Issue 42

Everyone hates Libra

After two days of Congressional hearings last week  it is clear that, Libra - Facebook's forthcoming cryptocurrency - is  intensely disliked by the establishment. Take the following headlines:

As a result, Facebook is "backpedaling from its ambitious vision for Libra",  moving away from the lofty goals set out in its white paper towards  something more closely resembling a conventional financial network. It  certainly didn't help that Facebook failed to do even a modicum of  homework such as, oh I don't know, actually getting in touch with the Swiss agency that will supposedly be governing the crypto.

It's  a shame, really, because most of the claims used to attack Libra are completely unfounded yet Facebook is folding like a cheap suit. In a  three-part series on Libra, Diego Zuluaga of the Alt-M blog delves into  how the critics' line of thinking is fundamentally flawed (do read the whole series). Some excerpts:

On systemic risk

"...a  massive redemption caused by factors unique to Libra would not seem  enough to cause a wider systemic crisis. Things might turn out  differently if the Libra Association went back on its commitment to  purchase stable assets on a one-for-one basis for every unit of Libra it  issued. However, the prospect of a rapid loss of confidence in Libra as  a result of such a turnabout, and the potential for customer lawsuits,  provide strong disincentives against the Libra Association’s reneging on  its promise of full backing. Still, given the commitments that the  Libra Association has made so far, the grounds for expecting Libra to  present a new systemic risk are lacking."

On monopolisation

"Networks  are fragile things. A miscalculated governance change, such as a fee  increase or a decrease in processing speed, can rapidly cause users to  leave the network in favor of alternatives. This potential for rapid  unraveling acts as a spur for networks to remain competitive and refrain  from abusing customers. In Libra’s case, many potential rivals are  members of the network and would see business flow to them directly if  Libra reneged on its promise of cheap payments and transparency. Some of  these latent competitors are billion-dollar businesses processing  trillions of dollars’ worth of transactions every year, so one should  not dismiss out of hand their ability to compete with Libra.

Even  if Facebook did manage to gain control over the governance of Libra,  Mastercard, Paypal, and Visa will still run their own payments  applications. Furthermore, Libra will face different competitors in  different markets. For domestic payments, the card networks, Venmo,  Paypal, and Zelle (the banks’ Venmo) come to mind. In international  payments, Transferwise has quickly become a successful cost-cutter by  matching foreign-exchange transactions, whereas Ripple promises to use  cryptocurrency technology to cut the cost of cross-border money  transfers. To these one must add the incumbent remittance providers,  such as Western Union and Ria."

On facilitating crime

"...the  anecdotal evidence overstates the degree to which cryptocurrencies  facilitate crime. While the pseudonymous nature of cryptocurrency  transactions disguises the identity of the people involved, most  cryptocurrencies are a poor instrument for nefarious activities. This is  because the transaction ledger, the blockchain, is publicly accessible  and includes information about the origin and destination of  cryptocurrency payments. Firms like Chainalysis (whose co-founder the  Times article cited) and Elliptic have in fact made it their business to  pore through blockchains on behalf of clients, including the U.S.  government, to combat fraud and aid the pursuit of crime.

Both  resellers and validators will act as intermediaries and be subject to  prudential and consumer protection rules. Furthermore, digital wallet  providers – who will support the applications people use to make and  receive Libra payments – will collect personal information from Libra  users to comply with regulations against money-laundering and financial  crime in the jurisdictions where the user lives. For example, Calibra,  Facebook’s own digital wallet subsidiary, has registered as a money  services business with the Financial Crimes Enforcement Network (FinCEN)  at the U.S. Treasury. Calibra also holds eight state money transmitter  licenses as of July 16. From Marcus’ testimony, it seems Calibra would  like to have licenses in all U.S. jurisdictions – states and territories  – before Libra launches in 2020. Marcus also stated the Libra  Association will register with FinCEN, despite being a Swiss-based  foundation."

I wanted Libra to succeed but  Facebook is doing its darnedest to mess the whole thing up. The  accusations being thrown at the yet-to-be-released stablecoin have very  little weight to them, yet Facebook is ceding valuable ground to every  single one. Perhaps that 5-billion dollar fine really did shake things up and Facebook has lost what disruptive touch  it once had, with Libra all but destined for the cryptocurrency scrapheap.

Enjoy the rest of this week's issue. Cheers,

— Justin

The bits

Slacking off on security

The  biggest waste of time that for some reason - unbeknownst to me - people  still use, does not have the best security track record. When the CEO  of Keybase had his account compromised and contacted support, Slack "did  not inform me of the directly related 2015 Security Incident but  instead implied that I was messy with my security practices and was to  blame".

Learn more:

Please, read the terms and conditions

Did  you install FaceApp to age yourself or your friends? Well, in this case  if you're not paying for the product... your face is. There's a good  chance all of your photos (yep, everything on your phone) will be used  to train some Russian facial recognition algorithm.

But I'm sure it'll be fine; when have the Russians ever violated anyone's privacy/liberties?

Learn more:

The Huawei fallout continues

At least the trade war is bringing in lots of tariff revenue, right? 🤔

Learn more:

Other bits of interest

Image of the week

The Countries With the Highest Housing Bubble Risks

A  high house price-to-rent or price-to-income ratio doesn't necessarily  mean a country is due for a housing crash (e.g. zoning laws might be  restricting supply). But it's certainly worth watching.

According  to these data, New Zealand has the highest house price-to-rent ratio of  the 22 countries analysed, closely followed by Canada. New Zealand is  also #1 on the price-to-income scale (not shown here), although both are  pipped by Portugal to the top spot in terms of real house prices.

The view source link will take you to the creators of this graphic, but you'll have to visit Bloomberg for the original data table.

This week's data breaches

A  lot of poor security practices exposed this week, and the most  important lesson for the average user is to be careful about which  browser extensions you install (and don't use any Microsoft browser).

The breaches:

That's all for now. If you enjoyed this issue, feel free to share it via email

Issue 42: Everyone hates Libra was compiled by Justin Pyvis and delivered on 23 July 2019. Join the conversation on the fediverse at