David Marcus, the head of Facebook's new Calibra payments division, appeared before two hostile congressional committees this week with a simple message. Facebook knows policymakers are concerned about Libra, and Facebook won't move forward with the project until their concern addressed.
While he didn't say so explicitly, Marcus' comments at hearings on Tuesday and Wednesday represented a dramatic shift in Facebook's conception of Libra. In Facebook's original vision, Libra would be an open and mostly decentralized network, akin to Bitcoin. The core network would be beyond the reach of regulators. Regulatory compliance would be the responsibility of exchanges, wallets, and other services that are the "on-ramps and off-ramps" to the Libra ecosystem.
Facebook now seems to recognize its original vision was a non-starter with regulators. So this week, Marcus sketched out a new idea for Libra—one in which the Libra Association will shoulder significant responsibility for ensuring compliance with laws relating to money laundering, terrorist financing, and other financial crimes.
Facebook's new stance addresses some of the questions I raised in last week's Libra feature. But it also raises further questions that Facebook will need to answer in the coming months. Marcus said Wednesday that the Libra Association would require regulatory compliance by Libra-based service providers, but he didn't explain how it will do so. However, it's done; there's likely to be an inherent tension between improving regulatory compliance and Facebook's other goals to build an open network and make it accessible to marginalized people around the world.
Comparing Facebook and Libra Association statements in June to Marcus' comments this week makes it clear that their stance has changed significantly.
"The Libra Blockchain will be open to everyone: any consumer, developer, or business can use the Libra network, build products on top of it, and add value through their services," Facebook wrote in its June white paper. "Open access ensures low barriers to entry and innovation and encourages healthy competition that benefits consumers. It is foundational to the goal of building more inclusive financial options for the world." Read more