On July 3rd, David Marcus, head of Calibra, published a letter on Facebook to answer some open questions which had been raised by individuals from different backgrounds and responsibilities following Libra’s announcement, which took place on June 18th.
He began by issuing a reminder that Facebook was just one of 28 Founding Members, while the press solely associated the Libra project with Facebook. He then went to explain that they had launched the plans for the Libra cryptocurrency early on purpose and that, “This was after an initial consultative phase with regulators, central banks, and other organisations from all around the world.” The goal being, “to encourage open discussion by design.”
About Blockchain, Openness and Decentralisation
He contended that although the mechanism by which an organisation can run a Libra node is not as open as the Bitcoin, the Libra Blockchain is “absolutely open”. By that, he means that everybody has access to the Blockchain to build services and wallets.
Regarding decentralisation, he agrees that it will be desirable and that they will commit “to gradually transitioning to a permissionless state in the years to come”.
“it was important to start with trusted entities that could operate in a regulated environment and with the operational expertise required to ensure the integrity of the network in its foundational stage.”
The real question here is how will they manage to move to a permissionless state and be regulated at the same time?
He contends that Libra will try to solve the financial inclusion issue regarding access by creating a low-cost environment.
“The very people who say they lack the money to open a bank account are actually not saying that they have no use for modern financial services. They’re just saying they can’t afford to access the system”
He also remarked that, with Libra, anyone using a $40 smartphone could access the world economy and transact at “a much lower cost.”
Libra’s Plans to Engage with Regulators
Marcus says they recognise the potential systemic problems that Libra might present and therefore…
“[…] we believe in and are committed to a collaborative process with regulators, central banks, and lawmakers to ensure that Libra helps with the kinds of issues that the existing financial system has been fighting, notably around money laundering, terrorist financing, and more. “
Then, he goes on to say that a digital environment where all activity is registered creates an opportunity for law enforcement to increase their power to fight financial crimes through the use of “on-chain activity analysis.” A clear statement about the level of privacy a customer might expect when using the Libra network.
“At the core, we believe that a network that helps move more cash transactions — where a lot of illicit activities happen — to a digital network that features regulated on and off ramps with proper know-your-customer (KYC) practices, combined with the ability for law enforcement and regulators to conduct their own analysis of on-chain activity, will be a big opportunity to increase the efficacy of financial crimes monitoring and enforcement”.
About Facebook Trustworthiness
Marcus contends that Facebook won’t have access to Libra’s network data and that Calibra, although a Facebook subsidiary, will not deliver any financial data to its mother company.
He also stated that customers will be able to access multiple custodial and non-custodial wallets with full interoperability, and able to send and receive payments from different companies and wallets, the bottom line being, there will be no need to trust Facebook to benefit from Libra.
Why is Facebook Involved?
He explains that this new service is mission-aligned.
“[..] right now, while people can send each other text, videos, photos, and more, in many cases they can’t easily move value between one another. Economic empowerment is one of our core values, and the 90 million businesses on the Facebook platform can attest to that.”
But points out also that engaging people with the Libra Network will benefit Facebook by increasing the number of customers and commerce, which leads to more effective ads and more advertisers who will purchase even more advertising to grow their business.
“Additionally, if we earn people’s trust with the Calibra wallet over time, we will also be in a position to start offering more financial services, and generate other revenue streams for the company”.
All quotations belong to the cited statement which can be accessed here.