When Facebook unveiled Libra a few days ago, the company also announced the Libra Association, a not-for-profit that will oversee all things Libra. Facebook wants to make sure that everyone is aware that Libra was created by Facebook but isn’t controlled by Facebook.
And yet, given Facebook’s reputation, it seems useful to evaluate the project and the company’s promises — should we trust Facebook?
Regulation
Before going into technical details, let’s start with Facebook’s promises when it comes to privacy. Facebook launched a subsidiary called Calibra that is responsible for its cryptocurrency projects. It’s a separate company with a separate team.
In addition to contributing to the development of the project at the protocol level, Calibra will release a wallet and build an integration with WhatsApp and Messenger. In other words, you’ll be able to tap on a button to launch a Calibra menu. You’ll then be able to send and receive money through the Calibra wallet.
While a clear separation is always an encouraging sign, it could be seen as a way to deal more effectively with regulation more than anything else.
Calibra was built for regulation purposes
If you compare Calibra with other peer-to-peer payment services, PayPal is regulated as a money transfer service in the U.S. Venmo, a PayPal subsidiary, relies on PayPal’s license to operate. Square Cash also complies with a long list of money transmission regulation.
In the U.S. in particular, each state has its own set of regulation when it comes to financial services. And Calibra also has to deal with cryptocurrency regulation, which is another source of troubles. That’s why it took a while to access Coinbase from all 50 states.
Creating a subsidiary makes this process easier for Facebook. The subsidiary has to comply with cryptocurrency and financial regulation, but not Facebook at large.
This isn’t the first time Facebook is creating a subsidiary to handle peer-to-peer payments. Facebook created a subsidiary called Facebook Payments Inc. It has money transmitter licenses in all 50 states.
That’s why it’s misleading to say Calibra was created to “ensure separation between social and financial data and to build and operate services on its behalf on top of the Libra network.” Calibra was built for regulation purposes.