Slap in the Face to Zuckerberg and the Uphill Climb of Libra and Gram
In the past month, the Libra project has encountered numerous obstacles in the way of realization, not least slaps addressed and received by Zuckerberg to various titles.
The defining aspect of the problem is that the doubts of the world’s monetary authorities have shifted from the need to have information, and reassurance, about Libra’s regulatory compliance with the [ lack ] of reputation that characterizes Facebook and Zuckerberg. When you look at the different hearings that project managers have passed with different groups, Europeans and Americans (at the end of the post the references for further information), of monetary and political elites, we can see that the initiative has always expressed and shared, by voice of its representatives, the will to subscribe to the existing rules on financial regulation. Even when it was made present that rules do not exist, to frame a structural change such as that thrived (effective reality, wittily and finally raised by some enlightened US Congress) the Libra Association’s response has been ‘do them, and we will respect them’. Meanwhile, no requests for authorisation, even in draft, have been submitted to delegated entity to grant it, including the main case by jurisdiction, the Swiss Finma.
The focus then shifted to the reputation of Facebook. In the questions that have characterised the last month, the central theme can be summed up in a question ‘How can we trust Zuckerberg after what has happened since 2007?’. The meaning is as follows. Strategically, the Facebook group with users’ data has always done what it thought, and think, more appropriate for its purposes regardless of the rules and ethics in being. When the irregular behaviors came to light, it remedied and paid the consequences ; in ethical view the attitude was the same, so when the cost of the loss of reputation was estimated to be greater than the continuation of the remarkable conduct, it ceased. In both cases, considerable damages had also been made. What therefore is the guarantee that this does not happen again : at present (example, antitrust infringement procedure in 47 (!!) States of the US Union) none.
Reputation factor is important in cryptocurrency world where the rules need to be still invented and ethics is an opinion. After ten years of Bitcoin & C. Libra, for the potential impact, has had the merit of bringing the problem to the highest decision-making levels but, paradoxically, it is suffering the consequences because of the reputation of its own proposer. While the rules can be remedied at the repeated behavioral predisposition in the years of Facebook (and how it is perceived by public opinion) no : from here the recent breakthrough of Zuckerberg’s for which the grudge for the project is political and no more regulatory.
This is the perspective of the ‘slaps’ of the title. On outside view, which have been said and on inside one, with the (not yet definitive) abandonment of the project by 7 of the initial 28 potential partners, including all of the relevant partners in the money market. It is not a problem of partners : although it is true of a tenth the claim, coming from within the project, for which the line of the hopefuls to the initiative is 1,500 entities, the achievement of a hundred will be just a formality. The difficulties that have caused the remission of commitments are to be traced back to two factors.
The first, the DOT invited all participants to the association, based in the USA, to demonstrate compliance with the activity undertaken respect the financial side and respect the own core business. For non-financial partners this may be a problem of information pervasiveness ; for financials a further task of an investigative nature to deal with. It could be an undesirability event for those, such as PayPal for example, already has to deal with charges of money laundering. The second factor is the fagocating in the reputational universe of Facebook cause of co-participation to Libra.
From Olympus looks like Zuckerberg is starting to understand that the tables have turned if it’s true what he writes (in the text read at the hearing, on October 23, at the Financial Services Committee of the U.S. House of Representatives) and what he says. The strategy is being modified by leveraging on two factors : the admission of bad past behaviour and nationalism. With regard to the second point, the concept expressed is that China in the short (but there are no dates, even indicative) will issue a national cryptocurrency and Libra should balance the problem on the US side. That more in a context of progressive ‘de-dollaration’ of markets (for the record and by the way, Russia and Iran recently adopted the EURO for the international regulations of the state companies).
Regardless of whether the CryptoYuan, from literature, is intended for internal use only, the argument needs reflexions. Libra from white-paper should be a stablecoin based on a basket. After FED’s insistence, about a month ago, it was possible to know that the basket should be composed 50% from USD, 7% from HKD and the rest divided into roughly equal parts between GBP, EUR and JPY. Anyone who knows the operation of the baskets knows that it is the compensation algorithm to be a fundamental defining factor, not the composition (and that is ‘which moves according to which else and how much’, see the functioning of the EMS before the Euro), which by Libra Association has yet to come out. It is not a secondary information, at the level of economic technique, its absence makes Zuckerberg’s nationalistic statements useful to appease rather than reassure : assuming linear and eque rules referring to the basket the advantage for USD would be zero, because 50% are competing currencies.
On the same theme, Andreessen Horowitz, fund and part of the 28 founders, still inside the initiative, proposed a stablecoin based only on USD; David Marcus, Libra’s project leader, has proposed (in a surprisingly messy way for his experience) convertibility to equals with different national currencies (4/5 different Libra?Mah?). So still many confused ideas.
Speaking about David Marcus, he recently expressed two interesting considerations. The first is that if anyone else had presented a global Libra-type monetary project instead of Facebook, it would have been hailed and not hampered. The statement traces that of Mark Carney and of Italian Davide Casaleggio in this blog previously reported. It is true but in dreamland. At present privates with means and reputation to undertake such a project do not exist : in the FAANMG family (the data-global-kleptocracies) the reputation of those who behave worse is a neck and neck; idem for sovra-gov entities suitable for the purpose : the monetaries, for obvious reasons of self-preservation, have no interest in doing so and non-monetary ones, such as UN, have levels of corruption and bureaucratic costs that they would like to never do ; the market alone has shown, at the moment with Bitcon, not be able be a global player, .
The second esternation of Mr.Marcus is the fact that the project is a structural revolution in the monetary sphere, able to change the rules of the game in favor of the weakest social strata and, at the same time, at the expense of the global monopoly in being. This is also true and we anticipate it months ago, on the occasion of the first post of this blog. The obstacle in this case is that the only actor who has had (and has) the strength to propulate it is the big-brother per excellence, to which it is fine to change the rules of the game only if they are in his favour, not for the purposes of social justice.
The short-medium term scenario is that Libra will born (by the way, in the last month June 2020 relased as a possible date to put on line the stable coin) : that for the intention expressed recently by the 21 founders, at the first formal meeting, and cause Zuckerberg and Marcus seem motivate by the adversity against the project. How and where it will born it remains to see.
Stop for Gram of Telegram as well. Some clarifications : Gram is not a stablecoin and for Telegram, as shown on other occasions, rules and elites existence are not obstacles in carrying out own projects; up to now they have a good reputation in the ethical and users respect points of view. So, contrary to the load of bullshits appeared on any digital (and not) media, if Telegram wants to put Gram on the line no one can prevent it: this was the expected by the end of October. The SEC (doc linked below) in an attempt to hinder the project is prosecuting the nature of the ICO (a successful ICO) token, issued by Telegram to obtain the funds needed for the initiative. So Telegram appealed and (waiting for a decision and for the preservation of investor) suspending the planned roadmap. Nothing to do with prohibitions or other impossible measures, as usual for cryptocurrency, to be put in place. The short-medium scenario in this case depends on the judgment of the federal court called to decide : if it is in favour of SEC the timing to putting Gram on-line should stretch.
This is adaptation of a neuronal Italian/English AI translation by IBM Watson.
Below links for further reading on the concepts expressed above.
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