Visa, Mastercard, Stripe, and eBay exit Facebook’s Libra project
theverge.com
theverge.com
Special thanks to @Visa and @Mastercard for sticking it out until the 11th hour. The pressure has been intense (understatement), and I respect their decision to wait until there’s regulatory clarity for @Libra_ to proceed, vs. the invoked threats (by many) on their biz.
I would caution against reading the fate of Libra into this update. Of course, it’s not great news in the short term, but in a way it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.
[1]https://twitter.com/davidmarcus/status/1182775728431087623
Good or Bad, its hard to tell for the project but at least you are left with the feeling that Libra team is formidable and preparing to weather the storm.
If I have to guess, something is going to come out it from this project, either a policy clarity from governments or while tinkering Libra team may pivot into some useful use case etc.
In much the same way that your keys are always in the last place you look, the last thing people say before "I give up" is often "I'm going to keep going." I expect Libra to be officially dead by the end of the year, although Facebook might slap the name onto some unrelated project in an attempt to save face.
As someone who runs a business that has (small) offices both in EU and North America, let me share a quick overview of the current state of things.
When you want to transfer a non-trivial amount of money between 2 countries, you have likely received it in the originating country's currency and are planning to spend it in the destination currency. Now because you don't want to pay ~3% currency exchange fees to your bank, the only reasonable way to do this is to get an account with a business forex broker, that will offer you a rate in the ballpark of 0.5% off the spot price. You will have to do the KYC/AML [0], but the complexity of the whole transfer is basically this:
1. Do a domestic wire to your broker's office in the originating economic zone.
2. Wait for them to call you and confirm the exchange rate.
3. Receive a domestic wire from the broker's office in the destination economic zone.
You often need to show the invoices/contracts showing the origin of the funds and the purpose of the transfer, but if you are running a legitimate business that pays taxes, you will need those for accounting reasons anyway.
Now the 0.5% fee charged by the forex trader (that is bound to a bunch of rules and regulations making it harder for it to run away with your funds) is not worth putting your trust into a fully automated distributed ledger, where a lost password or a hacked computer could permanently eat away your money without any legal recourse.
So the only potential audience of a new international coin would be people actively trying to evade KYC/AML and that's exactly why the governments will do their best to prevent it from getting adoption (which is very easy since you can outright ban the fiat endpoints in your jurisdiction).
On the other end, there's a bunch of people who have never written a response to an AML inquiry and have hardly done any business outside of their own state, that are hoping to get rich quick by grabbing a stake at something they haven't fully researched and later reselling it at a profit to someone who will actually need it. I wouldn't see any reason for it to be successful long-term, sorry.
I transfer money to Africa on a regular basis, and I don’t have these same issues other than the difference between published exchange rate and realized, which is about 1-1.5%. Transfer fees are minimal.
I transfer about $3,000 per month, but no I could go up to at least $10K without issue. Occasionally it can have a bit of a delay, but normally it closes in less than a minute, and I get email and text updates on the status, no calls needed.
I then just advised to use their local bank's wire transfer, which they had to visit in person at the local branch, as they had originally intended.
Nowhere in my Google searches and Transferwise articles did I see any limitations upfront. Nor did I figure out how to raise these limits after searching post-filling-out-everything.
Very disappointed to say the least. But if anyone knows if I can raise the limit, would be happy to try this again.
i wonder how much money is actually left after the whole transaction
And if I never needed to have a bank account before, just being able to open it while paying for my food won't suddenly create the need for it.
Grocery store handle a surprisingly large amount of money transfers and act as pseudo-banks to many of the unbanked. Some of them have their own banks on top and others have bank branches in them. Lots of people use these services.
Wal-marts cash checks, do money transfers, and provide debit cards which act as a pseudo-bank account since they can be used with direct deposit etc.
>2. Wait for them to call you and confirm the exchange rate.
> 3. Receive a domestic wire from the broker's office in the destination economic zone.
> You often need to show the invoices/contracts showing the origin of the funds and the purpose of the transfer, but if you are running a legitimate business that pays taxes, you will need those for accounting reasons anyway
When my father used to do research in the 60/70s the way they got a paper was to write a (paper) letter to an author asking him for a copy, put it in the mail, wait for a couple of weeks, and then get an answer from the author with the paper. It was simple, easy and straightforward.
Fast forward 50 years, we have access to millions of articles at our fingertips in a second with the likes of scholar.google.com.
Here, I can do it too: 50 years ago, I'd make fresh-squeezed juice by hand over the course of about 2 hours. Fast forward to a couple years ago, and juicero let me create fresh juice in under 5 minutes with no effort. Yet, somehow, juicero no longer exists and had very few users.
Or again, 50 years ago I'd wire money to people via a bank transfer which would take multiple days, and back in 2012 I could use liberty reserve to do the same thing instantly. And yet, somehow, liberty reserve no longer exists and had almost no users.
Comparisons that are as glancingly related as "more convenient" or "are new technology" are absolutely worthless.
Juicero no longer exists because people realized they didn’t need the insanely expensive subscription juicer machine and could squeeze the juice bags with their hands to obtain the juice. Hilarity ensued. Further details are available on their Wikipedia article, too.
I’d caution you not to read into these two data points.
AML/KYC requirements took a scan of my passport, and two days to get verified. At which point, I was good to go.
In summary I agree, it is not hard in NA or EMEA to send intentional funds
If it happens less than 0.5% of the time, then you are losing more money in fees with your forex broker.
Also don't forget the massive cashflow advantage of dealing in crypto only. Minutes to send crypto vs 24-48h + weekends/holiday delays incurred by your broker wires. That's especially true of businesses who transact with their partners/suppliers/contractors in crypto so they even avoid the fiat<>crypto conversion step.
«any legal recourse»
There is always legal recourse. Plenty of crypto thieves have been, are being, and will be prosecuted.
Transfers could (and often are) instant without cryptocurrencies too. Inside Europe most transfers clear within minutes.
The main reason why some transfers are slow is due to KYC rules which cryptos do not implement. With the same procedures in place, they'd be just as slow.
A blockchain is also a digital signature, a verifiable programmable general purpose ledger for smart contracts. Just giving each FB user a wallet id, even without money, has a lot of potential.
Paying for 'bits' of content is already a thing, you can buy single article access on many of the newspaper websites today.
I put on virtual pyrotechnics shows in various grids and and get paid or tipped in either the grid's own digital currency or in Gloebits. Gloebits are better since they can be spent on various different grids and by all my accounts. I also take paypal.
"You might want to ask yourself why the pressure has been so intense. And read some history that Bitcoin pioneers were aware of, for example the failure of e-gold. Your failure to learn from history has caused you to at great cost recapitulate the failures of the past.":
https://twitter.com/NickSzabo4/status/1182776582932332544?s=...
The more companies leave the initiative the more centralized it becomes and the less its trust model is valid. If only Facebook remains it isn't any different than a simple virtual currency (like the discontinued Facebook Credits).
And to preempt the argument that visa and mastercard aren't trustworthy - there is an inherent trust that most people give to big companies because their processes and checks and balances developed over years to be robust - usually from having to handle lawsuits and regulations which small companies rarely do.
That’s an oxymoron in general, but also specifically, did you just say Facebook is trustworthy? O_o
Low quality comment, I know, I just couldn’t resist.
All you need is somebody's phone number and the transfer is instant and with no taxes. You can also exchange currency at the interbank exchange rate during the week. And transferring that money to your local bank account is also free of taxes.
Not sure if Revolut will last, but I've been very happy with it.
https://www.itnews.com.au/news/aussie-banks-warn-customers-a...
In this story they refer to a “spike” in queries to the database. What actually happened is that someone tried querying every mobile phone number in Australia.
In Europe I can authorize a seller to directly take money from my account, if it's money for someone I trust (family, close friends) I can give them my prepaid credit card number and charge it with just the amount they need
Do you really think that Libra would make this simpler?
Why would I need to use Libra or anything else, what does it provide me that normal money doesn't?
Why should a broken commercial currency with surveillance integration be used globally just because the US payment situation is broken?
I suspect it won't be. Possibly could also catch on in developed countries, although places like Kenya and India already have home-grown non-bank phone-based payment systems. One market I can see would be remittances for international migrant workers - think the Indian workers in the UAE, or Filipinos (well, mostly Filipinas) across the Middle East.
Yes you can send money very quickly with SEPA, but that's not the settlement time. The money can still be reversed (although with more difficulty than credit card payments). With Bitcoin you also get a notification in seconds, but the payment becomes extremely more difficult to reverse in around 10 minutes.
So they're either equally fast or Bitcoin is faster.
From a banking perspective, the money is settled in 10 seconds, at least with TIPS (the ECB’s platform; the ACH clear it, but the end-user behavior is the same).
Reversal (known as a recall in the standards) requires consent of the beneficiary.
SCT Inst Scheme Rulebook § 4.3.2.3 [0].
Of course, if you are talking about fraud, yes: banks may answer positively to a recall, without contacting the beneficiary, when the beneficiary is a fraudster. Indeed, local laws often require that of banks, and therefore the standards define a dedicated protocol for that.
When you break the law, many legal protections no longer apply.
[0]: https://www.europeanpaymentscouncil.eu/sites/default/files/k...
And to clarify, it's not really "fraud", it's "claim by the originator that a fraud occurred". Which is a very different thing, and which matters immensely in practice.
In both of those cases, the beneficiary bank is not even required to send the funds back. It can require consent from the beneficiary (which is its client, after all) if it wants.
Yet in both cases, the beneficiary is not even meant to receive the funds.
Fraud works the same way: unless local law requires it, the beneficiary bank is not required to send the funds back, and can rely on beneficiary consent.
Personally, I don’t trust any of these systems or organisations, neither tech, nor fintech, nor traditional banks. They’re all flawed for different reasons.
Technology is an attack surface the traditional banks don’t comprehend (from the horror stories I’ve heard from tech people who worked for them), and successful attacks on banking have rewards that tech… I don’t think fully appreciates.
True, but Tech also doesn't really appreciate banks. Banks make much of their money from transaction fees, from literally moving money from one point to another, to large IPO underwriting. Tech can certainly lower transaction fees, but a bank's transaction fees is more than just getting a job done, it's trusting that the job can get done. Banks are able to get away with large transaction fees because they have developed trust and credibility that many are willing to pay for. Tech simply sees this as an engineering challenge and ignores the non-tech legal and social guarantees that banks provide.
That's very "sort of", and very remote! I wouldn't trust my (the UK) Government as far as I could throw them!
Literally the only wallet is a cold wallet. Cold hard cash.
What I have done is used it for my day-to-day shopping in Germany for just over a year, for holidays in Switzerland, Austria, Finland, and Spain, and also as a really good source of exchange rates when transferring money from my Pounds-only bank to my Euros-only bank.
In all occasions, it deducts from the correct balance without conversion.
This also opens the way for other more obscure partners to enter the association. That will probably determine its future course
By initially supporting Libra, they got to find out FB's plans, get access to a bunch of market research and see what kind of hurdles they would face if they wanted to launch their own version of the same thing. Then by backing out at the 11th hour, they're able to undermine Libra's credibility before it gets started and make it look like a doomed project.
I personally have no desire to own Libra. But traditional bank accounts kind of suck as a product and I would like to see more tech companies competing with them.
The problems with bank accounts:
1. They charge you fees for things
2. They try to upsell me stupid financial products
3. They are not easy to use in other countries
4. Typing in my credit card number sucks
5. Typing in my credit card number isn't secure
None of that has really gotten any better in the past ten years. It feels like banks have mostly given up on making their product better. Instead of improving their product, they just buy more expensive retail locations.
I would probably rather use a financial product produced by Google, Microsoft, or Amazon than a financial product produced by Facebook. I just don't want the rules to end up being, big tech companies are not permitted to compete with crappy banks.
Libra was designed as a currency to take over the world, replacing the rest.
You do not want a for-profit company to run a global currency. Sure, let them run banks, one bank won't rule the world. But the one who holds all the money, will.
"hundreds of global currencies" sounds like a good idea to me too, as long as they are out of the hands of for-profit companies.
The Federal Reserve is just about as close to a private company as any, running your entire economy. Certainly it's a for profit venture. But then that's profits funneled away from public coffers, and not to it.
Sure, the Fed has a pretty clear mandate from the Congress, deputizing them into a certain public role, but other than that, they receive little to no ‘advice’ on how to do things, and stand free to make private profit for a small cartel of privately owned banks.
The reason for this non-public setup is so that Congress won't simply print more money at will, which would be far worse.
True, but exactly the same applies to a state running the currency, with even more evidence of malfeasance and manipulation. State currency loses significant value every year by design, and the management of it is really opaque.
I’d rather a cooperative mutually owned currency to either corporate or state control.
Of course if you’re rich or privileged there are many options.
Also some centralized cryptocurrencies still use keys and random addresses, which means they work by default unless the addresses are blacklisted.
Practically every store that took bitcoin used bitpay as an intermediary so they never actually held any btc. They just had someone else turn it into USD and send them the money.
Also those businesses also didn't need to use bitpay to receive anything but they could for convenience.
Does Libra solve this problem?
I can never tell when discussing matters like this if the other party is expressing legitimate concerns poorly considered, or if I’m witnessing some astroturfing campaign.
JBoss was the first astroturfing campaign I learned about (and if you’re reading this, Marc, fuck you. Yeah people still remember.)
I know these sorts of things have been going on forever but it feels like it’s getting worse over time. To the point I’m not sure I know who to believe anymore.
I am fully in favour of the various new banking services and apps that are springing up, services to manage, transfer, save and invest better etc. That's an appropriate place for the market. Even there it's needed regulation to ensure the most marginal in society can get a basic bank account, or not get stiffed on fees.
Here's the issue, well my issue. I've read more than enough history to know what happens with company currency or scrip. It doesn't have to be the mining town paying the miner in mining dollars to use at a variable rate solely at the overpriced mining store, valid only whilst they work at the mine and don't upset the foreman or his wife. Each step and use gave opportunity, gladly taken, for the mine to extract more profit.
Currency regulators permit local dollars and pounds which are an attempt to keep money in a local economy. Their constraint is fair to both the public and the market, they are purely parallel to cash, and they are tiny enough not to matter - crucially there is no profit in and of themselves. A "local California dollar" might well deservedly get a different reaction.
With Libra, well it's not hard to create a Company Scrip 2.0 scenario. In fact it's disturbingly easy. Actually, to imagine dozens upon dozens of them. Then a few dozen more purely because it's supra-national. Then a few dozen more because they are large enough to squeeze out cash without needing to be a remote company town. Yeah actually I want regulators to squish that before birth, with extreme malice.
Just one example: Facebook and Ford do a deal for FB advertising and a bit of personal data swapping, in return for Ford F150s, or maybe just a particular model to start, solely being available for Libra. You want that Ford truck, well convert some dollars into Libra. You don't see how it's disturbingly easy to create an inevitable and easily manipulated stronghold down that route? What about if the local supermarket does the same deal? Breach the licence, well you're not shopping in these stores... Even stealing universal currencies, such as dollars, does not remove your future use of or right to use dollars. Only the stolen loot is taken from you.
I'm perfectly comfortable with the anarchistic cryptocurrencies such as BTC as there is no threat to the universality of exchange, even if it did take off more than BTC yet has. Even though BTC's main use seems as medium of speculation until the bubble bursts. They can reasonably be a currency. Libra feels more universality of control than of exchange.
A currency as product - that's inherently a bad thing, as I wrote in my other reply. Even if the company is not Facebook but is behind the crypto currency alone, with a built in route to profit just by the "currency" existing. That's diametrically opposed to the needs of a currency - a universal token of exchange and legal tender. It rather removes the ability to be a currency. It should not be a product in and of itself. I expect, and pray, that regulators will erase any that have chance of becoming widespread enough to be real alternative currency beyond speculative toy. Otherwise everyone except shareholders is worse off. Now a central bank backing a cryptocurrency - held as universal and legal tender - that's an entirely different, and interesting thing.
> that's diametrically opposed to the needs of a currency - a universal token
Currencies dont need to be universal, at least they were not until maybe the gold standard. It's government enforcement that made them look universal, but until then , a currency was of equal holding value as any commodity like gold. That was a good hedge against government misuse imho. And , looking at the manipulation of central govt rates, there is misuse today, worldwide. That doesnt mean the only alternative is FB of course, but it could be one, and i dont see a danger in it being one.
> such as BTC as there is no threat to the universality of exchange
BTC is a direct threat to any government that prints fiat money. It's just too small yet, so your theory gives it a pass.
Universality and confidence came long, long before the 19th century gold standard - to the early Middle Ages and beyond, a state, or king, set the purity of coin, the penalty for clipping, mutilating the coin and so on. The gold standard developed from, and long after coinage standard and assaying.
Again in the early ME, particularly during the Viking age, and with some overlap with coin, people used hacksilver and similar as preferred medium of exchange because there was inherent value to the commodity. Hacksilver goes long back into the dim and distant ancient past, beyond other universal coins and currencies that achieved confidence, such as Roman. So yes, it was the ultimate - and very effective - hedge, particularly as towns fell, were raided or found themselves repeatedly changing side.
Of course government can abuse rates, but the scope is amplified orders of magnitude with a Company Scrip. Libra is a company scrip that risks destabilising proper currencies, and creating islands of inclusion and exclusion. By contrast, BTC is not, and does not. The difference in regulatory response seems clear, and warranted.
People trusted gold at least as much as their king though, even if the roman emperor or king tried hard to push his coin. The Florin was very popular in europe but florence was a small territory. Taxes were often paid via barter. Silver and gold were not made by any government / even aluminum was once more precious than gold. You can have all of those, because people understand the value of monetary tokens as mediums of exchange, and money doesn't have to be universal. It's only in very recent decades that people have lost all control and voice about their money. With increased coordination, regulation and data exchange between central banks around the world, having choice is what cryptocurrencies bring back.
Choice is what some cryptocurrencies bring - the anarchistic ones. Even there I see little to no chance of surpassing central bank backed currencies - that's just a pipe dream. Of the corporate backed cryptocurrencies, the "with profit" currencies, they're simply Company Scrip, and an entirely different species apart.
Facebook is the last company I’d want to see dominate the coming global corporate currencies. They are unscrupulous, dishonest to the core, and willing to cheat partners and customers alike to get what they want.
IMO banks rather than currencies will be the first area tech companies can push into, then payment networks, then eventually currencies as nation states wither away.
There are some tech companies competing with banks and payment networks already, with some success, particularly in the UK. It will take a while for them to supplant traditional banks but I see it as inevitable and, for the reasons you point out, not too difficult, as the incumbents are sclerotic and unable to grasp the importance of software.
It's not inevitable at all. This is because (retail) banks operate more or less in the same way in their back office. The change is the front office - retail branches are being replaced with apps. But they have seen this before - with telephone and online banking. And the current generation of apps from the big banks is catching up (mainly UX). The only thing that really stands-out for the startups is the onboarding process.
This is going to end in a completely different way than the retail wars, because there, it was a revolution in both the front (storefront) and back (logistics of getting the product to the customers) office.
Tech/IT is seen as a cost centre, often outsourced, and if not outsourced performed by disillusioned teams with neither influence nor autonomy. The back end of big banks is a huge mess of legacy systems, they had to be forced to adopt open banking, and the leadership don’t recognise that everything will be software soon. They are the antithesis of tech companies.
> Tech/IT is seen as a cost centre, often outsourced, and if not outsourced performed by disillusioned teams with neither influence nor autonomy.
That may be true, but how people work is beside the point. That's a question of culture and dependent on the industry and it's maturity. Yes, it may make or break individual companies, but on the scale of industries it's not relevant.
The truth is that tech companies don't "win" by working better, they "win" by playing a different game and the game here isn't too different to the incumbents.
> The back end of big banks is a huge mess of legacy systems
Yes and no, as big banks are not monolithic nor homogenous. But this doesn't make the jobs of startups any easier either because the interfaces to existing platforms are just as necessary for them in order to interoperate.
>the leadership don’t recognise that everything will be software soon
Actually they do and they are betting on that to cut costs by automating legacy and inefficient functions.
> They are the antithesis of big tech.
They are not the antithesis, they are just at a different stage on the maturity curve. It's up to the disruptors to find enough gaps in their armour to usurp them. But I don't think that there is that much room for disruption in the retail market apart from niches players, because fundamentally their models are not that different.
I disagree.
It's true banks don't work like tech companies, it is also true that tech companies don't work like bank and the 100% of them failed to replace banks, because banks are more trustworthy when it's about client'money safety.
legacy systems are a good thing, it means they already solved a lot of edge cases and been working good enough for years (or tens of years)
The new shiny toy might look good, but if it does 1/20 of what's needed by the business, it's useless.
I work now in insurance, evolving legacy systems to new technologies, legacy systems suck, but they are also rock solid and a lot of things they do are vital for the company and, more often than not, save people's jobs.
A lot of rules we don't understand are there to avoid abuses
I'm working on a system that's offline from 11pm to 7am to avoid that agents created insurance policies over night making unfair competition to real agencies with offices, employees and regulated opening hours.
It's been put there probably 20 years ago, it looks silly now, but it served a purpose
In one year I've been able to replace alone maybe 1/30 of what the main legacy system does. Which, btw, sometimes still calls an even more legacy system on the backend, just like my system exposes what the new system still doesn't handle as a safer wrapper to the legacy one. It's a good pace, we have proved it can be done without breaking the workflow, now it's time to accelerate and build a little team around the project.
Evolution is layered, disruption is a jouvenile sin and usually it is bad for company's workers more than for companies.
I do think established banks have a lot of baggage and entirely the wrong emphasis for a world which runs on software. Some of their old rules still encode useful information, many don't, and it will be hard to disentangle the essential from the moribund.
I'm being slightly facetious, but there are banks here that are better at all of these.
1. In the UK at least bank accounts are completely free, as long as you don't borrow money (you can use a credit card for free as long as you pay it off every month).
2. Not really in my experience. The worst thing they do is constantly make new types of savings accounts with decent interest rates and then sneakily drop them to 0.1% a couple of years later.
3. Hasn't been an issue for me travelling around Europe and Asia. The new breed of banks don't charge you insane fees either. E.g. check out Transferwise's debit card.
4. How would Libra solve this?
5. It's actually not too bad now - more and more online shops support 2 factor authentication for credit card purchases. Plus because of the fees merchants pay you have pretty good protection against fraud.
> It feels like banks have mostly given up on making their product better.
Disagree. They finally have competition: Monzo, Revolut, Starling Bank, Metro Bank, etc.
you should check out "online" banks like Charles Schwab. they don't do any of this fancy retail bs. they've never charged me a fee (not even when I overdrew my checking account), and they reimburse me the full ATM fee whenever I use one, no matter how bad it is.
the only thing they "upsell" you on is their trading platform, which is quite good imo. they have a bunch of great inhouse ETFs and it's now free to trade other stuff anyway.
Well, they provide a service and charge for that. Seems legit to me. Specifically in the context of European banks (including Iceland, Norway and Switzerland) that charge virtually nothing for basically instantaneous transfers within those countries. If US banks suck, maybe have a word with your congressperson.
2. They try to upsell me stupid financial products
If so, change your bank.
3. They are not easy to use in other countries
Uhh, just about any bank I know of issues an ATM card, which is either attached to the Plus, or Cirrus networks. My Swiss Postfinance ATM card work mighty fine at ATMs in Bangkok, Burundi, or Bangalore. Or just about in any damn place in the world. In other words: This reasoning is total bullshit.
4. Typing in my credit card number sucks
Yeah, well. You may prefer to trust a company, which lies a lot and shuts down your account for any and all resaon, without any recourse. Let alone get hold of a real life person to rectify the issue. Frankly, I prefer the "hardship" to type my credit card number (which I know by heart anyway) than to trust Mr. Zuckerberg or Mr. Marcus. Which, in my opinion, always seem pretty much full of shit whenever they open their mouth. To each his own, I guess.
5. Typing in my credit card number isn't secure
Er, not my problem. I let my bank sort that out. They're obliged to do that and whenever I had that (rare) problem it was sorted out in a jiffy. Best of luck sorting this out with just about any major tech company.
not sure which country you are in but for me, UK based Transferwise largely fixes 1-3 and Paypal 4 and 5
I suspect the regulatory pushback was the least of the problem. These companies (and PayPal) have everything to lose and nothing to gain by helping to advance Libra. The entire business model is to capture value from financial system friction. Eliminating the friction eliminates their reason for being.
It's a classic innovator's dilemma: the action that will save these companies is building the thing that will destroy their business models. They can't do it because established companies are set up to eject people persisting with such notions. That leaves the field open for an out-of-left field solution that does away with the friction and the business models it spawned.
The source of the friction is regulatory. AML. KYC. All the laws that deputize financial institutions as extensions of law enforcement. It's quite expensive.
The only way to eliminate the friction is to eliminate the regulatory liability. And that's what has been happening with Bitcoin for some time.
What is surprising was that these companies ever lent their names to the project in the first place.
I don't get why people would get excited about Libra who weren't already excited by some other cryptocurrency.
Violate an arbitrary rule in financial institutions? Guilty until proven innocent. (I have real-world experience, here)
Violate an arbitrary rule in crypto and... oh wait, crypto doesn't have rules and doesn't judge your morality. (Neither does cash or gold, so be careful about using this as an argument against it.)
The argument goes through just the same? Cash, gold, cryptocurrencies and bearer bonds are all popular with criminals and crazies.
According to the leaked Facebook all-hands audio, Facebook is already planning to launch payments in Mexico by end of 2019 (https://qz.com/1719731/zuckerberg-confirms-facebook-payment-...).
I wouldn't be surprised if this goes extremely well for Facebook and WhatsApp payments becomes WeChat Pay / AliPay for the rest of the world.
If you're in control of the currency it provides you more flexibility and the blockchain aspect arguably makes it easier to manage the accounting as well.
reason - 100% regulatory issues.
I would take that "2019" as "2020 or later."
I think the main issue is that cryptocurrency still has a few unsolved research & regulatory problems (like how to handle more than 10 TPS, or how to record taxes transparently) before it's ready for mainstream adoption. No big company wants to take the risk that an unsolved research problem may not have a solution, and so they wait and see how the space evolves rather than committing large amounts of resources to it. (Other than FB, who has resources to burn.) If it starts taking off they'll buy a bunch of startups and then start throwing engineers at it; otherwise they risk nothing.
I wager it's the bad press and negative reactions (particularly from European governments) Facebook/Libra have gotten. That's something they possibly didn't anticipate.
I suspect their involvment was almost more of a "Keep your friends close and your enemies closer" sort of thing. The idea that it's better to be involved than shut out. But if I were them, I would be low-key thrilled that this is falling apart.
Libra is a fake cryptocurrency that the payment processors and governments hoped would help to hold off the cryptocurrencies for a few extra years. It would have allowed the payment processors to continue to profit from transactions and made it practical for governments to control payments and wallets.
They are probably pulling out for two reasons. One, having all of the payment processors involved makes it too obvious that it's not actually a cryptocurrency. Two, it's dead in the water, and to even have a slight hope of reviving it, that association with payment processors needs to go away. If they are able to resurrect it, expect the companies to come back down the line.
Are you actually saying that:
1. The payment processors joined this consortium to AVOID helping crytocurrencies catch on in the mainstream?
2. The payment processors are lying about pulling out. Facebook secretly pushed them out, because Facebook wants to start over with a more "pure" cryptocurrency?
2. My theory is that Visa et al voluntarily left for the time being because they could see that it was not going to work, and especially was not going to work with them sponsoring it. Facebook is never going to try for a real cryptocurrency, the model will stay the same, but if the project has any chance of moving forward (at this point it is a very slim chance) then it needs to disassociate at least temporarily from the payment processors. The technical parts will not actually become decentralized. Just the bad marketing from Visa and friends will go away for awhile.
It seems like there is a strong possibility that this particular project is going to be completely killed though anyway.
One more thing about the "alternative reality". Yes, my worldview is obviously very different from yours. But maybe if you consider carefully you may realize that your worldview may not be 100% accurate in all ways.
I am honestly wondering which audience you think was losing confidence in this project because of Visa et al.
There's worldview, and then there's confidently stating speculative mind-reading as fact.
Like when you say that the true reason behind payment processors and governments backing Libra was to "hold off the cryptocurrencies for a few extra years." Can you source your claim? Or any of your theories? Is this something you just 'know' to be true?
The cryptocurrency community is rife with people describing in exact detail the thinking and motivation of players behind the scenes, but often it turns out to be just "Here's what I am imagining".
But you got your generalization in there so what the heck, here is mine. The mainstream community is rife with people who accept marketing and propaganda as truth, but often it turns out to be just "bullshit" and companies or governments were actually just doing selfish things to help themselves strategically.
Simply hunt down vendors who accept Bitcoin and organizations who facilitate its exchange.
At that point, Bitcoin would be essentially dead as a rival to any currency.
This is commonly a argument for having drugs illegal too. "If we hunt them down, eventually there will be no one left"
What we know now, is that making something illegal, could make it stronger. If Bitcoin becomes illegal in most country, would the price go up or down? Suddenly there is a black market, and opens up a whole other can of worms, so governments might not be able to simply outlaw it.
It's not as though drugs became more popular because they became illegal. Prices may have gone up because they were harder to obtain and there's less competition. Demand was still there because.. well people like doing drugs or are addicted to them.
With Bitcoin, why would a business risk legal action to accept it? There's very little incentive as far as I can tell.
If bitcoins were illegal then I imagine they would probably only be used in illegal transactions.
This is not exactly a completely relevant example, but Colorado did see a decrease in teen marijuana use after marijuana was legalized recreationally (granted, it has also recently seen a decrease in teen heroin use, so the legal status may not be directly causal, but I find it interesting nonetheless):
https://www.washingtonpost.com/news/wonk/wp/2017/12/11/follo...
Regarding Bitcoin, one incentive might be positive press coverage - a PR move, so to say, such as when APMEX, the popular online precious metals exchange began accepting Bitcoin in late 2017:
https://www.coindesk.com/major-gold-dealer-apmex-begins-acce...
Many of these cryptocurrencies have non-profit foundations that push for adoption by getting ad-space at major events and pushing for the acceptance of cryptocurrencies in certain companies. Litecoin has the 'Litecoin Foundation' and they managed to get advertising for Litecoin in some UFC events. More often than not, I think partnerships like these make for good PR for both companies involved - here's a piece on why the Litecoin Foundation thought that this particular partnership was useful:
Whereas, a currency used by 0.1% of your friends / neighbors is totally useless.
These reasons make it 1) easier to suppress a currency 2) harder to suppress drugs.
Using something as a store of value has much less of a scale requirement. You only need a few people that will be willing to exchange your Bitcoin into something else in order for it to work as savings / an investment. Whereas a currency requires multiple places where you buy goods to accept it. Moreover, those places only really have a reason to accept a currency if multiple customers would use that currency.
Perhaps this is somewhat pedantic, but I think it's more accurate to say that there's a black market for drugs because governments have passed laws to make certain drugs illegal and some groups of people have accepted the risks that come with supplying the demand for this particular market in order to make a profit.
> On the other hand, people only like receiving cryptographic tokens on the assumption that they will be able to exchange them for something in future
It may not be exactly this simple, although this is mostly true. There are those out there that purchase cryptocurrencies to make foreign financial transactions in a way that may be considerably more difficult with their country's accepted currency. This doesn't necessarily have to be an exchange, it could simply be sending said cryptocurrency to a wallet of a relative in a foreign country.
For example it can be outlawed. Sure, people would still be able to use it, but they would be breaking the law and that would deter many, possibly enough to kill it outright.
Criminals use other less tracable coins.
Also: it will not be outlawed everywhere, some country will jump on the opportunity. So you earn bitcoins in one place, legalize then in another one, where it is legal. It's not so easy to prevent this, I'd even call an attempt futile.
What you think will happen:
- Ukraine will make fat stacks from all the people who care about BTC. Crypto-libertarians will rejoice, issue fifty billion ICOs, and Ukraine's GDP will exceed that of the rest of the world. BTC will go to the moon, and anyone who didn't get on that train when its future was in doubt will be starving to death in a ditch, or working as an indebtured servant, soldering mining rigs for early adopters.
What will actually happen:
- Any Ukranian bank that touches BTC will be barred from doing business in USD. For a bank, this is as good as suicide.
- Any intermediary that exchanges BTC for a local currency (Hryvnia), without touching USD will be barred from transacting with any Ukranian banks, that don't want to be barred from doing business in USD.
- Anyone trying to use Hryvnia for any international transactions will be subject to strict AML scrutiny, because it is a well-known intermediary currency for laundering BTC. The burden of proof with AML is on you, not your accuser.
- The Ukranian Rada will quickly come to its senses, and, in order not piss in the cornflakes of the 99% of its citizenry that doesn't give a shit about BTC, will ban it, and stop being a pariah state in the world of international finance.
The country with easy ICOs and many guys who became rich after launching coins, and sadly today the pariah of international finance.
The worst part of it, is that literally 99.9% of the population are totally honest persons and get punished for everyone else.
10% live in "absolute poverty" and it's certainly not the lack of money that caused it.
Hundreds of billions of USD are/were in the country.
No, hypothetical Ukraine will not issue fifty billion ICOs and its GDP will not exceed the rest of the world (btw it is rather ignorant to tie ICOs to bitcoin, they are completely different things).
What I think will happen in this hypothetical scenario, is that bitcoin will have a safe place in Ukraine where it can be legally turned in a very real cash USD, totally by an off-banking method. Then these USDs will be shipped to banks in Poland or Germany or Switzerland, which will accept it rather happily (as they usually do). Meanwhile, the rest of the world would continue using bitcoin for their day to day purposes, ignoring a worldwide ban. Some purposes will probably criminal [1], but many will have legal ones, especially in countries with failed fiat currency, like Venezuela or Zimbabwe. Because, you know, you can't really control a person who sells a pig to his neighbour and wants to have something REAL in return.
Should be mentioned, that if we pretend that just one country will legalize bitcoin, then it is more likely that this country will be the one least vulnerable to bank sanctions. Iran or North Korea are much more likely candidates than Ukraine.
Anyway, in reality, a worldwide ban is unlikely at this point, given the acceptance of bitcoin by too many jurisdictions already [2]. It's just a matter of time when it'll go to the moon and establish itself as the main world currency.
[1] In Russia all drug trade has moved online, facilitating sales with cryptocurrencies, check this investigation https://darknark.lenta.ru/ - and no Russian bank exchanges BTC for local currency. [2] https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country...
The only thing cryptocurrency has clearly got going for it, is in relative better ease of use, and better security, as compared to coins and banknotes, especially when it comes to international transactions.
It's troublesome to move a literal ton of cash from A to B, while moving a virtual ton of cryptocurrency isn't. The cost and risk of moving said ton of cash from A to B, is also staggering compared to the relative security and ease of movement offered by cryptocurrencies.
Best of all, cryptocurrency just about removes the need to have a bank as a third party when both storing and moving your valuables. Thus it's a much bigger problem for banks, than governments. Remember, taxation still existed in a time when no valuables were traceable. So that fact that some cryptocurrencies are claimed to be untracable, doesn't really matter much to the state.
Will it stop it completely? No - but put enough chicanes in the way and the incentive to use it will drop below critical mass required for it to achieve its actual long term goal, which is to undermine the power of a state to control the issue of currency (and with that, taxation).
Short term goals of facilitating grift by corrupted authorities and their crypto con artist enablers will remain largely unaffected.
Ignoring policy attacks, and focusing on the purely technical:
A useful metric here is to compare the cost of executing a 51% attack on Bitcoin long enough to erode confidence in the software to the military budget of the top nation states.
Additionally, the broadly assumed consistency properties of Proof-of-Work cryptocurrencies fall apart in the face of a powerful network adversary who can cause arbitrary segmentation.
Let's not pretend any of the processors are doing this because they have ethical issues with Facebook. They are likely doing it at the behest of the Fed, the Treasury and other international currencies. It's about power.
Facebook would not have unilateral control by any stretch of the imagination.
Libra Association is the organization these companies have withdrawn from.
At minimum they are the registered owner the Libra federal trademarks...that's a funny first step for a "decentralized" project. Satoshi Nakamoto never trademarked bitcoin or blockchain for that matter.
This will be live by the end of 2019 in a similar form.
The MakerDAO stablecoin system on the Ethereum blockchain produces the DAI stablecoin, with 1 DAI pegged at 1 USD. There's currently $85M of DAI in circulation.
Each $1 of DAI is backed with $1.50 of Ether, the currency of the Ethereum blockchain.
Later this year a major upgrade will go live named "MakerDAO multi-collateral DAI". The "multi-collateral" bit is related to a basket of currencies.
By Q1 2020, the DAI stablecoin will be backed still by ETH, but also backed by USDC (a US dollar stablecoin run by Coinbase), REP (a token for the Augur decentralized prediction market), and other tokens.
Not exactly "a digital currency backed by a floating basket of currencies" but a related concept and in production very soon :-)
https://mkr.tools https://vote.makerdao.com https://makerdao.com
That said I have high respect for the Maker team and the overall idea. They are some of the best people working in crypto right now.
I think what it'll take is a company with a profit (i.e. subscription/fee) model that clearly doesn't rely on pimping out consumer data to any/all comers and takes GDPR privacy to heart.
People keep saying oh this is proof crypto can't ever work because government. This was never a true crypto currency. It was just a private ledger tracking where actual money went. It was a stable coin at best. Its centralization is what got it killed.
Unlike, what, my established credit card company which still blocks me randomly when I'm traveling overseas even when I explicitly call their 800 hotline, sit on hold for 30 minutes, and tell some unempathetic worker "I'm overseas, don't block me"? Yes, thank goodness libra is dying, otherwise there might actually be some innovation against the exact things you just mentioned which perfectly describe the current state of affairs.
(Edit) I think it's fair to not trust Facebook with your currency, but keep in mind the players in the current system (governments, Banks, and credit companies) have hardly proven more trustworthy.
You should just get a new credit card or bank, whatever you're using is really out of date. Most modern cards and banks have websites or phone apps you can submit a travel notice on. Takes all of 2m and prevents you getting blocked for charges in that country.
I was also really please last month to notice that Capital One didn’t charge international transaction fees when I was in Canada.
This does not make sense. Looks like even your credit card is vastly more trustworthy than Facebook!
[0] http://www.optimizationtoday.com/what-i-learned-when-faceboo...
Your problems are already solved, in Europe at least. Thanks to banks and governments, ironically!
I think the others wanted to know what's going on with this project but in the end no sane person want's Facebook to have control over currency ("to move fast and break things") or even access to transaction data (it's proven FB can't be trusted with sensible data by now).
I’m not sure how this got broken, but a few powerful companies seem to be running with it.
As in "If you can't immediately name the individual who has the majority of leverage over the operation of X, then X is decentralized" low.
It's little more than an incantation at this point; the only proven implementation is as a sort of verbal ink blot test for identifying marks.
It’s basically creating a global currency out of the worlds fiat currencies, like banks did with gold long time ago. It’s quite clever and I could see the economic value and issues of something like market created globobucks.
Libra is backed by a basket of currencies or investments designed to spread risk around, which is a great idea unless a huge chunk goes belly up at the same time. And then what? We repeat the subprime mortgage crisis, where people also thought that there would never be mass defaults across the system at the same time?
All these alternative currencies look like they're solving a political science problem, not any actual problems that people have.
Second point is right on the money though!
All other aspects of the design strike me as either dumb, redundant or dangerous, but this would be the one part of the system not to worry about.
Its kind of hard to see this from the perspective of people who follow tech and HN, but Libra really may have been the first occasion that the possibility of crypto as anything other than an investment instrument - e.g. an actual usage as currency - penetrated the awareness of top national political leadership. Yes the ICO's got some attention but in many ways that attention seemed to suggest that crypto would be tolerated. And probably it will be, as long as it is simply another category of asset.
It will not be tolerated as currency, and governments will destroy any crypto that threatens to become one. For now, BTC is safe because its usage as a currency is minuscule and threatens no one. If it were to become successful, it will be destroyed. I've always known that was a possibility but now I'm sure of it.
if that's really the case at the Facebook headquarters they need to do some soul searching about how in touch they are with the world at large.
Because when I read that the biggest social network on the planet is going to try to introduce its own currency it took me and I think a lot of other people exactly two seconds to figure out that Uncle Sam and the EU would have none of it.
1. Like someone said above, know your enemy.
2. In the 0.1% offchance that it took off they really don’t want to be left out.
These wonks then make all the right favorable noises when queried by the FBs and VISAs of the world about the posture of the agencies, organizations, departments and NGOs they work for regarding crypto. As there's little to no in-group tolerance for critical introspection, there's correspondingly little to no collective power of seeing how this all looks from the outside.
It's a tight mutual feedback loop, twisted into hysteresis because everyone except the general public stands to gain from telling each other that the regulatory coast is clear.
Everyone should have anticipated that reaction. Finance is filled with smart people trying to pull fast ones. Regulators and lawmakers are sensitive to being blindsided, moreso with anti-money laundering.
The moment I saw the announcement I knew they screwed up. So did everyone in D.C. who isn’t selling blockchain consulting. It was hamfistedly introduced by the wrong people (Facebook) at the wrong time.
I'm not (yet) doubting that Libra will eventually be released, but I can see it being shutdown before or sometime after release.
Considering the many negative press stories about Facebook concerning things like privacy rights, I don't think Facebook would take a risk like that to begin with, but if they did, the US government would likely want to make an example out of them to deter future companies eager to act first and ask for permission later. Especially when it comes to something like this that could very well disrupt global currencies. There would be many ensuing battles of litigation and I would imagine the cost for Facebook, if they truly held steadfast in support of Libra, would be quite tremendous.
Basically financial regulators can fine or imprison anyone in the financial system at any time for any reason or even no reason, unaccountably so. Not surprisingly this power gets abused. These firms were told they would be attacked and punished for working with Facebook, so of course they baked away.
(small reminder for people who don't know him, he created the ISP french "Free" that kind of totally changed the telecom market in France (DSL and mobile), he also owns Scaleway (cloud), Kima Ventures (VC))
[1] https://www.theblockcrypto.com/linked/42886/libra-is-inevita...
[2] Original : https://www.lesechos.fr/idees-debats/cercle/europeens-libra-...
- Frictionless, fee-less digital transfer of a medium of value. To be able to transfer money natively over the internet.
- To keep it secure for 7 billion people - reversible, auditable etc - the benefits we have of a curated financial system.
I am sure there are lots of reading on this available - but those two do seem incompatible
You achieve the second by building upon this base layer. Just like how in the real world the base layer is physical transfer of cash and assets (not very reversible), and we have a financial and legal system built upon that (to simplify, it's doubtful how relevant physical transfer is any more).
And this automatically brings back a lot of hassle with verifying paperwork, it again allows people to be barred from the network, and it again prevents people withput paperwork from owning currency.
If the world does move ahead with central bank issued digital currencies - and it seems there's a lot of chatter in that area - then a metacurrency will no doubt pop up at some point anyway. Because that's what I expect hackers will find fascinating and because it will suddenly become possible. So we'll get Libra one way or another, but it may not be Facebook's.
A full fledged digital currency ecosystem will be incompatible with the status quo to a large degree, but that's no reason for dismissal. Doesn't all innovation challenge the status quo? Ultimately, the cat it out of the bag and the question is not if, but how digital scarcity, whether trustful or trustless (or a mix of the two), will impact our definition and use of money.
We'll have to ensure AML rules evolve to fit the new paradigm and that's fine. But we shouldn't look at existing AML frameworks and refuse innovation because our solutions for the past don't fit our possibilities for the future.
And regardless of the outcome of Libra, Facebook is making huge inroads in prompting conversations and ultimately regulating digital money, which in itself is a huge win. Given the negative govt and public reactions and their standing ground on the matter, they're doing it at their own expense and I'll give them kudos for that. I don't see any of the existing forces in the finance ecosystem do anything close to this.
Money and payments have stood still amidst the digital revolution. Imagine micropayments for consuming online content and how they could address some of the biggest issues prompted by the attention economy. The likes of visa and mastercard could've made this a real at any moment in the last 20 years or so.
I welcome anyone trying to do something bold. It's progress, regardless of the outcome of any specific project.
Money is sort-of fundamental (it's one tool), and that's more so because today's fiat money is powered by guns. In the past, europe would have a multitude of coins being used concurrently with some of them dominating like the Florin. Its a recent development that governments crack down on the money that people use.
How would that work with VZ?
That's what makes this whole Libra thing so shocking. I just can't believe Facebook would be so naive to just shout "digital cross-border currency" and then expect everyone to cheer them on. Bitcoin has been around for years, and controversies surrounding it are well known. PayPal has been around for decades and everyone understands the potential of electronic payments.
The fact that Facebook did not expect this ambivalence / skepticism and address it upfront is a pretty surprising misstep.
Because Facebook senses an opportunity that in the long-term they could make a lot more money than if they founded a bank.
I advocate for a new type of crypto: digital native and decentralized stablecoin. By adding a constant inflation rate, coin price can become somewhat stable. The tradeoff is worthy for permissionless, digital native and decentralization. I outline the benefits of this new type of cryptocurrency in this article:
The Next Big Thing in Crypto: Using Inflation to Create Stablecoin
https://bitflate.org/post/2019/10/10/the-next-big-thing-in-c...
- Governments: We'll ban Libra.
- Facebook: Let us do Libra and we'll give you access to the financial transactions which otherwise would go dark with Bitcoin or Wechat.
EDIT: I assumed that Libra would be for many, many small transactions so banking know your customer KYC regulations imposed on banks in all countries by the US and other governments would not really apply. Also, does something like Apple Pay also fit the need for people paying people in other countries small amounts of money?
https://techcrunch.com/2019/10/11/libra-denominated-in-dolla...
Baskets of currencies are nothing novel. The problem goes down to whether this is a Facebook-controlled currency (which is troubling, given Facebook’s track record) or a nobody-controlled currency that Facebook profits from (which is troubling, given the money-laundering concerns).
I wonder who paid them to say this?
Stripe ended Bitcoin support almost 2 years ago https://stripe.com/en-ee/blog/ending-bitcoin-support
Didn't they admit last week that facebook's own detection algorithms are far better at detecting child abuse than anything else? How does that work.
[0]:https://www.zerohedge.com/news/2018-02-12/trump-budget-sees-...
Why not evaluate this beforehand before very publicly announcing that you join the (Libra) project?!
With that in mind, the very last thing the EU and US authorities want is for the people who (mostly unwittingly) underpin the actual value to have an Exit from this type of controlled use of inflation into an alternative currency backed by say gold and other hard to inflate commodities, because allowing any significant amount of that.. (remember the true impact is inverse of the real fractional-reserve in play) would lead to a collapse in the power of the existing political-financial hegemony.