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Facebook’s Cryptocurrency: Stop It Before It Starts

66 points by smacktoward 7y ago

verdverm 7y ago
Poorly written and argued, while I agree with the title, the rest is garbage by someone who should not be talking about this
- chris_wot 7y ago
  What precisely have they gotten wrong? From my point of view, the article looks spot on.
  - IAmEveryone 7y ago
    The article’s objection is probably relevant, but not necessarily the most important. It’s almost guaranteed that this con (edit: “coin” was intended, but “con” works even better) will end up governed by existing KYC laws, just as has happened with BTC. The more interesting objection is about Facebook “disrupting” not the payment processing business, but the international monetary system (national banks etc.). There is ample reason to be concerned about this possibility, most prominently the fundamental idea that this system should be governed democratically, and not by industry, and certainly not by Facebook. Bitcoin was bad enough, with your power correlated with your wealth like a dark age’s feudal system. Restricting control further to a Silicon Valley Oligarchy is just dystopian. The article may have ignored this line of argumentation because the system as it is currently planned just doesn’t really do anything to that effect: it uses existing currencies as the backend, does not (yet) involve any of the usual mechanisms of monetary policy (policy-based control of currency creation etc.). Bloomberg’s Matt Levine had a long article on this yesterday, including a discussion how the basket-of-currencies backing might be a play to actually compete with these existing currencies.
  - verdverm 7y ago
    Abrupt topic change and thought flow, cyber criminal part, kyc... Much better pieces have already been written
gjs278 7y ago
the arguments used here are backwards. this currency should be stopped because of too much kyc, not too little.
ThrustVectoring 7y ago
Cryptocurrency has a pretty big problem: "dollars, but without US Government oversight" is exactly what money launderers and other financial criminals want to have. The closer any cryptocurrency gets to being this, the more illegal activity it will facilitate and the more risk the project takes on of getting the entire operation seized and the principals arrested and extradited to the US (see also: Liberty Reserve).
- SI_Rob 7y ago
  This is not a problem (for the cryptocurrency "thought leaders" at least). It is literally the primary motivation for its existence. Look at the message embedded into the Bitcoin Genesis block - it's no secret that the entire point was to evade, undermine, and ideally supplant government control over issuance and circulation of money.
- darawk 7y ago
  You could equally say "Speech, but without US government oversight, is exactly what the pedophiles and terrorists want to have".
  - ThrustVectoring 7y ago
    True. I'm not making a moral judgement here - merely stating that flouting anti-money-laundering laws and facilitating financial crimes has severe legal risks. I'm honestly not even worried that Facebook is going to flout AML laws. I'm more worried that they'll use the fact that they're using newfangled technology and the political and economic weight of their crypto consortium to get favorable legislation passed. And then, because of said crypto features, we'll end up undermining laws that fight money laundering and other financial crimes.
    - weddpros 7y ago
      "undermining laws that fight money laundering and other financial crimes": do these actually work? 5% of the time? 95%?
- 7y ago
jameslevy 7y ago
"But since Libra pegged is to a basket of currencies, it is not actually stable." A weighted basket of the top 5 currencies by market capitalization should be more stable than the dollar. The point about taxable income is true, although if I would rather pay tax on income I made from Libra than not had earned the income at all. Unless the dollar crashes hard I wouldn't expect this to be a meaningful amount of income.
- fnord77 7y ago
  The pound Sterling is the #4 currency. It has not been stable, it has been losing value against the dollar like crazy
- berns 7y ago
  > Nobody wants to receive $10 from a friend only to have it turn into $9.80. The author thinks that the USD is the unmovable absolute and it's everything else that changes in relation to it.
  - aaronharnly 7y ago
    I think the point is more profound than that — for all the reasons that local currencies are useful (and the flowering of many cryptocurrencies has happened), one’s local national currency is itself an incredibly useful thing to have. If your friend is in the same country or currency zone as you, which statistically they are very likely to be, a national stablecoin is more useful than one that drifts. (Conversely, for international remittances, an international basket stablecoin might indeed be a useful thing to have!)
  - forgottenpass 7y ago
    No. The author thinks people anchor value assessment in their local currency without factoring in short term currency fluctations. Which they do.
- freeone3000 7y ago
  It may be some people's only capital gain, especially considering the Libra target audience, which might greatly complicate taxes for those with US citizenship. It's not just the amount of money you make/lose through the forex.
camjohnson26 7y ago
People who think the government should have the technological power to decide who pays who in the world need to ask themselves this. Do you think that there should be a hardware filter on all internet fiber cables that allows the government to filter that traffic? Banning cryptocurrencies because they physically allow money laundering is as logically indefensible as banning internet fibers because they physically allow illegal content. The solution is to make the transactions illegal but physically possible. I’ve seen no reasonable people saying that all transactions should be legal, but I’ve seen a lot of people here saying that technology which allows illegal transactions should be banned. This is mind boggling to me and seems like a dangerous precedent. After all cash physically allows money laundering, should we ban cash? Cryptocurrencies are baby technologies, why would we make innovating on them illegal before we even know what they’re capable of?
- deleted 7y ago
  [deleted]
- jlmorton 7y ago
  > After all cash physically allows money laundering, should we ban cash? Yes, we probably should, now that better alternatives exist. We should have public postal banking, so no one is unbanked. And then we should stop issuing cash.
  - wilg 7y ago
    What better alternatives exist?
    - jlmorton 7y ago
      Preferably low-cost digital payments, such as debit cards, mobile payments, or whatever else, perhaps including cryptocurrencies like Libra. I understand many of these methods as they exist in the US come with significant fees, although debit cards have improved significantly since Dodd-Frank. Sweden will stop accepting cash payments in 2023, and already nearly 90% of transactions are completed without it. There's not a one-size solution, but 98% of Swedes have a bank card, and 60% have used mobile payment app Swish over the past year.
fnord77 7y ago
> Fortunately for the rest of the world, Libra may well fail. People prefer assets that hold their value relative to either the local currency or, in an unstable situation, dollars or euros. Nobody wants to receive $10 from a friend only to have it turn into $9.80. But since Libra pegged is to a basket of currencies, it is not actually stable. Like other cryptocurrencies, every Libra transaction thus involves exchange rate risk, and the only way Libra can succeed is if Facebook makes a concerted effort to force its adoption.
- solveit 7y ago
  >the only way Libra can succeed is if Facebook makes a concerted effort to force its adoption. But... Facebook obviously will?
55555 7y ago
You all need to read the following excerpt from Matt Levine's thoughts on Libra: > So, first, Libra will be a “stablecoin,” in the sense that its value will be pinned to conventional financial assets. Unlike most stablecoins, though, it will be pinned to a basket “of low-volatility assets, including bank deposits and government securities” in different currencies, so it won’t consistently be worth one dollar or one euro or anything else. “As the value of Libra will be effectively linked to a basket of fiat currencies, from the point of view of any specific currency, there will be fluctuations in the value of Libra.” > This strikes me as very annoying, but it has some obvious advantages for Facebook/Libra. For one thing, they’ll only need to manage one general Libra, rather than having different stablecoins corresponding to different national currencies. For another thing, if Libra gains widespread acceptance, its lack of one-to-one correspondence will give it a tendency to displace national currencies. If you mostly spend dollars, and Libra is always going up and down against the dollar, that will be annoying and you won’t want as many Libras. But if you mostly spend Libras—if Facebook is successful at making this the main currency of the internet—then that dynamic will reverse. If the dollar is always going up and down against the Libra, that will be annoying and you’ll want more Libras. The dollar will start to seem unstable and useless. If you buy most things online, and if everything online is priced in Libras, then you’ll end up living your life denominated in Libras, and only converting your Libras into dollars on your occasional touristic visits to the physical world.[4] The goal is for Libra to be more useful than any national currency, accepted in more places and with fewer complications; pegging it to a single national currency would only hold it back.
- a-nikolaev 7y ago
  Exactly. .. It is also pretty obvious that the guy wants to become a king of the world or something like that. He couldn't do that with his network. He will do that with money. It's also a diversification strategy, shifting business from problematic facebook (for how long it will last?) to a new potentially long-term venture.
- camjohnson26 7y ago
  Every currency fluctuates in value, we’re just used to talking in dollar terms. Every libra will always be worth one libra.
kkempster 7y ago
I wish people would proofread their articles. How can you not notice a glaring error in your first paragraph? "the coin really a Facebook project." Geez. Just take a minute and review.
mevile 7y ago
Facebook doesn't have anyone but themselves to blame for poor reactions to Libra. I think it's a cool idea with interesting tech and I'm interested to see what happens with it. I want to be optimistic, but I am not surprised at the backlash.
- buboard 7y ago
  facebook couldn't possibly do anything that wouldn't be painted in a bad light in the current year. They could literally shut down their site and the world would be up in arms that they cut their access to their audiences. It's a moral panic, it will pass.
malandrew 7y ago
Government should have no involvement in stopping a technological product because it might be used for something illegal. The creators are just producing a tool. The government should have no business stopping creators or interfering in any way because they aren't committing any illegal acts.
plankers 7y ago
>It is not live yet, giving governments the opportunity to kill this project before it actually gets off the ground and gives rise to cybercriminals that couldn’t capitalize on existing cryptocurrencies. Excuse me, I need a minute to stop laughing... Ahem, alright. In what world are criminals going to prefer using a cryptocurrency overseen by Facebook (however directly or indirectly) to using coins like Monero or Zcash, which have been built with privacy-enhancing feautures? And who are these criminals who couldn't figure out how to use these coins who are suddenly going to be enabled by this new blockchain? I should have stopped reading there, this guy has no idea what he's talking about.
- jddj 7y ago
  The ability of criminals to capitalise also depends on the people being exploited, no? When the proverbial Nigerian Prince's legal fees are denominated in Monero there's a much higher barrier to entry for the average scammee. One could see this lowering significantly with the adoption of Libras. Although to me it also seems possible that in the face of government KYC-style opposition, Facebook will use their Libra to advance their Real Name policy, bringing them one step closer to being the true 1:1 online representation of a person, essential for more and more services and tracked in higher and higher fidelity.
unicornherder 7y ago
Crypto just seems to be an endless lesson of people realizing why regulations exist.
vincentli2010 7y ago
reads like a sample SAT essay

66 points by smacktoward 7y ago

Poorly written and argued, while I agree with the title, the rest is garbage by someone who should not be talking about this

chris_wot 7y ago
What precisely have they gotten wrong? From my point of view, the article looks spot on.
- IAmEveryone 7y ago
  The article’s objection is probably relevant, but not necessarily the most important. It’s almost guaranteed that this con (edit: “coin” was intended, but “con” works even better) will end up governed by existing KYC laws, just as has happened with BTC. The more interesting objection is about Facebook “disrupting” not the payment processing business, but the international monetary system (national banks etc.). There is ample reason to be concerned about this possibility, most prominently the fundamental idea that this system should be governed democratically, and not by industry, and certainly not by Facebook. Bitcoin was bad enough, with your power correlated with your wealth like a dark age’s feudal system. Restricting control further to a Silicon Valley Oligarchy is just dystopian. The article may have ignored this line of argumentation because the system as it is currently planned just doesn’t really do anything to that effect: it uses existing currencies as the backend, does not (yet) involve any of the usual mechanisms of monetary policy (policy-based control of currency creation etc.). Bloomberg’s Matt Levine had a long article on this yesterday, including a discussion how the basket-of-currencies backing might be a play to actually compete with these existing currencies.
- verdverm 7y ago
  Abrupt topic change and thought flow, cyber criminal part, kyc... Much better pieces have already been written

gjs278 7y ago

the arguments used here are backwards. this currency should be stopped because of too much kyc, not too little.

ThrustVectoring 7y ago

Cryptocurrency has a pretty big problem: "dollars, but without US Government oversight" is exactly what money launderers and other financial criminals want to have. The closer any cryptocurrency gets to being this, the more illegal activity it will facilitate and the more risk the project takes on of getting the entire operation seized and the principals arrested and extradited to the US (see also: Liberty Reserve).

SI_Rob 7y ago
This is not a problem (for the cryptocurrency "thought leaders" at least). It is literally the primary motivation for its existence. Look at the message embedded into the Bitcoin Genesis block - it's no secret that the entire point was to evade, undermine, and ideally supplant government control over issuance and circulation of money.
darawk 7y ago
You could equally say "Speech, but without US government oversight, is exactly what the pedophiles and terrorists want to have".
- ThrustVectoring 7y ago
  True. I'm not making a moral judgement here - merely stating that flouting anti-money-laundering laws and facilitating financial crimes has severe legal risks. I'm honestly not even worried that Facebook is going to flout AML laws. I'm more worried that they'll use the fact that they're using newfangled technology and the political and economic weight of their crypto consortium to get favorable legislation passed. And then, because of said crypto features, we'll end up undermining laws that fight money laundering and other financial crimes.
  - weddpros 7y ago
    "undermining laws that fight money laundering and other financial crimes": do these actually work? 5% of the time? 95%?
7y ago

jameslevy 7y ago

"But since Libra pegged is to a basket of currencies, it is not actually stable." A weighted basket of the top 5 currencies by market capitalization should be more stable than the dollar. The point about taxable income is true, although if I would rather pay tax on income I made from Libra than not had earned the income at all. Unless the dollar crashes hard I wouldn't expect this to be a meaningful amount of income.

fnord77 7y ago
The pound Sterling is the #4 currency. It has not been stable, it has been losing value against the dollar like crazy
berns 7y ago
> Nobody wants to receive $10 from a friend only to have it turn into $9.80. The author thinks that the USD is the unmovable absolute and it's everything else that changes in relation to it.
- aaronharnly 7y ago
  I think the point is more profound than that — for all the reasons that local currencies are useful (and the flowering of many cryptocurrencies has happened), one’s local national currency is itself an incredibly useful thing to have. If your friend is in the same country or currency zone as you, which statistically they are very likely to be, a national stablecoin is more useful than one that drifts. (Conversely, for international remittances, an international basket stablecoin might indeed be a useful thing to have!)
- forgottenpass 7y ago
  No. The author thinks people anchor value assessment in their local currency without factoring in short term currency fluctations. Which they do.
freeone3000 7y ago
It may be some people's only capital gain, especially considering the Libra target audience, which might greatly complicate taxes for those with US citizenship. It's not just the amount of money you make/lose through the forex.

camjohnson26 7y ago

People who think the government should have the technological power to decide who pays who in the world need to ask themselves this. Do you think that there should be a hardware filter on all internet fiber cables that allows the government to filter that traffic? Banning cryptocurrencies because they physically allow money laundering is as logically indefensible as banning internet fibers because they physically allow illegal content. The solution is to make the transactions illegal but physically possible. I’ve seen no reasonable people saying that all transactions should be legal, but I’ve seen a lot of people here saying that technology which allows illegal transactions should be banned. This is mind boggling to me and seems like a dangerous precedent. After all cash physically allows money laundering, should we ban cash? Cryptocurrencies are baby technologies, why would we make innovating on them illegal before we even know what they’re capable of?

deleted 7y ago
[deleted]
jlmorton 7y ago
> After all cash physically allows money laundering, should we ban cash? Yes, we probably should, now that better alternatives exist. We should have public postal banking, so no one is unbanked. And then we should stop issuing cash.
- wilg 7y ago
  What better alternatives exist?
  - jlmorton 7y ago
    Preferably low-cost digital payments, such as debit cards, mobile payments, or whatever else, perhaps including cryptocurrencies like Libra. I understand many of these methods as they exist in the US come with significant fees, although debit cards have improved significantly since Dodd-Frank. Sweden will stop accepting cash payments in 2023, and already nearly 90% of transactions are completed without it. There's not a one-size solution, but 98% of Swedes have a bank card, and 60% have used mobile payment app Swish over the past year.

fnord77 7y ago

> Fortunately for the rest of the world, Libra may well fail. People prefer assets that hold their value relative to either the local currency or, in an unstable situation, dollars or euros. Nobody wants to receive $10 from a friend only to have it turn into $9.80. But since Libra pegged is to a basket of currencies, it is not actually stable. Like other cryptocurrencies, every Libra transaction thus involves exchange rate risk, and the only way Libra can succeed is if Facebook makes a concerted effort to force its adoption.

solveit 7y ago
>the only way Libra can succeed is if Facebook makes a concerted effort to force its adoption. But... Facebook obviously will?

55555 7y ago

You all need to read the following excerpt from Matt Levine's thoughts on Libra: > So, first, Libra will be a “stablecoin,” in the sense that its value will be pinned to conventional financial assets. Unlike most stablecoins, though, it will be pinned to a basket “of low-volatility assets, including bank deposits and government securities” in different currencies, so it won’t consistently be worth one dollar or one euro or anything else. “As the value of Libra will be effectively linked to a basket of fiat currencies, from the point of view of any specific currency, there will be fluctuations in the value of Libra.” > This strikes me as very annoying, but it has some obvious advantages for Facebook/Libra. For one thing, they’ll only need to manage one general Libra, rather than having different stablecoins corresponding to different national currencies. For another thing, if Libra gains widespread acceptance, its lack of one-to-one correspondence will give it a tendency to displace national currencies. If you mostly spend dollars, and Libra is always going up and down against the dollar, that will be annoying and you won’t want as many Libras. But if you mostly spend Libras—if Facebook is successful at making this the main currency of the internet—then that dynamic will reverse. If the dollar is always going up and down against the Libra, that will be annoying and you’ll want more Libras. The dollar will start to seem unstable and useless. If you buy most things online, and if everything online is priced in Libras, then you’ll end up living your life denominated in Libras, and only converting your Libras into dollars on your occasional touristic visits to the physical world.[4] The goal is for Libra to be more useful than any national currency, accepted in more places and with fewer complications; pegging it to a single national currency would only hold it back.

a-nikolaev 7y ago
Exactly. .. It is also pretty obvious that the guy wants to become a king of the world or something like that. He couldn't do that with his network. He will do that with money. It's also a diversification strategy, shifting business from problematic facebook (for how long it will last?) to a new potentially long-term venture.
camjohnson26 7y ago
Every currency fluctuates in value, we’re just used to talking in dollar terms. Every libra will always be worth one libra.

kkempster 7y ago

I wish people would proofread their articles. How can you not notice a glaring error in your first paragraph? "the coin really a Facebook project." Geez. Just take a minute and review.

mevile 7y ago

Facebook doesn't have anyone but themselves to blame for poor reactions to Libra. I think it's a cool idea with interesting tech and I'm interested to see what happens with it. I want to be optimistic, but I am not surprised at the backlash.

buboard 7y ago
facebook couldn't possibly do anything that wouldn't be painted in a bad light in the current year. They could literally shut down their site and the world would be up in arms that they cut their access to their audiences. It's a moral panic, it will pass.

malandrew 7y ago

Government should have no involvement in stopping a technological product because it might be used for something illegal. The creators are just producing a tool. The government should have no business stopping creators or interfering in any way because they aren't committing any illegal acts.

plankers 7y ago

>It is not live yet, giving governments the opportunity to kill this project before it actually gets off the ground and gives rise to cybercriminals that couldn’t capitalize on existing cryptocurrencies. Excuse me, I need a minute to stop laughing... Ahem, alright. In what world are criminals going to prefer using a cryptocurrency overseen by Facebook (however directly or indirectly) to using coins like Monero or Zcash, which have been built with privacy-enhancing feautures? And who are these criminals who couldn't figure out how to use these coins who are suddenly going to be enabled by this new blockchain? I should have stopped reading there, this guy has no idea what he's talking about.

jddj 7y ago
The ability of criminals to capitalise also depends on the people being exploited, no? When the proverbial Nigerian Prince's legal fees are denominated in Monero there's a much higher barrier to entry for the average scammee. One could see this lowering significantly with the adoption of Libras. Although to me it also seems possible that in the face of government KYC-style opposition, Facebook will use their Libra to advance their Real Name policy, bringing them one step closer to being the true 1:1 online representation of a person, essential for more and more services and tracked in higher and higher fidelity.

unicornherder 7y ago

Crypto just seems to be an endless lesson of people realizing why regulations exist.

vincentli2010 7y ago

reads like a sample SAT essay