Analysis and Interpretation of Libra and USDT Hearings
Overview Overview
Overview Overview
Bitfinex, Tether, and the parent company iFinex, which have similar concepts to Libra, issued USDT. On July 30, they also ushered in the issue of four major violations of USDT suspected of being illegal, the company’s unlicensed operation, and the alleged misappropriation of 850 million US dollars in security deposits. court debate.
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misplaced hearing
In fact, this trial about USDT does not have much significance. The issues surrounding USDT are not complicated: New York prosecutors suspected that the company had embezzled USDT deposits to fill holes in the company’s other businesses, resulting in the failure of the deposit to be linked to USDT 1:1, which aroused concerns among investors and regulators. At the beginning of May, Bitfinex issued LEO to raise US$1 billion, which is likely to fill the hole in the USDT margin. The most likely result is that firstly, New York prosecutors need to prove that Tether and Bitfinex have continued business in New York. The behavior is within the investigative powers of the New York prosecutors, otherwise the New York prosecutors have no jurisdiction over a company (Bitfinex and Tether) registered in Hong Kong and the British Virgin Islands that does not have any business activities in New York. It is very difficult to prove all of these, but for investors, if the New York prosecutors can prove within 90 days that Bitfinex and Tether have promised USDT deposits, then it will have an irreversible impact on the price of USDT. Influence.
Hearings full of gunpowder
The Libra hearing is more like a debate on the Libra project itself. The entire hearing not only exposed Marcus' lack of preparation for the committee members' issues, but also fully reflected the committee's concerns and negative attitudes towards the Libra project.
David Marcus exposed three problems in responding to committee members' questions:
1. Facebook still has unspeakable persistence in the Libra project"But at very least, you should agree to do the small pilot program first, fully overseen by you and the Federal Reserve and the SEC. I think that’s a very modest request. So would you commit right now to do a small pilot program first, yes or no?"First of all, Senator Maloney of the New York District Senate suggested that Libra should be put into trial operation on a small scale under the supervision of the Federal Reserve, SEC and other regulatory agencies, and wait until the supervision system is perfected before it is officially launched. She said at the hearing:
(But at the very least you should agree to a trial run first under the supervision of the Fed, the SEC, and yourself. I think this is a very modest request. So would you like to commit to doing a trial run now, yes or no?)"We will continue to work with the regulators and the working group of G7 that is notably look after the issue you raised to ensure however we launched is responsibly and with appropriate oversight. You have my commitment on that."Marcus didn't answer this question directly, but instead talked about him, just saying
(We will continue to work with regulators and the G7 working group and pay attention to the issues you raise to ensure that our launch is responsible and properly supervised. I assure you of this.)"There are two possibilities. The first possibility is: Facebook only wants to be supervised in terms of compliance, but it does not allow others to dictate the specific operating procedures. The second possibility is that Facebook has no say in the specific "how to do it". Marcus made it clear at the hearing:"People do not have to trust Facebook. Facebook is just one member of the Libra Association. (People do not need to trust Facebook, because it is just a member of the Libra Association.)
And he bluntly said that Libra's system is open source, and Facebook does not want to and will not control it. But this leads to a second problem: the neutrality of the Libra Association.
image description
Source: The Block
Source: The Block
Moreover, in Libra's white paper, it is written: "The interest on the reserve assets will be used to pay the cost of the system, ensure low transaction costs, and distribute dividends to investors in the initial stage of the ecosystem. The distribution of interest on the reserve assets will be set in advance. Libra users Will not receive returns from reserve assets." Coupled with the hidden benefits brought about by the huge amount of capital deposits and the collection of personal information, this standard banking model is not at all like a non-profit company the plans made.
3. Facebook’s monopoly and black-box operations"A lot of people think Facebook is too powerful,In the end, the committee did not abandon its suspicion of Facebook seeking monopoly because of the diversity of the Libra Association. According to Marcus's answer in the hearing, Facebook will and will only set up the digital currency wallet Calibra in its Messenger and WhatsApp, and Facebook will not allow any other competitors to install other wallets in these two applications. Senator Maloney said:"that it is becoming a monopoly. (Many people think Facebook is so powerful that it is becoming a monopoly)
These lawmakers are worried about the formation of a cartel-controlled cross-industry currency issued by new technology giants.
Congressman Cortez once raised doubts about this kind of monopoly and black-box operations. She questioned the democracy of the association's member elections, and expert witness Demirors also proved at the hearing that Cortez's concerns were not groundless. She said that even as a person in the industry, she is not sure what the qualifications for members to enter are. As stated in the Libra white paper, Libra is trying to serve 1.7 billion potential customers and the existing customer base of companies such as Facebook. Such a huge amount of financial data and transaction volume is controlled by a completely opaque monopoly cartel. The result is undoubtedly terrible.
Facebook's overbearing style
Facebook's past style proves that this possibility of monopoly is not unfounded. For the challengers of his status as the king of social applications, Facebook always relies on its own size, waving cash for acquisitions, and maintaining its own social empire.
On November 8, 2011, Facebook acquired HTML5 application delivery network Strobe
On April 10, 2012, Facebook acquired the online photo social service provider Instagram for US$1 billion
Facebook acquires social gifting app Karma for $80 million on May 25, 2012
On August 25, 2012, Facebook acquired Threadsy, a social analytics tool company.
On February 20, 2014, Facebook acquired WhatsApp for $19 billion
For Snapchat, which could not be acquired, Facebook used the acquired Instagram to develop the same application function and successfully captured the market and users from Snapchat. For Facebook, which acts in such a style, it does not claim to be a monopoly, but it is actually a monopoly.
Congressman's Center: America First
1. Whether Libra can safeguard the interests of the United States and its nationals in accordance with the wishes of the United States
Throughout the hearing, the committee members discussed only one point: whether Libra can protect the interests of the United States and its citizens in accordance with the wishes of the United States.
Lawmakers and Marcus himself kept mentioning during the hearing that "the United States should take a leadership role in the rule-making of digital currencies." Based on this point, all regulation and rule-making will serve the national interests of the United States."Why are you doing this in Switzerland and why are you using a basket of currencies? Why not the good old American dollar?"Senator McHenry mentioned that the Libra Association is headquartered in Switzerland instead of the United States, he said:
(Why headquarters in Switzerland? Why a basket of currencies? Why not just US dollars?)"Will you commit yourself to not launch before all the concerns from the Federal Reserve and all the regulators are addressed?"The Libra mentioned by Senator Velasquez must be proved to be in compliance with the laws and regulations of the United States and to address the concerns of lawmakers before going online. She said:
(Would you commit to not launching this product until the concerns of the Fed and all regulators are addressed?)"What are you anticipating as some of the new ways that criminals may attempt to export and exploit Libra for illicit use and how are you combating?"Will the Libra mentioned by Senator Scott provide additional financing channels for terrorists (
) (What new ways do you think criminals might export Libra and use it for illegal activities? How would you combat this activity?)
The core of the above-mentioned issues all focus on the national interests and security of the United States.
2. Maintain dollar hegemony
Libra can indeed serve the dollar hegemony better to some extent.
According to Marcus at the hearing, more than 50% of the reserves in the Libra Reserve's currency basket will be in the form of U.S. dollars. Libra can send U.S. dollars to places where paper money could not reach before in the form of digital currency, allowing more people to access U.S. dollars more conveniently, thereby further deepening the circulation value of U.S. dollars. Where the dollar can reach, the influence of the United States will go hand in hand, and ultimately achieve the purpose of serving the overall influence of the United States and national strategy. Just like the question raised by Senator Barr "how to prove that Libra will not affect the energy of the dollar", the energy of the dollar and the United States is the subject of their concern.
And on this issue, Marcus is very clever to use China as a shield to achieve his goal."Blockchain technology is inevitable and if the U.S. doesn’t lead in building and regulating it, the tech will come from places 'out of reach of our national security apparatus'."He proposed that, first of all, Libra will not challenge any sovereign currency, and if it is not Facebook, there will be other companies making digital currencies like Libra from places that the United States cannot touch. The original words are as follows:
(Blockchain technology is inevitable, and if America doesn't take the lead in building and regulating it, it will come from places beyond the reach of our national security agencies.)
This is undoubtedly a pain point in the United States.
As the renminbi joined the International Monetary Fund’s Special Drawing Rights (SDR) currency basket on October 1, 2016 and became one of the world’s reserve currencies, the rapid growth of China’s economy and international influence touched the nerves of the United States, making the United States This gradually became frightening. After Trump took office, he officially positioned China and Russia as strategic competitors of the United States. At the beginning of the Senate hearing, Senator McHenry also specifically mentioned Alipay in his statement, and Marcus's interpretation of Libra's functions coincided with the current strategic point of the United States.
3. Citizens' right to privacy
Another issue centered on Facebook's poor reputation for user privacy."It is not the first time that lawmakers have attacked Facebook for improperly sharing user information. Cortez and Pressley once again raised the issue of privacy in the Senate hearing. Among them, Pressley even said:"
It is long past time that we stop compromising consumers' privacy in pursuit of profit. Would you trust your money with a company who essential admits it's just winging it? (We have not sacrificed consumers' privacy in pursuit of profit for a long time. You Would entrust his money to a company that essentially admitted it was improvising?)
Facebook paid the price, paying a record $5 billion to settle with the FTC. At the same time, Facebook CEO Mark Zuckerberg lost the final say on privacy, which is undoubtedly a big event. But at the same time, the landing of the fine and the conclusion of other lawsuits have brought good news to the Libra project. The July 24 fine after the July 17 hearing not only represented the US government's strengthening of privacy regulation, but also removed an obstacle for Libra's progress.
From another perspective, the intervention of US government regulation represents the beginning of acceptance to another extent. After Facebook has a case to follow, the hostility of government departments and the general public towards the Libra project will also ease. This is not without precedent. Twitter joined Facebook in a Senate Intelligence Committee hearing on Sept. 5, 2018, on Russia's use of social media to interfere in the U.S. presidential election. After the hearing, Twitter regained the trust of American officials and the public, and its stock price rose all the way. As of July 2019, Twitter stock has risen 35%. And the same Facebook stock price briefly bottomed out after the hearing and then rose to the previous high. The hearing isn't the end of the world for Libra.
What Facebook Really Expects From Libra
When Marcus faced Carpo, chairman of the Banking, Housing and Urban Affairs Committee, about whether the data would be collected when users purchased items through the Facebook page and used Calibra transactions, he only answered that Facebook would provide a variety of payment channels, but did not collect The question of data was kept quiet, which meant that while Facebook likely didn't know how much money was in a user's Calibra wallet, it was able to access payment data to infer an individual's financial situation. At the same time, Marcus said that Facebook did not have a clear plan to invest in the project how much money. If we temporarily think that the Libra Association will be an NGO, then from the perspective of the NGO's organizational structure, although Facebook may only have one vote on the Libra Association's board of directors. But the more investment, the greater the right to speak in the organization, then the daily management team and the secretary general will be more inclined to the will of the party with more investment when dealing with daily affairs. The best example is the United Nations, the largest NGO in the world.
Conclusion
Conclusion"Utility"Finally, when Marcus described Libra's vision, he used
