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Fed Chair Jerome Powell Has ‘Serious Concerns’ with Facebook Libra Proposal
- conanbatt 7y agoAfter 10 years of the crypto-crazies of bitcoin denouncing the power of central banks, a private company announces to do a version of a crypto-currency and is under fire from a central bank. Clearly they got something right.
- wil421 7y agoIf we knew which government, I mean person, created bitcoin would the same apply? Or would the Feds be all over Satoshi Nakamoto? FB has been the subject of several congressional and parliamentary hearings around the globe recently. Why would they not question Libra?
- nostrademons 7y agoThere are several crypto projects (some even fairly popular) where we do know who's behind them - Ripple, Stellar, Ethereum, Tether, Bitcoin Cash, Tron, EOS, etc. Hell, the core dev team members of Bitcoin itself is public knowledge. I think it's interesting that while crypto was a bunch of hobbyists and startups, it was just a bunch of folks wasting their money, but now that FB is involved it's a threat to the global monetary order. (Personally, I think the threat of FB is overblown - I'd bet that it'll make some significant noise over the next 2-3 years but fail over the next 10 - but the threat of startups and new crypto projects is underestimated. While the government is obsessed with FB's 2 billion users, someone else will come up with a cryptocurrency that's actually useful and take those 2 billion users for themselves.)
- wil421 7y ago>someone else will come up with a cryptocurrency that's actually useful You named 8 different digital coins. Why aren’t any of them useful? Why do we need other ones?
- nostrademons 7y agoIt's like any other startup: building a product that's useful enough to get widespread adoption requires nailing a lot of different details. You leave one critical feature off and you don't get adoption. You get all of them right and the product takes off on a hypergrowth curve. It's like how Reddit took off once they added comments, or AirBnB took off once they started taking professional-quality photos. It's not that comments define Reddit (a Reddit with comments but no links or upvoting is a mailing list) or that photos define AirBnB (an AirBnB with photos but no booking, billing, or review systems is a travel blog), but that those were the last critical features needed for success. Speaking of the platform coins (Ethereum, EOS, Tron), I can think of few critical features they're missing. Scalability is one of them, which Ethereum is working on and EOS has - the network has to support more than 10 TPS. The ability to host a pretty, intuitive UI on the blockchain itself (so that you don't also need to run a website that listens to blockchain events for average users to run your DApp) is another. Discoverability is another, letting ordinary users find useful apps and spread them around.
- anchpop 7y agoDo you view privacy as an important quality? Nano seems like a pretty good attempt at making a cryptocurrency that's useful as a currency, but transactions are not private and I'm not sure how big of a problem that is
- nostrademons 7y agoI don't personally, but there are cryptocurrencies that have made some really big strides there: Monero and ZCash. I've heard that a lot of dark-web business is actually switching over from Bitcoin to Monero, so it's getting some real adoption. One of the interesting things about the cryptocurrency space is that it's challenging one of our fundamental assumptions about economics, namely that currency is a winner-take-all market and everything works better if there's a single currency used for everything. Instead we're seeing that currencies can actually have different properties, and that this can actually affect which currency you'd chose to use in which circumstance. Want to do things that you don't want the government to know about? Use a privacy coin like ZCash or Monero. Want to let your computer programs transact economically? Use a platform coin like Ethereum, EOS, or Tron, and select which based on whether you want to write your smart contracts in Solidity, WebAssembly, or Java, respectively. Want to define a marketplace and create a utility coin to mediate transactions in it? That's what coins like BAT (Brave), Kin (Kik) and now Libra (Facebook) do. The primary functions of a currency (store of value, medium of exchange, and unit of account) are also now getting unbundled: Bitcoin is used as a store of value, but not as a medium of exchange, while something like Monero or BAT is much more a medium of exchange than a store of value, and stablecoins like Tether or USDC are filling the unit-of-account role. That trend has been going on for decades - stocks and bonds are stores of value, but not mediums of exchanges or units of account, while in-game currencies are units of accounts but not a good store of value or unit of exchange - but the crypto space has made it explicitly clear.
- buboard 7y agoThats the beauty of decentralization. You can't really blame one person for bitcoin's value today, you have to blame everyone who participates in it (Really, who would the congress question, and what could that person do? take down bitcoin?). While Libra is centralized so single point of failure
- damnyou 7y agoThere are no decentralized cryptocurrencies. Like all other so-called "decentralized" coins, Bitcoin rewards economies of scale. That means that it tends towards centralization. Though of course Bitcoin has its own unique problems, like being deflationary (which is evil).
- stale2002 7y agoWhat? Are you aware that all commodities are basically deflation? Do you think it is "evil" to buy commodities? This is all about freedom of choice. If you don't like the properties of certain products, then buy the one that you like. But lots of people would apparently prefer to spend their own money on deflationary assets. Who are you to say it is evil to do this with assets that one owns?
- damnyou 7y agoWho are you to police me for saying that it's evil? You're welcome to your opinions, and I'm going to have mine. As you said, freedom of choice. Personally I think that modern fractional reserve banking and the Fed are great, and bitcoin maximalists are overall not very smart.
- stale2002 7y agoNowhere did I "police" your opinion. You are the one who doesn't support people's ability to buy deflationary assets. Instead I was calling your opinion bad and in opposition to free choice. How is owning crypto any different than just owning a commodity, which can be deflationary? And why would owning a commodity be "evil"?
- conanbatt 7y agoI think what is happening to Libra right now is a good example of why Bitcoin is so censorship-resistant minded.
- DiseasedBadger 7y agoNothing about Libra denounces the power of central banks. Facebook just becomes an unregulated central bank.
- buboard 7y agoif it did. it would clearly denounce their power. the US has waged many wars over the Dollar.
- dmix 7y agoI don’t know why people keep calling Libra unregulated as if some registered entity in Switzerland is going to protect them from gov scrutiny around the world. There’s no way they don’t face regulatory pressure as soon as they start operating, assuming it can even get to the size and scale where regulators even care about it.
- conanbatt 7y agoThey can't be a central bank because they are not a government.
- vageli 7y ago> They can't be a central bank because they are not a government. Isn't the federal reserve in the United States a private corporation that is not part of the government?
- conanbatt 7y agoNo, they are not a private entity in that sense. They president is appointed by the president. They are a (theoretically) independent organism.
- asveikau 7y agoAlternatively, a private entity which is typically described as under-regulated in its existing businesses thinks it can pivot into central banking without scrutiny.
- conanbatt 7y agoHaving a currency is not the definition of a central bank. Central banks are public institutions with responsibilities within a government. Casinos that issue their own chips are not central banks.
- andirk 7y agoI worked for a mobile gaming company who did mainly casino games with fake chips that you could buy, and they're now under investigation for violating gambling laws because their chips _acted like real money_ therefore the same laws apply. Might be the same with crypto money where they'll be under the same laws as real money and trading.
- devoply 7y agoThe US already has full control of the global currency, what could this possibly buy them? They want to be able to embargo nations' currency and destroy them doing that economically, this would get in the way of that... They would need FB's blessing to properly deprive citizens of other countries whom they are targeting of financial resources. So obviously it's a non-starter.
- TheRealPomax 7y agoMy main concern about libra is that, by being strongly tied to real currencies, libra issuers (not just facebook, all of them) have effectively assumed the role of unsanctioned mints, with the ability to damage the stability of each currency because libra is not tied to the international exchange system: if you pay facebook, or anyone else, $10 and they convert that into libra, now they have $10 that they will absolutely put back into circulation to make additional money on, _and_ $10 worth of libra have been created, which can be converted back into real dollars with the original $10 already gone.
- DiseasedBadger 7y agoWhat about that makes it better to be embargoed by Facebook? That's a dystopia no one needs.
- TheRealPomax 7y agoWhat about Libra is exclusive to Facebook? It's not "their" cryptocurrency, they just pitched the idea. The actual power behind libra is the Libra Association, which has a lot more scary companies participating.
- cmiles74 7y agoI don't find this at all convincing. I believe Facebook will be managing much of the physical hardware involved, likely in their existing data centers. IMHO, the Libra Association will boil down to Facebook and the payment processors who have signed on. This strikes me as very much Facebook's currency.
- c-cube 7y agoEach of the 28 participants will run its own hardware and validator on it (there are hardware requirements on top of the 10M$). FB might control the only wallet, initially, but not the validators.
- traek 7y ago
- buboard 7y agoWell he should have. Or maybe it's just for show. Libra can be a great tool to control the rising markets in africa. Perhaps this will end with a compromise that gives Fed control over the network.
- bilbo0s 7y agoI don't know man? There are things happening in Africa right now that make me think FB won't be a major player in Africa in the future. The Africans have been smitten by the Chinese protectionist model. That new free trade agreement they have actually specifically excludes your company from benefiting if you're using goods or services from outside the zone where options exist inside the zone. Don't misunderstand me, I get it, they need to get their economies going. Get jobs for their people. Etc. Just pointing out that this stipulation has some obvious consequences for companies outside the zone. And it's not just Africa, I'm betting the future will see a balkanization of the internet. I could be wrong though? But I doubt it. A lot of corruption in Africa and everywhere else, and corrupt people are exceedingly greedy. I think we can count on them taking the whole pie wherever possible. As well as aggressively working to expand the number of places it's possible to take the whole pie.
- buboard 7y agofacebook doesnt have to be in africa for Libra to succeed. Although i think it's pretty popular there anyway. And, no matter how tempting the chinese influence is, the Dollar is still a lot more attractive , and by extension Libra, which is backed by US companies mostly.
- hardlianotion 7y agoFacebook is a major player in Africa right now.
- bilbo0s 7y agoSure, now. All I'm saying is that after reading through some of those regs, clearly it'd be prudent to bet on African properties for those playing the long game.
- rufusroflpunch 7y agoOf course he does. His job, his entire worldview, is based on technocratic control of the economy. Breaking the government monopoly on currency threatens everything about him.
- JumpCrisscross 7y ago> Breaking the government monopoly on currency threatens everything about him This is naive. Breaking governments’ holds on currency would be supremely lucrative for bankers. See the American free banking era.
- wtfrmyinitials 7y agoThese two are not mutually exclusive
- jpadkins 7y agoThis is also naive. The federal reserve is a joint org of government and banks. There is no separation of government and banking power when it comes to currency in the US. In 1913, they agreed to control it together (run by the banks, oversight by federal government).
- kregasaurusrex 7y agoThe idea of pegging a currency's value to a basket of existing fiat currencies has already been done by the IMF as Special Drawing Rights[0], where Libra's goal is to extend a similar functionality into a living digital payment system. Transfers of XDR are restricted by its issuing bodies only to nations due to the large amount of risk bourn by having the ability to print an unlimited amount of currency, and a continued guarantee for the currency to remain solvent against its allocation baskets. Governments are right to see this as a competitor to central banking as the network operates outside their jurisdiction (including the IMF'S), avoiding payment monitoring networks like SWIFT, and Libra doesn't seem to have a well-defined plan in the case of a major liquidation event. [0] https://en.wikipedia.org/wiki/Special_drawing_rights https://en.wikipedia.org/wiki/Special_drawing_rights
- WheelsAtLarge 7y agoInteresting that Powell does not address the power that FB gets by having its own currency. Having billions of users gives it the power to create its own economy and by extension its own government. If you give it enough time FB will be able to set its own monetary policy and rules. It won't happen today or tomorrow but give it time and it will.
- conanbatt 7y agoIts an independent currency: if it changes rules in a way users dont accept it would stop being used. Lets not confound the capacity to build a token with the capacity to levy taxes. The latter is the scary one. The former is just playing with casino chips and airline miles.
- objektif 7y agoYeah it would but what abkut the value of the currency when they change the rules?
- conanbatt 7y agoIt would go down, or up, like with any other currency.
- WheelsAtLarge 7y agoOne of the ways that fiat currencies are accepted by the public is that you can use them to pay taxes so even if no one wants to accept them you can be sure that the issuing government will accept it as payment for taxes and government services. So people are assured that at worst there is a place where it can be used. Once FB creates services that people want and then FB decides that they will only accept its currency as payment then people will have the confidence to accept it and use it. There is no doubt in my mind that FB will create services since all companies eventually create them as part of their business. There is nothing new about the general idea. It's happened in the past and it will happen in the future.
- 7y ago
- seibelj 7y agoPosted this in an older Libra hatefest but I'll post it again: Cryptocurrency and blockchain technology have opened up permissionless innovation in an industry that has been so choked by regulation that previously only the largest, most well-connected players could get in the door: finance. You can, right this second, create a smart contract that allows extremely sophisticated financial instruments and attract real users. The initial shoots of innovation are already happening, such as MakerDao's Collatorized Debt Positions (CDPs)[0] and Compound Finance for money market crypto instruments.[1] Regulators and governments can stick their fingers in their ears, outlaw the technology, and drive everything offshore or underground. The point is that these technologies are permissionless and unstoppable. As long as the internet exists, you can't eliminate such technology and behavior. Rather than knee-jerk outlaw progress in the industry by projects such as Libra, governments need to let the industry mature and eventually pass laws that protect consumers without stifling innovation. HN users especially need to embrace their so-called "hacker" roots and stop lobbying for the state to crush such innovative technology in its infancy. Seriously - the outrage to blockchain and crypto on HN is entirely absurd. This is cool, interesting technology and entrepreneurs should be analyzing it for its disruptive potential rather than whining that there aren't enough licenses and bureaucrats involved. [0] https://makerdao.com/en/ https://makerdao.com/en/ [1] https://compound.finance/ https://compound.finance/
- camjohnson26 7y agoPersonally I think a lot of the hate is because users here knew about the technology early but didn’t invest in any meaningful way. They don’t want to think they made the wrong choice, so they call it a scam or a ponzi scheme to try to justify the decision not to invest. The truth is that crypto is very scammy and that its value run-up in 2018 was a massive bubble, but that doesn’t mean the tech behind that bubble is worthless. Anyone who got rich off of crypto essentially got lucky, but that says nothing about how good that technology is or is not. Crypto can be good technology and a bad investment while still allowing risk takers to make millions.
- seibelj 7y agoAlso everyone forgets that for every Amazon or Google in 1999 there were 25 pets.com flameouts. Hindsight is always 2020 and game-changers only seem obvious in retrospect.
- jasonhansel 7y agoMy concern about Libra is that it suggests that Facebook is trying to control things that have normally been the purview of the government. This is concerning in the long run because Facebook is not run democratically. Any institution performing government-like functions should be at least as accountable as the government itself.
- 50656E6973 7y agoI agree with you, but central banks like the Fed are not accountable like the government is
- jasonhansel 7y agoThe Fed is certainly more accountable than Facebook. The Fed chair is appointed by an elected president; Mark Zuckerberg is appointed by various unelected rich people.
- MrMember 7y agoMark Zuckerberg is appointed by Mark Zuckerberg. He controls a majority of voting rights in the company. If he wanted to he could completely ignore all other shareholders and there isn't a whole lot anyone could do about it.
- nixonpjoshua1 7y agoNot directly accountable but still much more accountable than Facebook is. Even in a non-elected position there is still a duty to the people and greater good rather than fiduciary duty to shareholders.
- 50656E6973 7y agoThe only real way the Fed is accountable to the people and greater good is to the extent that they don't screw the people so obviously and badly that the people (including the police and military) revolt against them, which is the same level of accountability for any dictatorship
- nkebbas 7y agoOf course he's concerned. This type of thing could potentially displace USD as global money. Pretty unlikely but the idea of it is reasonably terrifying to the federal reserve.
- mind-rape 7y agoThe elephant in the room: Nobody actually likes Facebook.
- mind_rape 7y agoThe elephant in the room: Nobody actually likes Facebook.
- rstuart4133 7y agoFor some reason this reminds me of Uber. Over the centuries we have built up a very elaborate currency system. It complex with elaborate protections yet is simple for your average person to use. It's also very expensive for what it does. Today money is represented by a few bytes on a disk. Transferring it takes a few smallish IP packets and minimal CPU cycles. Ergo, the cost of doing these things should be fractions of a cent. Yet if I buy something using paywave, it costs someone about 1% of the transaction. If I by something over the internet it's more than 1%. If I transfer $1K overseas it costs $20 or something. With costs like that its ripe for disruption. This system is firmly cemented into our society with lots of law, and this inflow of those huge quantities of cash has created a legion of formidable vested interests who will defend it to the death (most because if it disappears they will too). This is what Uber was up against in the taxi industry, albeit this is at much larger scale. Uber got around it by just ignoring the law, and in the process bankrupting the species those laws protected - the taxi licence holders. It caused enormous pain for them, and they were most innocent bystanders. It's going to take a special kind of hubris to take that on, and a enormously talented person to pull it off. Zuckerberg may be that person. I can't say I like his chances, but given he's seen WeChat's success in China I don't doubt his motivation.