What Libra backers are calling “decentralisation” is in truth a shift of power from developing world central banks toward multinational corporations and the US Federal Reserve and the European Central Bank.Developed world central banks will understandably prioritise their own economies. Meanwhile, the fewer rupees or lira a country’s citizens hold, the less power the national central bank has to set monetary policy, making it harder to stimulate the local economy in times of economic stress.In the recent Greek crisis we saw first-hand what happens when emerging markets prematurely give up local control of their currency. As a member of the eurozone, Greece lacked control over its monetary policy and had no way to appropriately devalue its local currency after the financial crisis. A decade later the Greek economy is still 25 per cent smaller and its unemployment rate is the highest in the eurozone. Libra could render other central banks equally powerless in the face of recession.The Libra Association could also wield significant power over the workings of global finance. Unless regulators jump in quickly, these for-profit companies will set the standards for identity verification, at least in the short run, as well as defining the rules and enforcement around the privacy of transactions and what to do in case of theft.Facebook and its partners will decide which banks, payment processors and distribution agents to work with, making or breaking companies in some markets overnight. This will entrench existing players rather than creating a truly decentralised system.Many will say these fears are overblown: it’s not clear if Libra will even get off the ground. But if we’ve learnt anything about Facebook, it’s that we should not underestimate its power to transform how people interact. The company’s decision to offer live broadcasting made it possible for teenagers to stream bullying, terrorists to livecast an execution and a gunman a mass shooting. It has similarly transformed mobile messaging and news and journalism faster than many imagined.Governments around the world cannot afford to adopt a wait-and-see approach. The G7 has already set up a working group to review the project in conjunction with the IMF and central banks. Regulators in emerging markets should slow down Facebook’s push by preventing local banks and payment processing networks from accepting Libra. If a Libra user can’t move the coin into a local bank account or cash it in for local currency, it’s unlikely to take widespread hold. This need not be a permanent ban. It simply buys time for all of the implications to be thought through.At the same time, US and Swiss regulators have a central role, for they are likely to be the ones setting standards for know-your-customer, anti-money laundering and financial stability requirements. Watchdogs have underestimated Facebook’s power in the past, allowing it to swallow potential rivals Instagram and WhatsApp. This time the scrutiny by the appropriate government regulators should be nothing short of exhaustive.
“The Bank of England approaches Libra with an open mind but not an open door, said Carney. “Unlike social media for which standards and regulations are being debated well after it has been adopted by billions of users, the terms of engagement for innovations such as Libra must be adopted in advance of any launch.”Libra, if it achieves its ambitions, would be systemically important,” he went on to say, continuing: “As such it would have to meet the highest standards of prudential regulation and consumer protection. It must address issues ranging from anti-money laundering to data protection to operational resilience. Libra must also be a pro-competitive, open platform that new users can join on equal terms. In addition, authorities will need to consider carefully the implications of Libra for monetary and financial stability.”
After years of disregarding privacy, exploiting user data, and failing to control its platform, Facebook has now unveiled a cryptocurrency and payment system that could take down the entire global economy. Governments must intervene before a company that “moves fast and breaks things” ends up breaking everything.
Facebook Inc.’s ambitious plan to roll out its own cryptocurrency ran into immediate political opposition in Europe, with calls for tighter regulation of the social-media giant.
French Finance Minister Bruno Le Maire said the digital currency known as Libra shouldn’t be seen as a replacement for traditional currencies.
“It is out of question’’ that Libra “become a sovereign currency,’’ Le Maire said in an interview on Europe 1 radio. “It can’t and it must not happen.”
Read more about Facebook’s cryptocurrency plan
Le Maire called on the Group of Seven central bank governors, guardians of the global monetary system, to prepare a report on Facebook’s project for their July meeting. His concerns include privacy, money laundering and terrorism finance.
Libra was also a talking point at the European Central Bank’s annual symposium in Sintra, Portugal, where Bank of England Governor Mark Carney referenced Libra. “Anything that works in this world will become instantly systemic and will have to be subject to the highest standards off regulation,” he said.
Carney’s ‘Open Mind’
While Carney said “we need to have an open mind” about technology that can facilitate cross-border money transfers, “we will look at it very closely and in a coordinated fashion” at multilateral organizations including the G-7, the International Monetary Fund, Bank for International Settlements and Financial Stability Board.
Meanwhile, Markus Ferber, a German member of the European Parliament, said Facebook, with more than 2 billion users, could become a “shadow bank” and that regulators should be on high alert.
Facebook is developing Libra, a stablecoin designed to avoid the volatility of Bitcoin and thus be useful for commerce, in partnership with some of the biggest names in payments and technology, such as Visa Inc. and Uber Technologies Inc. The new currency, which will launch as soon as next year, is pegged to a basket of government-backed currencies and securities.
While Bitcoin, the original cryptocurrency, has attracted a lot of attention since its creation a decade ago, it’s still not widely used beyond market speculation. Facebook meanwhile, plans to build a new digital wallet that will exist in its Messenger and WhatsApp services to make it easy for people to send money to friends, family and businesses through the apps.
“This money will allow this company to assemble even more data, which only increases our determination to regulate the internet giants,” Le Maire said in parliament.
Facebook’s Calibra cryptocurrency is on its way.
It’s mission is to “enable a simple global currency and financial infrastructure that empowers billions of people”.
AbstractEmerging as a comprehensive and aggressive governance scheme in China, the “Social Credit System” (SCS) seeks to promote the norms of “trust” in the Chinese society by rewarding behavior that is considered “trust-keeping” and punishing those considered “trust-breaking.” This Article closely examines the evolving SCS regime and corrects myths and misunderstandings popularized in the international media. We identify four key mechanisms of the SCS, i.e., information gathering, information sharing, labeling, and joint sanctions, and highlight their unique characteristics as well as normative implications. In our view, the new governance mode underlying the SCS — what we call the “rule of trust” — relies on the fuzzy notion of “trust” and wide-ranging arbitrary and disproportionate punishments. It derogates from the notion of “governing the country in accordance with the law” enshrined in China’s Constitution.This Article contributes to legal scholarship by offering a distinctive critique of the perils of China’s SCS in terms of the party-state’s tightening social control and human rights violations. Further, we critically assess how the Chinese government uses information and communication technologies to facilitate data-gathering and data-sharing in the SCS with few meaningful legal constraints. The unbounded and uncertain notion of “trust” and the unrestrained employment of technology are a dangerous combination in the context of governance. We conclude with a caution that with considerable sophistication, the Chinese government is preparing a much more sweeping version of SCS reinforced by artificial intelligence tools such as facial-recognition and predictive policing. Those developments will further empower the government to enhance surveillance and perpetuate authoritarianism.Keywords: Social Credit, information and communications technologies, governance, social control, human rightsSuggested Citation:
At TILTing 2019 the Lab presented a study on the legal instruments that are, as of today, applicable to blockchain-based digital assets under European law, and the relative enforcement challenges. The broader question to be tackled is whether and how regulators deal with such challenges, and what are the interests at stake. http://ipkitten.blogspot.com/2019/05/tilting-perspectives-2019-report-2.html
When Satoshi Nakamoto designed the Bitcoin protocol, he had the insight to include the notion of transaction fees. These fees incentivized miners to include transactions into blocks. But initially, Bitcoin did not have, in any meaningful sense, a fee market.A large portion of early Bitcoin transactions were completely free up until 2013 (blue in the above chart). Wallet developers eventually hard-coded tiny fixed fees into their clients, thought of as donations to miners. At first these fees defaulted to 0.1 BTC, but they were driven down as the Bitcoin price rose.