intended to foster trust and stabilize the price. Although Libra prices may not always align with the underlying assets, holders should have a “high degree of assurance” that they can convert coins into traditional currency based on an exchange rate, according to the project’s information. Libra will trade on a network of exchanges, which Facebook did not identify.
TECHNOLOGY
Libra transactions will be powered and recorded by a blockchain, which is a shared ledger of transactions maintained by a network of computers. The Libra blockchain will be permissioned, meaning that only entities authorized by the governing association will be able to run the computers. Its governance differs from bitcoin, which does not have an entity in charge. The software will be “open source,” meaning companies outside the association can build applications on top of it. The association plans to move toward a permissionless blockchain within five years of Libra’s launch.
THE ASSOCIATION
The Libra Association is a 28-member independent non-profit based in Geneva, Switzerland. It will oversee major decisions about the digital coin. Members include Mastercard Inc, Visa Inc, Spotify Technology SA, PayPal Holdings Inc, eBay Inc, Uber Technologies Inc and Vodafone Group Plc, as well as venture capital firms Andreessen Horowitz and Thrive Capital. There is a minimum $10 million investment to join, except for non-profit members like financial inclusion group Kiva. The association aims to have 100 members by launch. Each will have one vote on important issues. Facebook will be a member via Calibra, a newly created subsidiary that will offer a digital wallet for Libra.
THE WALLET
Individuals and merchants will be able to use Calibra to store, send and receive Libras. It will be available as a standalone app on smartphones, as well as a button within Facebook’s Messenger and WhatsApp products. Facebook eventually wants to make Calibra available for transactions across its family of apps, such as digital checkouts for purchases on Instagram. Executives envision users purchasing Libra through the app either by linking a bank account or, for people without banks, at physical locations like cash transfer businesses and convenience stores. Calibra engineers are involved in building the blockchain, though Facebook says it intends to keep the currency and the wallet in separate entities. Calibra has about 100 employees, mostly based at Facebook’s headquarters in Menlo Park, California, as well as in Tel Aviv. Calibra executive Kevin Weil told Reuters he did not foresee a dramatic expansion beyond that headcount.
PRIVACY AND SECURITY
Every person who uses Calibra will have to go through a “know your customer” process, which verifies user identities to prevent financial crimes. That means anyone who signs up must share a government ID and other personal information. Calibra will provide support to customers who lose phones or their passwords, and refund customers whose Libras are stolen by fraudsters, Facebook said. Calibra will only share user data with parent company Facebook and third parties when it has customer consent, or in other “limited cases,” such as when law enforcement requests information, according to a statement. Facebook pledged not to use Calibra data to improve ad targeting. Businesses will see the same information about customers who pay with Libra as they do about customers who pay with credit cards, Weil told Reuters.



U.S. lawmaker calls for hearing into Facebook's cryptocurrency
Reuters

URL: https://www.reuters.com/article/faceboo ... SL2N23P1F8
Category: Politics
Published: June 18, 2019

Description: WASHINGTON, June 18 (Reuters) - A senior Republican lawmaker wants Congress to promptly examine Facebook Inc’s decision to launch its own cryptocurrency. Representative Patrick McHenry, the senior Republican on the House Financial Services Committee, wrote a letter Tuesday to committee Chairwoman Maxine Waters, a Democrat, calling for a hearing on the initiative, dubbed Libra. “We know there are many open questions as to the scope and scale of the project and how it will conform to our global financial regulatory framework,” he wrote. “It is incumbent upon us as policymakers to understand Project Libra. We need to go beyond the rumors and speculations and provide a forum to assess this project and its potential unprecedented impact on the global financial system.” A spokeswoman for McHenry said he would be open to having Facebook testify directly about the move. Facebook’s announcement has already attracted criticism from some prominent Democrats, including Senator Sherrod Brown, the senior Democrat on the Senate Banking Committee, and Representative Katie Porter, who sits on Waters’s panel. Both called for close regulatory scrutiny of the move citing data privacy concerns. Waters, through a spokeswoman, did not have an immediate statement on Facebook’s announcement.



Senior U.S. lawmaker says Facebook should halt cryptocurrency project pending review
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TJ2VU
Category: Politics
Published: June 18, 2019

Description: WASHINGTON (Reuters) - U.S. House Financial Services Committee Chairwoman Maxine Waters said Tuesday that Facebook Inc should halt development of its announced cryptocurrency until Congress and regulators conduct a review.

stares-maxinely.jpg

In a statement, Waters also said Facebook executives should testify before Congress about the product, dubbed Libra, saying the company has “repeatedly shown a disregard for the protection and careful use of this data.” “Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action,” she said in a statement.



U.S. lawmaker calls for Facebook to pause cryptocurrency project
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TJ2SJ
Category: Politics
Published: June 18, 2019

Description: WASHINGTON (Reuters) - A leading U.S. House lawmaker on Tuesday called on Facebook Inc to halt development on its new cryptocurrency and for company executives to testify before Congress, adding to global concerns about what the digital currency could mean for data privacy and security. Maxine Waters, who chairs the House Financial Services Committee, said Facebook should halt development of the product, dubbed Libra, until Congress and regulators can review the issue, and called on company executives to testify before Congress. “Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data,” she said in a statement. “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users.” Her comments came after Representative Patrick McHenry, the senior Republican on her panel, also sought a hearing on Facebook’s new initiative. A Facebook representative said the company looked forward to answering lawmakers’ questions. Facebook’s announcement was met with immediate backlash from U.S. lawmakers and regulators across the globe, who are concerned that Facebook is already too massive and careless with users’ privacy. “Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy. We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight,” said Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, in a statement. U.S. Senator Mark Warner, a Virginia Democrat who also sits on Senate Banking Committee, expressed concern that through Libra, Facebook was using its scale in social networking to achieve dominance in adjacent markets like mobile payments. French Finance Minister Bruno Le Maire called for more regulation of tech companies. “This instrument for transactions will allow Facebook to collect millions and millions of data, which strengthens my conviction that there is a need to regulate the digital giants,” he said in an interview on Europe 1 radio. But Bank of England Governor Mark Carney said he had an “open mind” on the potential utility of the product, while warning it could face strict regulation. Facebook has engaged with regulators in the United States and abroad about the planned cryptocurrency, company executives said. They would not specify which regulators. A U.S. regulatory source briefed on the matter said Facebook had been in communication with U.S. regulators but added it was still unclear how the currency would be structured and whether it would directly fall under any existing U.S. regulatory regimes. Switzerland’s financial watchdog said it was in contact with the initiators of the Libra project but declined to comment on whether it was obtaining specific regulatory permission or status. Markus Ferber, a senior German lawmaker in the European parliament, said in a statement that Facebook’s new coin should put “regulators on high alert” and called on the European Commission to start work on regulatory framework for virtual currencies.



Facebook's cryptocurrency ambitions face privacy concerns, political backlash
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TJ0TN
Category: Politics
Published: June 18, 2019

Description: SAN FRANCISCO/NEW YORK (Reuters) - Facebook Inc announced ambitious plans on Tuesday to launch a new global cryptocurrency called Libra, part of an effort to expand into digital payments that immediately raised privacy concerns. The social networking giant has linked with 28 partners including Mastercard, PayPal and Uber to form Libra Association, a Geneva-based entity governing the new digital coin, according to marketing materials and interviews with executives. No banks are yet part of the group. To facilitate transactions, Facebook also created Calibra, a subsidiary that will offer digital wallets to save, send and spend Libras. Calibra will be connected to Facebook messaging platforms Messenger and WhatsApp. The whole system is scheduled to launch in the first half of 2020. Facebook executives and others associated with Libra have big aspirations. They hope it will not only power transactions between established consumers and businesses globally, but offer unbanked consumers access to financial services for the first time. Facebook is also betting Libra can squeeze more revenue out of its suite of apps, something already happening on Chinese social networks like WeChat. Representative Maxine Waters, chairwoman of the U.S. House Financial Services Committee, called for Facebook executives to testify before Congress and asked the company to halt development of Libra until lawmakers and regulators have reviewed the project. “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users,” Waters said in a statement. Other regulators, lawmakers and government officials around the globe also quickly issued critical statements. France’s finance minister said he had asked central bank heads from G7 countries to write a report on the project by mid-July. A Facebook representative said the company looked forward to answering lawmakers’ questions. Before Tuesday’s announcement, Facebook was already facing significant backlash over mishandling user data and not doing enough to prevent Russian interference in the 2016 U.S. presidential election. Those issues have led some government officials to call for Facebook to incur penalties, or be forcibly broken up. Kevin Weil, who runs product for the Libra initiative, said Facebook hopes it can bring global regulators to the table by publicizing its plan. “It gives us a basis to go and have productive conversations with regulators around the world,” he told Reuters. “We’re eager to do that.” The name “Libra” comes from Roman weight measurements, the astrological sign for justice and the French word for freedom, said David Marcus, who heads the project for Facebook. “Freedom, justice and money, which is exactly what we’re trying to do here,” Marcus said in an interview. Facebook shares closed up 0.1%.
UNREGULATED SECTOR
Facebook is using one of the least-regulated areas of finance for its foray into the sector. Bitcoin, the best-known digital coin, was created in 2008 as an alternative to traditional currencies that are controlled by governments and central banks. Some countries have explored ways to regulate the market since then, but crypto trading remains largely unsupervised. In the meantime, investors have lost hundreds of millions of dollars through steep price drops and crypto-exchange hacks. The market has also faced money-laundering and terrorist-financing allegations. But Facebook’s status as a Silicon Valley behemoth touching billions of people around the world could help legitimize what has so far been a niche and volatile market. Other Libra Association members include companies like Visa, Spotify, eBay and Vodafone, as well as venture capital firms like Andreessen Horowitz. They hope to have 100 members by Libra’s launch. Each gets one vote on substantial decisions and firms must invest at least $10 million to join. The group aims to raise money through a private placement in coming months. Facebook does not plan to maintain a leadership role after 2019. Though there are no major banks among the inaugural members, there have been discussions with them, said Jorn Lambert, executive vice president for digital solutions at Mastercard. Big lenders are waiting to see how regulators and consumers respond to the project before deciding whether to join, he said. Some Libra backers acknowledged that consumer privacy brawls or regulatory resistance could hinder their lofty goals, and detailed some steps they are taking to pre-empt those issues. For instance, Calibra plans to conduct compliance checks on customers who want to sign up, using verification and anti-fraud processes that are common among banks. The subsidiary will only share customer data with Facebook or external parties if it has consent, or in “limited cases” where it is necessary, Facebook said. That could include for law enforcement, public safety or general system functionality. Sri Shivananda, PayPal’s chief technology officer, said the project was still in its “very, very early days” in terms of getting necessary regulatory approvals and consumer buy-in. And, Mastercard’s Lambert said that if the project receives too much pushback, “we might not launch.”



Facebook called before Senate panel over digital currency project
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TK2SX
Category: Politics
Published: June 19, 2019

Description: WASHINGTON (Reuters) - Facebook Inc’s plans to create a global cryptocurrency will face scrutiny from the U.S. Senate Banking Committee on July 16, the latest sign that policymakers around the globe are casting a wary eye on the project. The hearing will explore the project, dubbed Libra, as well as any data privacy considerations it may raise, the committee said on Wednesday. No witnesses have been announced yet, according to a committee spokesperson. David Marcus, who oversees Facebook’s blockchain efforts, is expected to testify, according to a source in Washington familiar with the matter. The announcement comes one day after the social media giant unveiled plans to launch a global cryptocurrency, which immediately attracted attention from regulators across the globe, and skepticism from Washington. Representative Maxine Waters, the Democrat who chairs the House Financial Services Committee, said Tuesday she planned to similarly call Facebook to testify, and asked the company to halt the project while policymakers studied it. In May, the leaders of the Senate Banking Committee wrote to Facebook seeking information on rumors of its cryptocurrency project, and how it would protect consumer information. On Tuesday, a Facebook representative said the company looked forward to answering lawmaker questions. The company did not immediately respond to a request for comment on the July 16 hearing. Facebook hopes to launch the Libra in the first half of 2020. They hope it will not only power transactions between established consumers and businesses globally, but offer unbanked consumers access to financial services for the first time. Before Tuesday’s announcement, Facebook was already facing significant backlash over mishandling user data and not doing enough to prevent Russian interference in the 2016 U.S. presidential election. Those issues have led some government officials to call for Facebook to incur penalties, or be forcibly broken up.



U.S. government should consider halting Facebook cryptocurrency project: lawmaker
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TL2N2
Category: Politics
Published: June 20, 2019

Description: WASHINGTON (Reuters) - The U.S. government should consider forcing Facebook Inc to freeze work on its new cryptocurrency project, a senior U.S. lawmaker said on Thursday.

maxine-waters.jpg

Representative Maxine Waters, who chairs the House of Representative Financial Services Committee, said in a CNBC interview the government needs to study cryptocurrencies and Facebook’s initiative, dubbed Libra, further before permitting it to proceed. “We should ask them, as we are doing, or force them in any way that we can to place a moratorium on this new cryptocurrency that they’re putting into place,” she said, without offering specifics.



Facebook's Libra cryptocurrency could raise regulatory issues: BoE deputy governor
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TL0QR
Category: Politics
Published: June 20, 2019

Description: BRUSSELS (Reuters) - Plans by Facebook Inc to launch a new global cryptocurrency called Libra could raise regulatory issues, Bank of England Deputy Governor Sam Woods said on Thursday. “It does seem clear that something like this could be very important from a regulatory point of view,” Woods told a financial conference in Brussels, adding that regulators might have to think about the best treatment for this new asset class.



Unruly social media no model for Facebook's Libra currency: BoE's Carney
Reuters

URL: https://www.reuters.com/article/us-brit ... SKCN1TL23B
Category: Politics
Published: June 20, 2019

Description: LONDON (Reuters) - Facebook cannot expect its new Libra currency to benefit from the same unregulated free-for-all that helped the company achieve a dominant position in social media, Bank of England Governor Mark Carney said on Thursday. The U.S. social media company drew worldwide interest earlier this week when it announced plans to establish its own payment system, backed up by a currency it calls Libra. “The Bank of England approaches Libra with an open mind but not an open door,” Carney says in a speech he will give in the heart of London’s financial district. “Unlike social media ... the terms of engagement for innovations such as Libra must be adopted in advance of any launch.” Carney, who will step down next January, delivers his speech alongside finance minister Philip Hammond, who is expected to warn of the risk that a no-deal Brexit could trigger extended austerity and a Scottish vote for independence. Hammond also sets out his vision for Britain’s financial services, at a time when both the government and the BoE are keen to ensure London retains its place as the world’s leading financial center even after Britain leaves the EU. An immediate aim would be to improve coordination between British financial regulators, according to extracts from his speech - something welcomed by industry trade bodies. “To remain a dominant player we in the UK must do what London’s markets have always done: evolve,” Hammond said in advance extracts of his speech, adding that financial services might need to be more globally focused after Brexit.
CASH DOWN
Carney’s comments were part of a broader speech unveiling a major review into the future of Britain’s financial system, to cut costs for consumers, make it easier for small businesses to borrow and reduce banks’ compliance expenses. Cash usage is falling rapidly in Britain in favor of credit and debit cards - though some older Britons and businesses in rural communities with poor internet access still prefer cash. If Libra comes close to meeting Facebook’s ambitions, it would be a systematically important payment system which the BoE and financial regulators worldwide would take a keen interest in, Carney said. The company would need to meet tough standards on consumer protection and fighting money-laundering, as well as ensuring the platform boosted competition and was genuinely open so that “new users can join on equal terms”. The BoE - which already allows some non-banks to use its payment services - said it would consult on being the world’s first major jurisdiction to allow non-banks to deposit money with it overnight, rather than relying on banks. “Expanding access can improve the transmission of monetary policy and increase competition,” Carney said. Britain’s major banks still dominate consumer and small business financial services, but came close to collapse during the 2008 financial crisis, costing taxpayers billions. Positive Money, a campaign group set up after the crisis, welcomed the prospect of a wider range of financial services providers but said the BoE should go further and create its own digital currency for the public - something the BoE has not deemed appropriate so far. Carney also gave a date - 2021 - for when British financial institutions account for the risks of climate change in a ‘stress test’ of their finances. Climate change is a major preoccupation for Carney. Britain’s government recently announced the aim of making the country carbon-neutral by 2050, the first G7 country to do so. The central bank governor did not address the more immediate challenge of Britain’s departure from the European Union, due on Oct. 31, or the outlook for interest rates and the broader economy. Earlier on Thursday the BoE kept interest rates on hold at 0.75% but cut its growth forecast for the second quarter to zero, highlighting risks from global trade tensions and growing fears of a no-deal Brexit.



France creating G7 cryptocurrency taskforce, says central banker
Reuters

URL: https://www.reuters.com/article/faceboo ... SP6N21G022
Category: Politics
Published: June 21, 2019

Description: PARIS, June 21 (Reuters) - France will set up a G7 taskforce on “stable coin” projects, including Facebook’s planned Libra cryptocurrency, that will be led by European Central Bank board member Benoit Coeure, France’s central bank Governor Francois Villeroy de Galhau said on Friday. France currently holds the G7 presidency. As Villeroy spoke, Bank of England Governor Mark Carney said Libra had to be safe or it would not happen, and that the world’s major central banks would need to have oversight.



Bundesbank's Weidmann says 'virtual' coins could undermine banks if used widely
Reuters

URL: https://www.reuters.com/article/us-ecb- ... SKCN1TM0VU
Category: Politics
Published: June 21, 2019

Description: FRANKFURT (Reuters) - Virtual tokens pegged to official currencies, known as stablecoins, could undermine banks if they became widely used, the head of Germany’s central bank said on Friday. Under such circumstances “they would almost certainly become systemic by nature, not only because of their operational risks, but also in a more fundamental way: they could undermine the deposit-taking of banks and their business models,” Jens Weidmann told a conference at the Bundesbank. “This might disrupt transaction banking and financial market intermediation,” Weidmann, who also sits on the European Central Bank’s Governing Council, said. U.S. social network Facebook this week announced plans to establish its own payment system, backed up by a stablecoin it calls Libra.



European central bankers claim oversight over Facebook’s cryptocurrency
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TM188
Category: Politics
Published: June 21, 2019

Description: FRANKFURT (Reuters) - Three European central bankers are claiming oversight over Facebook’s planned virtual currency to ensure it will not jeopardize the financial system or be used to launder money. Facebook drew worldwide interest this week when it announced plans to introduce a cryptocurrency called Libra, part of an effort to expand into digital payments. Facebook said Libra would be backed by real-world assets, including bank deposits and short-term government securities, to make it more stable — and thus practical for payments and money transfers — than other cryptocurrencies such as bitcoin. With the potential to reach billions of internet users and the backing of payment giants like Visa, Facebook hopes Libra will not only power transactions but offer people without bank accounts access to financial services for the first time. But the central bankers of Britain, France and Germany said Facebook should expect scrutiny. “It has to be safe, or it’s not going to happen,” Bank of England Governor Mark Carney told the BBC in an interview broadcast on Friday. “We, the Fed, all the major global central banks and supervisors, would have direct regulatory (oversight),” he said, referring to the U.S. Federal Reserve. Global central bankers have so far largely refrained from regulating digital currencies, having failed last year to reach an agreement on how to do so and concluding they were too small to pose a risk to the financial system. Other global regulators have been monitoring the growth of cryptocurrencies. The Financial Action Task Force, a Paris-based global anti-money-laundering watchdog, is expected to announce rules to address the use of digital coins for illegal purposes. But Libra’s announcement has put the issue back on their radar, with the focus now shifting from bitcoin to so-called stablecoins, such as Facebook’s Libra, that are backed by real-world assets. France said on Friday it would create a task force on the matter as part of its presidency of the Group of Seven club of the world’s seven largest economies. It will be chaired by European Central Bank board member Benoit Coeure. “It will in the coming months examine the anti-money laundering requirements, but also those of consumer protection and operational resilience and any issues relating to monetary policy transmission,” said France’s central bank governor, Villeroy de Galhau. His German counterpart, Jens Weidmann, warned that stablecoins could undermine banks if they became a widespread alternative to bank deposits in conventional currencies. “They could undermine the deposit-taking of banks and their business models,” Weidmann said on Friday. “This might disrupt transaction banking and financial market intermediation.” One of the issues to be considered by the G7 task force is custodianship, or where and how the official currencies underpinning the tokens would be stored, according to a letter seen by Reuters. This is a crucial point for stablecoins. Tether, the highest-profile stablecoin, with coins worth around $3.6 billion in existence, has faced questions over whether it holds enough U.S. dollars to back the tokens in circulation. The company has said it has sufficient reserves. Facebook is grappling with public backlash after a series of scandals ranging from privacy breaches to accusations that it is restricting freedom of speech.



Facebook co-founder says Libra could shift monetary clout to private companies: FT
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TM1LI
Category: Politics
Published: June 21, 2019

Description: (Reuters) - Facebook Inc’s Libra cryptocurrency would hand over much of the control of monetary policy from central banks to private companies, the company’s co-founder Chris Hughes said in an opinion piece in the Financial Times on Friday. “If global regulators don’t act now, it could very soon be too late,” Hughes said. Hughes also said the corporations that would oversee the new currency would put their private interests - profits and influence - ahead of public ones. Facebook did not immediately respond to a Reuters request for comment.

fb-blocked-from-electronic-wallet.jpg

The social media giant revealed plans on Tuesday to launch a cryptocurrency called Libra and linked up with 28 partners in a Geneva-based entity called the Libra Association, which will govern the new digital coin set to launch in the first half of 2020. Hughes, a former roommate of Facebook CEO Mark Zuckerberg, had earlier called for a break-up of the social network in an opinion piece in the New York Times in May. Facebook, then, rejected here Hughes' call to split the company in three. The company has been under scrutiny from regulators around the world over data sharing practices as well as hate speech and misinformation on its networks. Some U.S. lawmakers have pushed for action to break up big tech companies as well as federal privacy regulation.



Global money-laundering watchdog launches crackdown on cryptocurrencies
Reuters

URL: https://www.reuters.com/article/us-mone ... SKCN1TM1I8
Category: Politics
Published: June 21, 2019

Description: FRANKFURT/LONDON (Reuters) - Cryptocurrency firms will be subjected to rules to prevent the abuse of digital coins such as bitcoin for money laundering, a global watchdog said on Friday, the first worldwide regulatory attempt to constrain the rapidly growing sector. Financial Action Task Force (FATF), set up 30 years ago to tackle money laundering, told countries to tighten oversight of cryptocurrency exchanges to stop digital coins being used to launder cash. The move by FATF, which groups countries from the United States to China and bodies such as the European Commission, reflects growing concern among international law enforcement agencies that cryptocurrencies are being used to launder the proceeds of crime. Countries will be compelled to register and supervise cryptocurrency-related firms such as exchanges and custodians, which will have to carry out detailed checks on customers and report suspicious transactions, FATF said in a statement. “This will enable the emerging FinTech sector to stay one-step ahead of rogue regimes and sympathizers of illicit causes searching for avenues to raise and transfer funds without detection,” U.S. Treasury Secretary Steven Mnuchin told a FATF meeting in Florida, according to remarks posted on the U.S Treasury website. Simon Riondet, head of financial intelligence at Europol, the European police agency that coordinates cross-border investigations, told Reuters he saw a growing use of cryptocurrencies in laundering criminal money. “This is a risk we all face worldwide,” FATF President Marshall Billingslea told Reuters. “Nations need to move forward rapidly. This is an urgent issue.” Europol broke up a Spanish drugs cartel this year that laundered cash using two crypto ATMs, machines that issue cryptocurrencies for cash. Riondet said cryptocurrencies were used to transfer money across borders, as well as to break down large criminal money transfers into smaller amounts that are harder to detect. “We also have some investigation on the dark web in which the payments are made in cryptocurrencies, sometimes in bitcoin, and they are switching it to more anonymized cryptocurrencies,” he said.
SEEKING OVERSIGHT
The move by the FATF comes amid heightened concern about a sector, championed by some as a means of shaking off government controls, but seen by central banks as a potential threat to their status as guarantors of the financial system. There is little available data on the scale of money laundering using cryptocurrencies although, given the relatively small scale of the market, it is likely to be a fraction of money laundering using cash. This week, Facebook prompted criticism from regulators and policymakers when it unveiled plans for a cryptocurrency it dubbed Libra. Three European central bankers have claimed oversight over Libra to ensure it would not jeopardize the financial system or be used to launder money. Germany’s central bank chief, Jens Weidmann, said virtual tokens pegged to official currencies, known as stablecoins, could undermine banks if they become widely used. The FATF initiative marks the first attempt to establish a global approach in regulating the $300 billion coin trading market, supplementing a current patchwork ranging from Japan’s move to license exchanges to an outright ban in China. Global Digital Finance, an industry body that represents crypto-related companies worldwide, said it welcomed the FATF rules. But Teana Baker-Taylor, its executive director, said FATF recommendations to compel firms to include in cryptocurrency transactions details of senders and beneficiaries could be difficult to meet. “We are obviously going to comply,” Baker-Taylor said. “The challenge is asking for something that there is the technical facility to do.” The rules could spark consolidation in the cryptocurrency sector because of the high cost of implementing anti-money laundering checks for smaller firms, said Megan Gordon, a partner at Clifford Chance law firm.



Politicians need to move fast as Facebook & Co move into finance: BIS
Reuters

URL: https://www.reuters.com/article/us-bis- ... SKCN1TO0OH
Category: Politics
Published: June 23, 2019

Description: LONDON (Reuters) - Politicians need to quickly coordinate regulatory responses to new risks from technology companies like Facebook moving into finance, though banks won’t be squeezed out anytime soon, the Bank for International Settlements (BIS) said on Sunday. The social media group’s announcement last week that it wants to expand into payments and launch its own coin Libra has focused minds of regulators and central bankers, the BIS said. Such a move by Big Tech mixes extensive data on individuals with activities that could potentially undermine financial stability, the BIS said. It touches on competition, data privacy, markets and banking, all areas that have their own regulators that would need coordinating, Hyun Song Shin, economic adviser and head of research at the BIS, told reporters. “To make that coordination possible, I think there would need to be more of a concerted effort on the part of our political leaders to take that forward,” Shin said. The Group of Seven economies is looking at Facebook’s plans, but no single global authority has taken the lead role so far. Shin suggested it could be up to the Group of 20 economies (G20), a body that last year failed to muster consensus that went beyond gathering more information on cryptoassets. “The role of Big Tech in finance introduces very many new and very unfamiliar elements which pushes us to take a fresh look at some of the activities that international policymakers engage in,” Shin said. “This is something that needs attention sooner rather than later.”
COURTESY MEETING
Shin said the BIS, a forum for central banks based in Basel, Switzerland, had a “courtesy meeting” with the initiators of the Libra project ahead of its announcement, but knows no more than what the social media company has made public. He added that questions over what kind of regulation Libra would be subject to did not come up in the meeting, declining to give details of when it took place. Banks have so far faced external competition in payments from financial technology (fintech) firms, but many are relatively small and without the depth of data that the likes of Google, Alibaba, Amazon, Apple and eBay have to hand. On Sunday the BIS published a chapter on Big Tech in finance from its annual economic report. It looked at the sheer volume of data held by social media, search engines and ecommerce firms, putting them at an immediate advantage over fintech firms and banks. Their entry into finance could spark rapid change in financial services as the broad range of data on consumer behavior and preferences paints a more detailed picture of a person’s creditworthiness, the BIS said. Banks typically rely on credit scores. While Big Tech could mean financial services becoming available to people normally shut out of banking, it also raises potential data privacy and competition issues, Shin said. It was early days regarding the impact of Libra if it goes ahead. “We need to see much more before we can come to a judgment,” Shin said. Regulators will need to decide how the activity of Facebook and others in finance fits into existing, regulated categories. The same activity should face the same regulation, the BIS paper said, though Shin added: “We should not rule out a new approach that fits better.” But even the biggest forays by Big Tech into finance, such as in money-market funds in China, represent a tiny fraction of total banking deposits, the BIS said. “Banks are not in imminent danger of being squeezed out,” Shin said. “It would not be right to be alarmist here as the banks still have a very big advantage.”



Facebook's Libra coin closely watched by authorities: FSB
Reuters

URL: https://www.reuters.com/article/us-g20- ... SKCN1TQ1Z5
Category: Politics
Published: June 25, 2019

Description: LONDON (Reuters) - Facebook’s plan to expand into payments is not expected to be on the agenda of this week’s G20 summit in Japan, but the social media giant’s intentions could lead regulators to take a closer look at crypto assets, a G20 regulatory group said on Tuesday. Randal Quarles, chair of the Financial Stability Board (FSB) which coordinates financial rules for G20 countries, said crypto-assets did not currently pose a risk to global financial stability, but gaps may occur where they fall outside the remit of regulators or from the absence of international standards. Facebook said last week it wanted to expand into payments and launch its own coin, Libra. “A wider use of new types of crypto-assets for retail payment purposes would warrant close scrutiny by authorities to ensure that they are subject to high standards of regulation,” Quarles said ahead of a summit of Group of 20 countries in Japan this week. “The FSB and standard setting bodies will monitor risks very closely and in a coordinated fashion, and consider additional multilateral responses as needed,” said Quarles, who is also Federal Reserve Vice Chair for Supervision. G20 finance ministers and central bankers agreed in March 2018 to monitor crypto assets, but stopped short of some specific action called for by some member countries. The FSB said if Libra takes off, a different kind of regulatory response would be needed, but it does not expect Facebook’s plans to be a concrete topic of conversation at the G20 meeting in Japan on Friday and Saturday. The FSB’s financial innovation network met with Facebook to discuss Libra, but the discussions were general and not detailed. The Bank for International Settlements, a central bank forum in Basel, Switzerland, that also houses the FSB, said on Sunday that politicians needed to quickly coordinate regulatory responses to new risks from technology companies like Facebook moving into finance.
PREPOSITIONING
The FSB helped to push through a welter of financial reforms after a financial crisis a decade ago forced governments to bail out undercapitalized lenders. Much of its work is now focused on making sure all the new rules are being implemented. Lately, there has been a growing concern that global capital markets are being split up by national regulators forcing foreign banks to hold large amounts of capital and liquidity locally, and not just at the parent level, in case they go bust. The FSB said such “prepositioning” of capital and liquidity had been put on its agenda for discussion. The aim is for international agreement to ensure countries that host foreign banks are comfortable they hold enough capital and liquidity, but not to the extent that it fragments a global market, the FSB said.



European watchdogs demand detail on Facebook's cryptocurrency
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TQ0YR
Category: Politics
Published: June 25, 2019

Description: LONDON/ZUG, Switzerland (Reuters) - Facebook’s fledgling cryptocurrency faced mounting scrutiny on Tuesday as European central bankers and regulators demanded more detail on the social media giant’s Libra project. Britain’s top financial regulator said there was not yet enough information to understand Libra, adding that it could be very significant for public policy and that would not easily get the go-ahead without further disclosure. Facebook last week announced plans to launch Libra within the first half of 2020, part of an effort to expand beyond social media to e-commerce and digital payments. “They are not going to walk through authorization without that,” Andrew Bailey, chief executive of the Financial Conduct Authority, told a British parliamentary committee. Cryptocurrencies such as bitcoin remain one of the least-regulated areas of finance, and the response of domestic and international financial regulators and monetary authorities to the Libra project will have a crucial impact on its prospects. S&P Global Ratings said regulatory hurdles were the main hurdle to Libra’s success, and risked delays to its launch. The coin would likely be subject to differing regulatory approaches, as is the case with existing cryptocurrencies, it said. “This level of scrutiny could imply either delays or limited scope in the initial roll-out,” S&P said in a report. Facebook’s project has raised privacy concerns among U.S. lawmakers and prompted European central bankers to claim oversight to ensure it would not jeopardize the financial system or be used to launder money. Until now, global central bankers have largely refrained from regulating digital currencies, concluding last year they were too small to pose a risk to the financial system. Although Facebook’s plan to expand into payments is not expected to be on the agenda of this week’s G20 summit in Japan, the Financial Stability Board (FSB), which coordinates financial rules for G20 countries, said it could lead regulators to take a closer look at digital assets.
PLAY BY THE RULES
The FCA’s Bailey said the watchdog had been in contact with Facebook, and that many more engagements could be expected, while Domenico Gammaldi, the Bank of Italy’s head of market and payment system oversight, also called for further information. “The white paper, that means ‘white,’ without any information,” Gammaldi told the Crypto Valley Conference in Zug. Bank of France Governor Francois Villeroy de Galhau said that Libra would have to respect anti-money laundering regulations and its backers would have to seek a banking license if it was to offer services such as deposits. France is using its year-long presidency of the Group of Seven nations (G7) to set up a task force to tackle such concerns at an international level. Other central bankers were more sanguine about the project for which Facebook has recruited 28 partners including Mastercard, PayPal and Uber to form the Geneva-based Libra Association to govern the cryptocurrency. “I think it’s an interesting development and I’m pretty relaxed about it,” Thomas Moser, an alternate member of the Swiss National Bank’s governing board said. “They have clearly indicated that they are willing to play according to the rules, they have been contacting the regulators,” Moser said at the Crypto Valley Conference. The Bank for International Settlements, an umbrella group for central banks, said on Sunday that greater political coordination was needed to deal with the entry into finance of major tech firms like Facebook.



Fed to hold Facebook's crypto coin to 'high' bar: Powell
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1TQ2L3
Category: Politics
Published: June 25, 2019

Description: (Reuters) - The U.S. Federal Reserve is looking carefully at Facebook’s planned cryptocurrency Libra, and will hold it to high standards regarding protecting consumers and regulation, Federal Reserve Chairman Jerome Powell said on Tuesday. “Libra’s a new thing; we are looking at it very carefully,” Powell said in response to an audience question after a talk at the Council on Foreign Relations in New York. “Given the possible scale of it, I think that our expectations — from a consumer protection standpoint, from a regulatory standpoint — are going to be very, very high.” Facebook said last week it wanted to expand into payments and launch its own coin, Libra, by next year. “Authority for overseeing Libra is going to be in a number of places, but I think that the big picture is we are going to be looking really carefully at it,” said Powell, whose cautious remarks echoed those of other financial regulators around the world about the possible new currency.



Facebook's Libra coin likely to run a regulatory gauntlet
Reuters

URL: https://www.reuters.com/article/us-face ... SKCN1TT30A
Category: Politics
Published: June 28, 2019

Description: NEW YORK/SAN FRANCISCO(Reuters) - Facebook Inc will face unprecedented regulatory scrutiny over a new digital currency that the social media company hopes will become globally recognized legal tender within a year. Since Facebook unveiled its cryptocurrency, called Libra, 10 days ago, Reuters has spoken with more than a dozen people with experience in financial regulation, financial technology, payments or cryptocurrency. Few expected government agencies to proceed lightly. The company’s announcement was met with immediate backlash from U.S. lawmakers and regulators across the globe, who are concerned that Facebook is already too massive and careless with users’ privacy. Randal Quarles, chair of the Financial Stability Board, which coordinates financial rules for G20 countries, warned this week that wider use of crypto-assets for retail payments needs close global scrutiny by regulators. Cryptocurrencies such as bitcoin remain one of the least-regulated areas of finance. “It’s a complete disaster from a regulatory perspective,” said Barry Lynn, executive director of antitrust advocacy group the Open Markets Institute. “This is a corporation that’s got fires all over the world with regulators. It’s only going to get worse.” The plan for Libra involves taking customer deposits, investing them in government bonds, holding traditional currencies in reserves and offering cross-border services and transacting in the new coin will require engagement with central banks, financial regulators and enforcement authorities around the globe. The Facebook subsidiary formed to handle Libra transactions, called Calibra, has applied for money-transfer licenses in the United States and registered with the U.S. Financial Crimes and Enforcement Network (FinCEN) as a money services business, a spokesman said. It has also applied for the license required to operate a cryptocurrency business in New York from the state’s Department of Financial Services, a person familiar with the matter said. Representatives of Britain’s Financial Conduct Authority, the Bank of England, and Switzerland’s financial regulator FINMA have also said Facebook has been in touch. “The scrutiny that we’ve seen is something that we expected and welcome,” a Facebook spokesman said. “We announced this early by design in order to have this discourse in the open and gather feedback.” Reserves would be subject to monetary policies of countries where funds are located, the spokesman said. Calibra does not plan to apply for local banking licenses, he added. Facebook also formed a Geneva-based association to govern the new coin and hold the reserves, alongside several major partners. They plan to launch the whole system in the first half of 2020, and intend to eventually offer a broad suite of financial services, including loans. “They will not get a free pass anywhere,” said Sean Park, Founder and Chief Investment Officer, at Anthemis, a venture capital firm that backs digital financial services companies. “And, given their intention to be global, they will ultimately need literally hundreds, perhaps thousands, of licenses from hundreds of different regulators across the globe.” Besides central banks, markets regulators, consumer protection watchdogs, and agencies that tackle money laundering, tax evasion and other financial crimes, Facebook’s payment network might also have to adhere to the Principles for Financial Market Infrastructures that are set by the Bank for International Settlements and the International Organization of Securities Commissions. There are also the privacy and antitrust regulators around the globe with whom Facebook is already battling. “Just in terms of new regulators, it’s a whole new ball game,” said Jeff Bandman, a former U.S. Commodities Futures Trading Commission official who now runs the fintech regulatory consultancy Bandman Advisors. “A year is enough time to meet with regulators, figure out where the real trouble spots are and potentially scale it back to something narrower.” But its a challenge that Facebook appears willing to take, given the potential payoff with its 2.4 billion users, and the prospect of replicating the success of Chinese social networks such as WeChat, which has grown profits by offering financial services on its apps. RBC analysts described Libra as a “potential watershed moment” for Facebook in terms of revenue and user engagement. However, the costs could be substantial before income starts rolling in. It will need to set up an internal compliance framework with staffers who screen transactions for illicit activity and verify customer identities. Money-transfer giant Western Union Co for instance has spent $1 billion in compliance over the past five years, a spokesman said. Western Union is registered with FinCen and regulated under the U.S. Bank Secrecy Act, with licenses in 49 states, plus Washington, D.C. and three U.S. territories. It has licenses in more than 30 countries, and reporting obligations in more than 54. “I would say the risks are commensurate with the returns – potentially huge,” said Pascal Bouvier, managing partner at MiddleGame Ventures, a financial technology venture capital firm.



Fed chief calls for Facebook to halt Libra project until concerns addressed
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1U51VE
Category: Politics
Published: July 10, 2019

Description: WASHINGTON (Reuters) - U.S. Federal Reserve Chairman Jerome Powell said on Wednesday that Facebook’s (FB.O) plan to build a digital currency called Libra “cannot go forward” until serious concerns are addressed, comments that pressured the project and dented the price of the original cryptocurrency bitcoin. The strong comments from the most powerful U.S. financial regulator underscored the growing regulatory hurdles facing the proposed cryptocurrency, which has drawn scrutiny from policymakers globally. “Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability,” Powell said during his semi-annual testimony on monetary policy before the U.S. House of Representatives Financial Services Committee. “I don’t think the project can go forward” without addressing those concerns, he added later. Powell said any regulatory review of the project should be “patient and careful.” He noted that existing rules do not fit digital currencies. “It’s something that doesn’t fit neatly or easily within our regulatory scheme but it does have potentially systemic scale,” he said. “It needs a careful look, so I strongly believe we all need to be taking our time with this.” “We are very much aligned with the Chairman around the need for public discourse on this,” Facebook spokeswoman Elka Looks said in an email. “This is why we along with the 27 other Founding Members of the Libra Association made this announcement so far in advance, so that we could engage in constructive discourse on this and get feedback.” Powell’s comments about Libra hit the price of bitcoin, which fell as much as 7% during his three hours of testimony. Late last month, bitcoin climbed back to near $14,000 and has rallied by more than 30% since June 18, when Facebook announced plans to launch Libra. By mid-afternoon on Wednesday bitcoin was trading at $12,268.99, down 2.4% on the day. Facebook shares, too, took a hit during Powell’s appearance before the committee, although they largely recovered that lost ground and were trading 1.3% higher at $201.89 a share.
WORKING GROUP
It was unclear exactly how the Fed could slow the project if it wanted, given the murky regulatory treatment of digital currencies, but Powell’s perspective looms large. Facebook officials are scheduled to testify about the project later this month in Congress, where senior lawmakers have raised data privacy and other concerns. “What Facebook is planning raises serious privacy, trading, national security, and monetary policy concerns for consumers, investors, the U.S. economy and the global economy,” said Representative Maxine Waters, who chairs the House banking panel. Powell said the Fed has established a working group to follow the project and is coordinating with other central banks across the globe. He also expects a review from the U.S. Financial Stability Oversight Council, a panel of regulators charged with identifying broad risks to the financial system. Powell noted that he supports financial innovation as long as appropriate risks are identified, but he said the massive platform enjoyed by Facebook immediately sets Libra apart from other digital currency projects. “Facebook has a couple billion-plus users, so I think you have for the first time the possibility of very broad adoption,” he said. Any problems that could emerge through Libra “would arise to systemically important levels just because of the mere size of Facebook.”



Facebook vows Libra currency will wait for approval as U.S. airs worries
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKCN1UA1PF
Category: Politics
Published: July 16, 2019

Description: WASHINGTON (Reuters) - Facebook Inc said on Monday it would not proceed with the launch of its Libra cryptocurrency until regulatory concerns are addressed, as the U.S. Treasury secretary took the unusual step on of saying he had serious concerns it could be used for illicit activity. David Marcus, who oversees Facebook’s blockchain efforts, planned to tell Congress that Libra is not being built to compete with traditional currencies or interfere with monetary policy. “The Libra Association, which will manage the (Libra) Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena,” Marcus was due to say on Tuesday, according to prepared testimony released by the Senate Banking Committee. “Monetary policy is properly the province of central banks.” “Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals,” he said. Speaking with reporters, Mnuchin said he was not comfortable with Libra currently, particularly in guarding against money laundering and other illicit use. “They’re going to have to convince us of very high standards before they have access to the U.S. financial system,” he said. Mnuchin is the latest senior U.S. regulator to air concerns with the product, days after Federal Reserve Chairman Jay Powell expressed similar worries about the digital currency could be misused. “These cryptocurrencies have been dominated by illicit activity and speculation,” said Mnuchin. In his prepared testimony, Marcus said the Libra Association, the companies behind the Facebook-led cryptocurrency, planned to register as a money services business with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and fully expected to comply with anti-money laundering and Bank Secrecy Act rules. Since announcing the Libra project last month, Facebook has faced a torrent of criticism and skepticism from policymakers across the world who cite concerns over data security, money laundering and consumer protections. Marcus was scheduled to testify on Tuesday and Wednesday before congressional committees overseeing financial issues and several members have suggested the product be barred. Addressing some of those concerns, Marcus said in his prepared testimony that partners providing financial services with Libra will be required to comply with anti-money laundering rules. The Libra Association will not hold personal data of users beyond basic transaction information, and personal information provided to Calibra, the digital wallet Facebook is developing to hold Libra, will not be shared with the social media company and cannot be used for targeting ads. Marcus added that he expected the Swiss Federal Data Protection and Information commissioner to be Libra’s privacy regulator because the Libra Association is headquartered in Geneva. The association is also in preliminary talks with the Swiss Financial Markets Supervisory Authority on “an appropriate regulatory framework.” While promising Libra will adhere to relevant laws and regulations, Marcus aimed to sell lawmakers on the product’s merits as well, arguing the United States should not stifle such innovation. “I am proud that Facebook has initiated this effort here in the United States,” his testimony said. “I believe that if America does not lead innovation in the digital currency and payments area, others will. If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different.”



EU antitrust regulators raise concerns about Facebook's Libra currency: sources
Reuters

URL: https://www.reuters.com/article/us-eu-f ... SKCN1VB1BQ
Category: Politics
Published: August 21, 2019

Description: BRUSSELS (Reuters) - EU antitrust regulators want to know whether Facebook’s proposed Libra cryptocurrency and its use of consumer data pose possible anti-competitive constraints, people familiar with the matter said on Wednesday. The European Commission sent out a questionnaire earlier this month to various parties involved in Libra, giving respondents two to three weeks to provide feedback, the people said. By sending out a questionnaire, the EU could be preparing the ground for a formal investigation. The EU competition enforcer’s main focus is on the use of consumer data, the people said. Facebook has linked up with 28 partners in a Geneva-based entity called the Libra Association, which will govern its new digital coin, which is due to launch in the first half of 2020. “The Commission is in particular concerned about the possible competition restrictions that may result from the Association, especially with regard to information that will be exchanged and the use of consumer data,” the questionnaire said. The Commission, which can fine companies up to 10% of their global turnover for breaching EU antitrust rules and order them to change their business practices, declined to comment. Facebook was not immediately available for comment. The EU’s queries about Libra follow recent calls from politicians, central bankers and regulatory watchdogs for tight regulation of Libra to avoid disrupting the global financial system amid concerns that it may be used to launder money and could also affect the privacy of users. The EU document also sought information on the scheme’s governance structure and to what extent it is open to others. Bloomberg was the first to report about the Commission’s questionnaire.



Europe should ignore 'treacherous promises' of Facebook's Libra currency: ECB's Mersch
Reuters

URL: https://www.reuters.com/article/us-ecb- ... SKCN1VN0H0
Category: Politics
Published: September 2, 2019

Description: FRANKFURT (Reuters) - Facebook’s proposed Libra currency could undermine the European Central Bank’s ability to set monetary policy and Europe should ignore its siren call of “treacherous promises” ECB board member Yves Mersch said on Monday. Facebook announced Libra — a new digital coin backed by four official currencies and available to billions of social network users around the world — earlier this year, saying it hoped to launch next year. “Depending on Libra’s level of acceptance and on the referencing of the euro in its reserve basket, it could reduce the ECB’s control over the euro, impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks, and undermine the single currency’s international role,” Mersch added. Like regular currencies, Libra would be highly centralized, an “extremely concerning” setup since it is not backed by a lender of last resort and it is ultimately accountable to shareholders, who are not seen as repositories of public trust, Mersch added. “It is scheduled for release in the first half of 2020 by the very same people who had to explain themselves in front of legislators in the United States and the European Union on the threats to our democracies resulting from their handling of personal data on their social media platform,” Mersch added. Given these challenges, European regulatory and supervisory authorities need to assert jurisdiction over Libra and also need global cooperation to mitigate its risks. “I sincerely hope that the people of Europe will not be tempted to leave behind the safety and soundness of established payment solutions and channels in favor of the beguiling but treacherous promises of Facebook’s siren call,” Mersch added.



Facebook's Libra falls into 'big gap' in EU rules: regulator
Reuters

URL: https://www.reuters.com/article/us-eu-b ... SKCN1VQ1OY
Category: Politics
Published: September 5, 2019

Description: LONDON (Reuters) - Facebook’s proposed Libra cryptocurrency falls into a “big gap” in European Union financial regulation at a time when the bloc’s ability to tackle money laundering is already stretched, a top EU regulator said on Thursday. Jose Manuel Campa, chair of the European Banking Authority (EBA) said it was necessary to “keep an eye” on cryptoassets like Libra. The watchdog had issued investor warnings before Libra was even mooted that cryptoassets could be channels for money laundering activities, he said. Explaining that financial assets are covered by EU investment laws while electronic payments came under payments rules, Campa told the European Parliament’s economic affairs committee: “There is a big gap in between where most of these assets fall.” An assessment of Libra so far indicated it would be “in that big gap”, he added. Stopping money laundering has shot up the agenda in Europe after a spate of scandals at banks, including Danske Bank (DANSKE.CO). Denmark’s biggest lender has admitted to having handled 200 billion euros of suspicious transactions through its Estonian branch between 2007 and 2015. There is no consensus within the 28-country EU for a standalone agency to crack down on money-laundering, leaving enforcement to national authorities that have wide discretion and differing approaches. This left the EBA looking like a poorly resourced “paper tiger”, only able to issue guidelines to national regulators, lawmakers said on Thursday. The Paris-based agency has just three staff working on ensuring that national authorities comply with EU anti money-laundering rules, with another eight due to be added over the next three years, Campa said. “We have very limited resources,” Campa said. But lawmakers slammed a decision by national supervisors in April to effectively clear financial regulators in Estonia and Denmark over potential legal breaches in how they applied EU money laundering rules in relation to Danske Bank. “That EBA is able to conclude no breach in union (EU) law is really a scandal from my point of view. We need a strong EBA,” said Niels Fuglsang, a Danish member of the committee. Campa said the EBA board was looking at how to make better use of its “breach of union law” procedure, which proved less effective in historic cases like at Danske Bank. An official from the European Commission told lawmakers that the EU executive could bring its own EU Treaty violation case in relation to Danske case. “Things have not been concluded. We are still analyzing that matter,” she said.
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Facebook’s Libra Is a License to Print Money

Postby smix » Mon Jun 24, 2019 11:33 am

Facebook’s Libra Is a License to Print Money
The Wall Street Journal

URL: https://www.wsj.com/articles/facebooks- ... 1561282380
Category: Business
Published: June 23, 2019

Description: On some reasonable-sounding assumptions, Libra could be insanely profitable for its founders, but a lot less appealing for users
Buy Facebook’s Libra and you are literally giving the social media giant a license to print money, in the form of its new cryptocurrency. A bunch of big companies have agreed to pony up $10 million each to take part, and it is easy to see why: On some reasonable-sounding assumptions about its takeup, it could be insanely profitable in real money, too. Yet, delve into the plans and Libra looks a lot less appealing to users than Facebook’s hype suggests. The profits would come from interest on the reserve backing Libra, designed to keep Libra’s value stable. All interest is diverted to the companies backing Libra’s governing body, while holders of Libra itself earn nothing—giving the founders profits akin to the seigniorage made by central banks. Assume one in 10 of the world’s 1.7 billion unbanked each hold $10 of Libra plus half of Facebook’s 2.4 billion other users sign up, putting in $50 each. The backers would get the interest on $61 billion of reserves. They’ve pledged to hold a very boring safe portfolio of global bonds and bank accounts, which might earn 1% tops. Still, that is $600 million or so a year. Take out $100 million as a wild guess of what it costs to run the system, and assume the 24 initial founders were joined by another 100 helping finance the expansion, and it would generate 40% returns on their initial investment every year. If interest rates ever go up, those returns would be much higher. It is easy to get carried away. In China the rapid expansion of Ant Financial, Baidu and Tencent pushed mobile payments above 16% of GDP in 2017, according to research by the Bank for International Settlements, without even counting payments between accounts. If Libra takes 16% of Visa’s transactions, it would be processing a cool $1 trillion a year; match the velocity of money of the U.S. and Libra would need a $200 billion reserve, making $2 billion of profits, about a third of Visa’s net income in 2017. (Visa is among Libra’s backers.) On less optimistic assumptions things don’t look so good. If Facebook users put in only $10 each, returns would be just 3%. And if only a quarter of Facebook users adopt Libra, the income wouldn’t cover the (assumed! These are all assumptions!) costs. If regulators get in on the act—as the Bank of England Gov. Mark Carney has suggested he would—the costs would be much higher, too; Visa’s costs are more than $5 billion a year. Even if Libra only breaks even, Facebook and other backers might hope to profit from services built using Libra, or from the (probably fat) fees charged by brokerages, such as Facebook’s new Calibra, to convert money in and out of Libra. Still, if Libra follows the pattern of virtually every bank in history, it would recognize that it can be more profitable by taking more risk with the reserve or minting new coins without reserve backing. It says it won’t do either, and has a voting structure that would require a supermajority to change the rules. But the voters have a strong incentive to change the rules once (if!) Libra becomes established. Facebook’s reach ought to help Libra get big quickly. But its success isn’t obvious. The problem is the cost of getting money in and out via the “authorized resellers,” or exchanges. San Francisco-based Coinbase charges a minimum of 1.49% plus another 0.5% as a spread on the rate it offers to convert money into bitcoin and other cryptocurrencies. There is no reason to think Libra pricing would be much different. Those costs make it hard to justify using Libra for domestic payments, which will be cheaper via the banking system, unless you want to hold Libra anyway. Even inefficient and expensive international transfers will still be cheaper in many traditional currencies than via Libra, if you have to pay 2% crypto exchange fees at either end. If Libra offers a cheap way to transact in small sizes, it might be worth holding some, though, to allow tiny payments for things online such as articles, music or virtual items in games. Libra might have appeal in countries with dodgy currencies, much as bitcoin does. It is designed to hold its value by promising to hold only the safest assets, just like a money-market fund, so it should move roughly in line with this basket of bonds and deposits spread across multiple currencies. The reserve isn’t quite as great as it seems, though. Like a money-market fund Libra has no capital and no deposit insurance, so any drop in the value of the reserves should mean the value of Libra falls. Losses from fraud, mismanagement or default within the reserve fall on Libra holders, unlike with a normal bank account or bank note. Worse still, the founders of Libra have a terrible incentive structure. If the reserve can be run to have capital losses but a high cash yield, the losses lie with the Libra holders while the profits go to the founders. Buy an old bond issued when yields were higher, and the price will be above face value. That generates a capital loss at maturity offset by coupons well above more recent issues. Do you trust Facebook and the big corporations and venture capitalists on the governing board not to misuse a license to print money? If so, no problem.
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Big bad Libra: Do we really need (or want) Facebook to reinvent money?

Postby smix » Mon Jun 24, 2019 2:17 pm

Big bad Libra: Do we really need (or want) Facebook to reinvent money?
ZDNet

URL: https://www.zdnet.com/article/do-we-rea ... ent-money/
Category: Business
Published: June 24, 2019

Description: Facebook's cryptocurrency scheme will undoubtedly generate value and a following. But if the hairs on the back of your neck start to raise up, you're not alone.
Are you kidding me? Facebook, the company that thinks privacy is a challenge to be overcome rather than an essential right to be protected, is launching its own currency. Good lemmings that we are, we're all supposed to transfer our hard-earned dollars or euros or rupees or yen into Zuckerbucks? Okay. Okay. Let's back up a second. What exactly is Facebook doing? Let's break it down. Facebook has announced it will be launching a new cryptocurrency called Libra sometime next year. The company is going to integrate payment and currency transfer capabilities right into Facebook's mobile app, Messenger, and WhatsApp. Presumably, we'll see it show up in the Facebook-owned Instagram app sometime later. Libra, according to Facebook, is like Bitcoin in that it's a blockchain-based currency. But it's not like Bitcoin because Facebook claims it's put a structure in place to stabilize the value of Libra. Libra is also not like Bitcoin because you can't mine Libra. Although cryptocurrency mining rigs are hugely expensive these days, you can still mine Bitcoin. But you have to buy Libra. In that way, getting Libra is a lot more like buying in-game currency in World of Warcraft by spending real money than it is like Bitcoin, where you at least have the option to apply prodigious computing power and get cryptocoin in return. Look, I'm going to say "Facebook claims" a lot. Normally, when we say Company X claims, it means we're not entirely sure we can fully trust what the company is saying. Whenever we say Company X claims, it's kind of code for a mix of we-can't-verify-it with it-smells-like-BS. But in this case, when we say "Facebook claims," um, yeah, that's what we mean. It's got that used car that lived through Hurricane Katrina smell to it. In any case, Facebook claims that Libra will be separate from Facebook, so you don't have to worry about Facebook sucking down all your financial information along with everything else it's already gathered up. The foundation for this claim is that Facebook has created a subsidiary company called Calibra which will manage the transactions. Facebook also claims that it's not in control of Libra, because there's an independent, not-for-profit association running the "reserve" and Facebook only has one vote in that association. Stay with me. This gets confusing fast, but I'll try to unwrap it as we go.
The Libra Association
The Libra Association is made up of member organizations who have each bought into it by forking over $10 million. In megalomaniac terms, ten million is chump change. The roster of organizations looks impressive, but when you really think about it the motivation of most of the members is obvious. Members include VISA, Mastercard, PayPal, and Stripe. These organizations would pay ten mil simply to keep an eye on what Facebook is doing with payments. Their buy-in gets them a vote, and potentially some income if Libra winds up screwing with their national currency-based business models. eBay is part of it because eBay owns PayPal and hey, making it easy for someone in another country to buy Cabbage Patch Kids is right on mission for the company. Next you've got Uber and Lyft, who are spending so much, another few million doesn't matter. Plus, they're all about mobile payments since they're pretty much mobile incarnate. In-car-nate. Get it? Fine. That's my Dad Joke for the day. No more. I promise. There are a bunch of blockchain startups participating, because of course they are. The same with the lineup of venture capitalists, who really, really want to make cryptocurrency a financial boom as big as social networking was. Finally, to lend a taste of credibility, there are a few non-profits who are members of the Libra Association. This is part of the spin that Libra is good for the world, because it will enable the billion or so smartphone owners who don't have bank accounts to spend and store money in their phones. It's "empowering" - unless, of course, these financially challenged folk lose their phones or they get stolen.
The Libra Reserve
That chump change $10 million buy-in to the Libra Association isn't just about doing good or keeping your enemy closer. There's potentially big money to be made by the Association shareholders. That's because of the Libra Reserve. When you transfer real national currency into Libra in return for digital fake money, the real money has to go somewhere. That's the Libra Reserve. On one hand, it's there to back up the value of the Libra, in much the same way that the gold reserves at Fort Knox are there to back up the value of our paper money. The value of the Libra will be based, claims Facebook, on the value of real currency like the dollar, yen, and euro. But it's also there to make money for the Libra Association members, in the form of interest. They're planning on investing that money and each - according to the amount they put into the Libra Association - gets a share of the interest. There will also be transaction fees for money going in and out of Libra, along with every Libra transaction. Those fees also go into the reserve. Here's the elevator pitch. Facebook has more users and reach than any single organization has had since the beginning of time. If this works, the majority of those users will put their money into Libra. You, if you sign up, can get interest on that money. Ooh. Shiny. Notice that Google, Apple, Amazon, and Microsoft are not part of this Libra cabal. Neither are any banks. Don't worry. That slightly nauseous feeling is normal. It's just a side effect of the rational response to yet something else in our world beginning to go terribly, terribly wrong.
What could possibly go wrong?
Facebook has claimed that it will be separate from Calibra, and the data gathered by Calibra won't be used by Facebook. So, yeah, your privacy is golden. Riiiiight. Facebook hasn't said anything about Calibra not using your financial data, so there's that nerve-wracking omission. Facebook has also claimed that there will be the equivalent of an opt-in to allow some level of data sharing. Users won't be opted in by default. But Facebook and its partners are going to bang the drum really, really hard to get you to convert your cash to Libra, so they're going to offer tasty incentives. Wanna bet giving up some of your privacy rights will be buried in the terms and conditions for accepting those incentives? I'll take that bet. Then there's the whole decentralized blockchain so no one can get to it all thing. The idea of the blockchain came from Bitcoin and it's a way to store encrypted unique information in a decentralized form. Except Facebook expects Libra to be so big that it would take too much time to do decentralized transactions. There will be some centralized management of all that Libra currency. If you don't think that's already a target for hackers, you're not paying attention. Speaking of rotten smelling eggs, Facebook intends to allow Libra to be baked into apps other than those owned by Facebook. It's going to start promoting an API so anyone with access to a good pizza delivery service and a tendency to stay up all night can incorporate Libra transactions into their apps. Do you think there might be some spammy, scammy apps out there? Sure you do. Then there's the government. Which government? Any government. Libra is specifically designed (like Bitcoin) to be government agnostic. But since each government likes to govern how money flows through its economy (and its sticky tax-collecting hands), many governments are likely to weigh in on Libra. The odds are they're not going to like what they see. The good news, from the point of view of Facebook and the Libra Association, is that it doesn't take a lot of money to influence a senator or congresscritter. According to the New York Daily News, it now costs about $10.5 million dollars (total!) to win a senate seat. Does that number look familiar? Yep, it costs $10 million to buy into the Libra Association. Now, I'm not going to say that any of these companies are buying votes. That's illegal. But it's not illegal to hire lobbyists and fund them reaaal well. Oh, and for the company who wants to influence policy on a budget, it costs about $1.7 million for a seat in Congress. Let's put this in big business perspective. It cost $5 million for a 30 second TV spot in Super Bowl 2018. The cost of a single Super Bowl ad is enough to fund the campaigns for almost three members of congress. Again, I'm not saying our elected officials will do anything illegal. I'm just saying that you shouldn't expect them to be the bulwark against Facebook's new currency scheme.
Is it really that bad?
Put in a historical perspective, not really. Our society has reinvented money a bunch of times in just the last century. Paper checks, electronic fund transfers, credit cards, services like PayPal were all fundamental rethinks on how money is transferred. Libra is just another take on smoothing the movement of money between hands. Think of it this way: Amazon wouldn't work if we didn't have credit cards. Rethinking money transfer opens up new doors of possibility. But it also has chilling effects. From my perspective as a very busy consumer, Amazon is wonderful. But from the perspective of the many businesses that Amazon has put out of business, it's is the grim reaper. Most of our modern technological powerhouses are really double-edged swords. They provide some real value, but they do so at a cost. Sometimes that cost is obvious and shows up in monthly subscription fees. Other times, that cost is insidious and just sucks away at us behind the scenes, to the detriment of us all. Facebook is clearly in that second category. The Libra will undoubtedly generate value and a following. But do we need it? Some would say that the disadvantaged without access to banks do, and that's true. But Facebook? Facebook??? What do you think? You probably already trust Facebook with knowledge of your preferences, locations, interests, friends, and political opinions. Are you going to trust Facebook with your money, too?
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Libra: Could Facebook’s new currency be stopped in its tracks?

Postby smix » Tue Aug 13, 2019 5:32 pm

Libra: Could Facebook’s new currency be stopped in its tracks?
BBC News

URL: https://www.bbc.co.uk/news/business-49090753
Category: technologyNews
Published: Mon, 12 Aug 2019 23:15:18 GMT

Description: Facebook's Mark Zuckerberg wants to launch a global currency and change the world of finance for billions of people. But many - including powerful politicians, bank chiefs and regulators - don't like the idea one bit. Why? Libra, Facebook's proposed new digital currency, is not receiving a balanced response. "I don't think you should launch Libra at all," said US congresswoman Carolyn Maloney at a hearing in Washington in July. US President Donald Trump, leaders of the G7 nations, and the head of the Bank of England, Mark Carney, have all expressed concerns about Libra, too. Now the UK's Information Commissioner's Office has joined the chorus of sceptics. Some bystanders assume that because Facebook has used terms like "blockchain" and "decentralised" in its statements about Libra, that it is a system like Bitcoin. n other words, that it would be a grassroots digital currency that anyone can buy into and which would be extremely difficult to shut down. But Libra really isn't anything like Bitcoin. It will, in fact, be managed centrally - a basket of other currencies and assets will be used to set the value of Libra, keeping it much more stable than highly volatile Bitcoin.
Currency creation?
And, of course, Libra will be built directly into some of the world's most popular apps: Facebook, WhatsApp and Instagram. Facebook Inc owns them all. Financial bigwigs are upset because Facebook, a corporation, appears to want to take on a government-like role, creating a currency and perhaps even setting monetary policy. Everyone invested in that currency then becomes subject to the whims of the Libra Association. And should Libra become popular, it could end up impacting other currencies and national economies, critics fear. Those, like Carolyn Maloney, who think this should all be stopped in its tracks, do have some tricks up their sleeves. That's probably why Facebook has promised to come to an agreement with regulators before launching Libra.
Too big to fail?
"This is an alternative money," says Prof Ross Buckley at the University of New South Wales. "It's not going to get the easy treatment that coins in a game get." Virtual currencies you use to trade items in online games such as World of Warcraft, or commodity-like cryptocurrencies such as Bitcoin and Ethereum, are essentially exempt from the strict regulations that can be applied to national currencies and stocks and shares. Prof Buckley and his colleagues recently published a paper all about the various regulatory stumbling blocks in Facebook's path. The conclusion is that Libra will have to face some kind of regulation - it can't be ignored. "Libra is perhaps the ultimate example of something that is highly likely to move from 'too small to care' to 'too big to fail' in a very short period of time," the paper notes.
What is it?
Prof Buckley gives the example of developing countries, where many living there rely on payment transfers from citizens working abroad. These transfers, known as remittances, are subject to high fees that the G20 nations have promised to tackle. But Facebook could disrupt the whole system overnight, if people in those countries switch to Libra instead. It could do what M-Pesa, a digital currency popular in some African countries, has long sought to do - but on a much bigger scale. That might be useful in the short term for those so reliant on remittances. But widespread use of Libra could also affect the economy of an entire developing nation, some believe - for better or for worse. To supervise Libra properly, regulators everywhere must ask themselves what sort of financial instrument it is. No-one has a good answer yet. Prof Buckley thinks Facebook's own white paper about Libra is deliberately vague.
Tight regulation
Regulators and politicians have essentially been thrown a gauntlet by the tech giant: you tell us what sort of scrutiny our brand new currency might receive, and we'll respond accordingly. But not all roads lead to success, says Jerry Brito, executive director of cryptocurrency research agency Coin Center. "If, at the end of the day, it is [classed as] a security, then it may not work as a currency and we might see Facebook abandon the project," he explains. That's because securities, tradeable financial assets like stocks and bonds, are very tightly regulated. Other cryptocurrencies have largely avoided falling into this category.
Lots of licences
But Mr Brito thinks Facebook aims to persuade regulators to class Libra as a payment instrument or, possibly, a new kind of security that faces slightly less draconian regulation. Once national regulators decide how they want to treat Libra, the main tool they can use to ratify it is licensing, explains Prof Buckley. Facebook would need to apply for a licence in any country where it wants to offer Libra as a payment tool. And to get those licences the company would have to show that it can detect and stop money laundering, and the financing of terrorism, for example. Facebook or its subsidiaries might also need licences to operate as financial trading institutions, again depending on how regulators view Libra. Attempting to ignore these licences and standards would not end well. "It would have to be willing to be totally maverick, basically be a criminal organisation," says Prof Buckley. "I'm not even sure Facebook would be willing to take that on."
Crisis plan
There remain, though, other concerns that existing regulatory regimes may not be able to address. As Prof Lana Swartz at the University of Virginia points out, no-one really knows what the Libra Association aims to do with its monetary policy. "Theoretically, when a financial crisis hits, the goal of central bankers is to stabilise the monetary supply and move towards financial recovery in their country," she explains. "With Facebook, it's unclear whose interests would be taken into account in trying to stabilise Libra." And to whom would the Libra Association be accountable, internationally? There, things get even murkier. Libra could be stopped from ever launching, it is true. But should it launch and become a hit, no-one really knows how it will be regulated globally. The politicians and bank chiefs are, therefore, trying to buy themselves time. If this thing does get off the ground, they must be wondering what on earth they can do to keep it in check.
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