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Home / Business / Facebook says that Libra is out of control. But the Guardians of Guardians are a network of Silicon Valley insiders

Facebook says that Libra is out of control. But the Guardians of Guardians are a network of Silicon Valley insiders



This is important because the emphasis is on being, and the responsibility associated with, duties that have previously been managed by central banks.

Libra is a cryptocurrency built on open source blockchain technology that Facebook developed. It is different from most other cryptocurrency because it is designed to be used for transactions, not just for investment. With Libra, people could send money to friends or pay for things online like sending an email – freely (or at least, cheaply) and easily through digital wallet apps, the first of which will be offered by a Facebook- subsidiary. Facebook says Libra can improve access to financial services worldwide.

Many experts and lawmakers believe Facebook's billions of users will make the wake of the most widely used cryptocurrency and may make it big enough to compete with government-backed currencies such as dollars, potentially threatening the stability of traditional economic systems. The Libra Association will be responsible for overseeing that currency: ensuring that it retains value, deciding how to work with regulators and how to protect users' privacy.

Therefore, regulators are particularly concerned about Facebook having significant influence over the Libra Association. Some do not trust the social media company to manage such an ambitious project due to its history of privacy breach and have its platform co-opted by foreign trolls most notorious for meddling in US elections. Many US lawmakers reiterated such concerns at two hearings on the House Financial Services and Senate Banking Committee project in July.
Facebook CEO Mark Zuckerberg "and his leaders have proven time and time again that they don't understand governance or accountability," said Sherrod Brown, an Ohio Democratic senator, during one of the July hearings. The battle for weight comes as Facebook and other major tech companies also face bipartisan probes over antitrust issues.

The association was intended to help build trust in the project.

"The reason we designed Libra in such a way that Facebook will be just one of 100 different members of the Libra Association and will not have any special privileges which means you don't have to trust Facebook," said Facebook's David Marcus to lawmakers in July.

The Libra is expected to be launched next year, although Marcus has promised to wait until the currency gets government approval. Technically, the Libra Association does not need the approval of US regulators to launch outside the US because it is based in Switzerland, but it will be difficult to gain traction without US users. While the association is still in its early days, [19659004] the connections between the group's basic member companies can make it more difficult to gain the confidence of legislators.

The scales' connected network, with David Marcus in the center

The connections start to a great extent with Marcus himself.

Marcus was pioneering Weight on Facebook. He now runs the Facebook subsidiary to develop Libra-related products and services, and he is a member of the executive leadership team of the Libra Association. Marcus until last year was a board member of one of the members of the Association, Coinbase, and was previously president of another, PayPal.

"So we are discussing a currency controlled by an undemocratically elected coalition of largely massive corporations?" New York Democrat Alexandria Ocasio-Cortez asked during congressional dare.

Facebook says it reached out to a number of organizations to join the association in the months that led to the Weight being revealed. The last group of 28 founding members includes Facebook and payments, technology, venture capital and telecom companies, as well as four nonprofit organizations.

These companies all shared a desire to "build this network and solve problems," Marcus told lawmakers at Hearings in July, adding that any organization that meets a set of public policies could join. The member companies themselves cite a number of reasons for joining, including interest in business applications of blockchain technology and a desire to improve access to financial services. Others said they simply didn't want to miss the chance to get involved in a potentially revolutionary project.

Facebook has stated that the association will be an independent supervisor of Libra, and that Facebook will have the same level of influence as any other member after the currency transitions from the development phase. However, many of the Libra Association's basic members are affiliated with Facebook, Marcus or each other. Here are some examples:

  • Peter Thiel founded one association member, PayPal and sold it to another, Ebay . He was the first major investor in Facebook and now sits on the board. Thiel also has investments, through his venture capital firm, in members Spotify Lift and Stripe .
  • Mark Zuckerberg is Facebook's founder and one of three board members of association Breakthrough Initiatives . He is personal friends with Daniel Ek, founder and CEO of the association member Spotify – Zuckerberg attended Ex's wedding in 2016.
  • Venture capital firm Andreessen Horowitz is a Vogger Foundation member and an early investor in Facebook. The company has also invested in Lift Stripe Coinbase and Anchorage . Co-founder Marc Andreessen is a member of the Facebook Board and previously served in Ebays while owning PayPal . Fellow Ben Horowitz is a board member of Lyft .
  • Association member Union Square Ventures has invested in members Coinbase and Stripe .
  • Frederic Court is a board member of association member Farfetch and founder Felix Capital, who previously invested in one of Facebook's David Marcus & # 39; startup companies, Zong.
  • Wences Casares is the founder and CEO of association member Xapo. He is also a board member of PayPal and previously served on the board of one of the association's nonprofit organization members, Kiva . Xapo received funding from the association member, Ribbit Capital .

Although these people may not have been directly involved in the Libra project, the connections show that the Libra Association may be less "diverse and global" than Facebook has claimed. The links also reach the top management of the Vågen association.

So far, three leaders have been identified in documents submitted to the Swiss government: Marcus, Bertrand Perez and Kurt Hemecker.

Marcus worked with digital payments long before Libra. He founded Zong, a Geneva-based provider of mobile payments for online companies. When he sold Zong to Ebay in 2011, the company appointed him as the head of PayPal's mobile division (then owned by Ebay), and then the president of PayPal the following year. He left the position of head of PayPal in 2014 for Facebook.

Perez and Hemecker previously worked as top executives for Marcus & # 39; Zong, and later for PayPal while Marcus was president. Perez is now Libra Association & # 39; s CEO and CEO, and Hemecker is the head of business development, according to their LinkedIn profiles.

The CEO will lead the management team and be responsible for such tasks as reviewing the Libra Network's security, monitoring the financial path of the Libra, and encouraging new union members, according to the Libra White Paper. Marcus is identified as a board member in official documents, as is the CEO.

Having Marcus and two longtime colleagues leading the association in the beginning is likely to give Facebook a strong influence over the organization's culture going forward, Columbia Law Schools Pistor said. Board members are elected for one year, but may be elected indefinitely.

"They moved quickly and put the people in place," she said. "The CEO will set the tone for the organization in the beginning, which gives them a lot of control."

The association disputes this idea. Dante Disparte, chief of police, said that even though Facebook played a key role in the development of the Libra Association and the blockchain network Libra will continue, the company "will have no greater rights or duties or voting rights than any of the other members."

Why Libra's management relationship counts

These men will lead an association structured in the same way as other nonprofit organizations, according to Libra's White Paper and documents submitted to the Swiss government.

All member companies will include the "council", which will meet bi-annually to make major decisions, such as adding new members or changing the technology that underlies Weight. Because that body will be large and rarely meet, two other groups will have a more regular role in handling the Weight. The Board, elected by the Council, will oversee the Weights' broader strategic direction. The Executive Committee, appointed by the Board, will have daily, operational control of the Weight.

The Libra Association's charter, which has not yet been ratified, is expected to provide greater details about the organization's complete, official leadership slate and how it will function.

Marcus has emphasized that the Libra Association will facilitate an important public good, making it faster and cheaper to transfer money. To facilitate this, the Facebook subsidiary Calibra will launch a digital wallet for users to store, store and send Weight. Other companies can develop similar services, although experts agree that Facebook is likely to be the fastest and most adopted due to its huge global user base. Facebook says Calibra will operate independently and the two do not plan to share users' data.

Danny O & # 39; Brien, Director of Consumer Privacy Policy Electronic Frontier Foundation, said he worries connections between Libra Association members can make it difficult for other digital Libra wallets or crypto projects – those that offer similar benefits to consumers without Facebook reputation for handling user data – to compete.

"It may be in all of these companies' interests to encourage you to use Facebook's software and services because they now have skin in the game," said O & # 39; Brien. "They want Facebook's service to win unlike other projects that may be better for the consumer."

Another key role for the association will be to manage the reserve, a basket of government-issued financial instruments, which will support Weight 1: 1 and swing as needed to stabilize Weight.

If Libra grows as fast as many think it could, lawmakers worry that this reserve could have a significant impact on governments and economies around the world. They are also concerned that it may concentrate power under an already dominant Facebook or a closely linked group of large companies.

"If Facebook's plans are implemented, the company and its partners will provide enormous financial power that can destabilize currencies and government," said Maxine Waters, chair of the House Financial Services Committee, during the House Libra hearing. Marcus said Libra does not want to compete with sovereign currencies or governments.

Libra Association member companies must make a $ 10 million investment to join. They will earn a return on the investment in the form of interest on the reserve, which will first go toward paying the running costs of the association and then being distributed to member companies, Facebook has said. Some experts worry that this could prevent the council from approving new members and further diversifying the organization.

"If you make a lot of money from this, why would you want to share?" Said Pistor.

Even with Libra's altruistic goals, some experts and lawmakers believe that public goods such as money and payment systems, and the consumer's financial data generated by using them, are simply better handled by public institutions. France and Germany's finance ministers recently spoke out against Libra operating in Europe for this reason. The Federal Reserve, which also closely monitors Libra, is developing an instant money transfer system that could provide some similar benefits to Libra for American consumers.

"We can bring Mark Zuckerberg to Congress and shame him publicly, but we can't vote him out while we have some public accountability with the Federal Reserve," said Mehrsa Baradaran, a professor of banking law at the University of California, Irvine. "Why should we trust Facebook more than our own public institutions, for something so sensitive?"


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