Facebook’s Libra Masterplan
The social media company’s move into cryptocurrency takes advantage of regulatory loopholes
Facebook is very knowingly exploiting a very specific gap in regulations and technology made possible by the cryptocurrency industry that will allow their planned “Libra” cryptocurrency to flow into the black market economy while still being compliant with traditional financial entities’ compliance policies.
(I don’t use “black market economy” as a bad word here. The right to financial services should be universal, since leaving the control to gatekeepers creates a tool that is much more likely to be successful at oppressing people than at keeping the bad guys out. The problem with the Libra is that it’s a part of Facebook’s broader surveillance capitalism strategy. I’m a privacy proponent and I usually spend my free time writing guides on Privacy & Cryptocurrency for the Human Rights Foundation. In a previous life, I built cryptocurrency exchange platforms.)
How the “exploit” works
The exploit works by following a playbook that was written by the Bitcoin industry. The exploit emerges in the gaps of a little puzzle consisting of a few key players:
- Cryptocurrency exchanges (“on- and off-ramps”) where you can buy and sell Bitcoin for dollars
- Banks that give the exchanges their bank accounts
- Regulators who set the know-your-customer (KYC) & anti-money laundering (AML) rules
- Blockchain analysis firms who monitor cryptocurrency transactions for “suspicious activity”
- Bitcoin users who buy and sell Bitcoin at cryptocurrency exchanges and then distribute them into the global Bitcoin ecosystem
Here’s a diagram showing how they view their relationships with each other:
The basis of the exploit lies in combining the pseudonymity of Bitcoin’s public key cryptography with the transparency of the Bitcoin blockchain. The transparency gives the participants in the diagram above the ability to surveil the…
