Thread by @mayazi

with genuine humility i bring u some comments on David Marcus's attempt at Libra-splaining to congress, any snark is pathos free & unitentional. the fault is on the Zuck
banking.senate.gov/imo/media/doc/…

Marcus is careful to describe Libra as a payment infrastructure, although no token has managed to this day to deliver a scalable solution that can be deployed to millions, the ambition of Libra is far greater than that, and we have no assurance that is even plausible 2/

Even if users only use Libra for payments (a theoretical) don't ignore the fact that Libra membership is a security token, earning their holders a share in the interest income of the reserves. it's income on FB's R&D costs no less.

It should be clear ahead of time how much Libra FB/calibra will hold on day 1?what is their share of the total Libra supply? will libra distribution be dependent on them for the mere fact that they state Libras will be redeemed for investment? 4/

Marcus states "Libra will not have a fixed value in any single real-world currency" that infers Libra is propped to be a new global unit of account, competing with the incumbent global currencies. Namely USD. Do they expect people to pay taxes, milk, gas in Libra? 5/

The promise of a distributed custodian network for the Libra reserves introduces a new risk of a local Libra exchange rate. Meaning that the Libra might be worth 5% more Euros in Poland than in France, an exchange arbitrage common both in crypto, securities & commodities.

very rarely does that arbitrage effect consumer spending directly. It's exactly where central bank reserves come into play to offset such fluctuations with monetary policy. on Libra it isn't so - users are exposed to the exchange rate directly with no intermediary offsets

That's before we ask what are the empirical evidence that Libra will trade on par with the reserves. the fact that there is a float introduces the possibility that the Libra might be traded with a premium (for access to the Libra network) or a discount 8/

It's vital to understand the impact on local monetary policy when more ppl hold Libra than the entire population of a country with a central bank. that has the possibility of not only diminishing the monetary tools available to a CB in a time we are desperate for a toolbox 9/

but also degrading any capital controls available to the global economy, mostly used to curb toxicity from spreading across the globe instantly. Sometimes intermediaries are a vital stop-loss measure that benefits the entire world's economy, than a talking point to disparage 10/

Tax wise, it always ends up with tax - it's unclear how Libra will impose tax on the transactions or what tax should be levied. Sales tax per transaction? Is Libra an asset (it does represent redeemable holdings in the reserve) or a currency? By which jurisdiction? 11/

Is it up to where the transactions took place or by the jurisdiction of the reserve custodians? Perhaps it's where the authorized reseller the user purchased the Libra? What if they got The Libra as a salary?

Thats a question congress needs to carefully think through before Libra winds up as a tax haven for domiciled companies to hide income off-shore in jurisdictions with lower tax rates

Money Laundering: Libra is designed as a porous system. Meaning KYC might be required to purchase Libra (using the same old payment networks) but any user can send his/her Libra to another Libra user w/out KYC. It should be clear if FB is looking to leverage their enormous ID 14/

database to serve as another form of KYC, I refer to as Zuck-knows-u (ZKU). thus making FB the single greatest friction point for onboarding. This is the occasional reminder that FB has failed thus far at fencing off bots & fake users, using that as an ML tool is an invitation 15

The regulatory framework Libra is looking to adapt not only defeats the purpose of a digital FMI, p2p, or inclusion, the stated goals of Libra, it introduces a feasible possibility that Libra will result in 2 separate economies - a KYC for those currently eligible for banking 16/

and another shadow economy. A ZKU world completely dependent on the FB identity repository Marcus will swear (just like they did regarding Whatsapp) will never be integrated into FB, yet dependent on it with money laundering potential out of scope of US law enforcement 17/

privacy: the mere fact that Marcus hasn't started this statement addressing the privacy "mishaps/blunders/liabilities/illegalities" is a statement in itself. Even the corporate speak here is meant to obfuscate the design choices FB has made, and it's FB not a consortia who chose

The fact that FB won't hold personal data doesn't mean FB won't leverage the Libra data. Make no mistake pseudonymity DOES NOT MEAN PRIVATE. FB made a conscious decision not design Libra with privacy on the base layer. the consequences open possibilities of abuse by ppl who abuse

First off, lets not conflate personal data with all data. The amount of data a user creates in a single transaction exceeds just his personal data - the metadata of that transaction is of equal importance if not greater to FB 20/

the metadata of a transaction that can be traced back (and it can) to an entity on-boarded by one of the Libra members means FB can now map out what they consider the holy grail of ads - the behavioral tracking of ads users were exposed to all the way to real world purchased. 21/

each user that is on-boarded to Libra with a KYC of his/her real world identity, allows the on-boarder to pair that identity with a pseudonymous Libra address. linkability allows everyone who sees that pair to peer into the entire transactional graph of that user. 22/

that's not a feature/bug available in existing payment systems. even on credit card transactions the only ppl who see all the data is the users' bank & credit card company., not the merchant or competitors 23/

pseudonymity exposes users' entire transactional graph to anyone. even if they are unable to match that users' real world identity it's enough to profile that user, and take appropriate measure when the user attempts to redeem their Libra 24/

Marcus or Libra have failed to provide a credible explanation why they chose to go with pseudonymity on the base layer, and it should be something congress presses them on.

Marcus assure us that the data FB or Libra might be exposed to won't be used for ad targeting. that's a clever obfuscation of the fact they don't need that data for targeting, they need it for other purposes:
1. behavioral predictions of ads success - aka purchases
2. IG market

those are the obvious, but Libra went one step beyond. They've already publicly admitted that one of the goals of Libra is to allow the monetization of the identity process. what does that mean? will libra render privacy a luxury good? do they intend Libra as a rev share for ads

What guarantees are in place to assure the public FB CANNOT MIX ANY LIBRA DATA with the FB identity repository? What assurances do we have legally? which jurisdiction will protect people? should we trust FB lobbying power in authoritarian regimes?

back to metadata - if the promise of Libra is that it's a "cheaper" digital currency to use with the FB messaging platforms, that entails FB (not Libra but real FB) will be exposed to every single metadata of a Libra transaction done on Whatsapp or messenger or IG.

Any approval of Libra should be contingent on making FB's messaging platforms encrypted e2e including the metadata, otherwise Libra empowers FB to grow even more powerful, above any state, and infringes on any hope of competition. we'll all be living in Zuck's world perpetually

anti-competition: there are 3 anti-trust design choices Libra took:
1. Libra memberships might be open to 100 member, but 2/3 are required to be multinationals with a valuation of over $1B, meaning this is a network by the monopoly for the incumbents, and some token startups

2. leveraging existing networks - FB has the built in advantage of being the gate-keeper of not only the biggest ID repository but also the most popular messaging platforms. FB can limit connecting Libra wallets to messaging, and make it an exclusive feature of Calibra. built-in

3. The move moat - Libra has the ability to limit deployments of third-party move contracts, or even make that a feature only open to Libra members. that in itself will greatly limit any concept of competition medium.com/@loredana.cirs…

Last is payment - don't let the innovation theatre FB is putting on for accountability fool you. Any user looking to purchase Libra will use the same old payment networks we're used to. pay the same fees & be trapped in the Libra garden. nothing new here.

To summarize the worst case scenario is if fb data mixes with transactional data, if FB credentials become a plausible substitute for KYC, if & when FB introduces their own version of a credit score - and voila' a Dark Mirror episode becomes reality across the globe

No democracy should be culpable for that outcome, no society that cherishes equal opportunity under the law, no claim to a meritocracy is plausible in a society where social credit scores are permitted. even our AI descendants might judge us harshly if we were to enable that.

Least of all the greatest democracy on earth, the shining city on the hill, the nation that led the last century by free markets & capitalism

done/