1. CLOSING THE
CIRCLE: IN LIBRA
WE TRUST
Alexandra Giannopoulou
Valeria Ferrari
Blockchain and Society Policy Research Lab
Institute for Information Law (IViR)
University of Amsterdam
Gikii 9 September 2019 University of London

2. Libra will be a digital currency, qualified
as a stablecoin.
Facebook Inc created Libra, but it only
positions itself as co-founder of the Libra
Association and as a participating node
and user of the project also via its
subsidiary, the custodial wallet Calibra.
28 companies are founding members of
the Libra Association. Their role consists in
maintaining a validating node and
having a representative member on
the Council of the association.

3. Intermediaries role:
1. A user provides his identity (national or social) and funds.
2. Funds are deposited in the Libra Reserve and indirectly command the issuance of libras
3. Validator nodes measure the outstanding libras and are queried by intermediaries

4. Imagine an open, interoperable ecosystem of financial services that developers and
organizations will build to help people and businesses hold and transfer Libra for everyday
use.
To ensure that Libra is truly open and always operates in the best interest of its
users, our ambition is for the Libra network to become permissionless (…) 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.

5. The Libra blockchain: towards open,
decentralized, permissionless?
■ Is the promised decentralized and open architectural environment possible
within the Libra circle?
■ If yes, is it the future we want?

6. The Libra blockchain: towards open,
decentralized, permissionless?
■ Is the promised decentralized and open architectural environment possible
within the Libra circle?
■ If yes, is it the future we want?

7. The Libra blockchain: towards open,
decentralized, permissionless?
■ Is the promised decentralized and open architectural environment possible
within the Libra circle?
■ If yes, is it the future we want?

9. «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. Open access ensures low barriers to entry and innovation
and encourages healthy competition that benefits consumers. This is foundational
to the goal of building more inclusive financial options for the world»
A financial ecosystem open to everyone

10. «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. Open access ensures low barriers to entry and innovation
and encourages healthy competition that benefits consumers. This is foundational
to the goal of building more inclusive financial options for the world»
A financial ecosystem open to everyone
This sounds cool!

11. A financial ecosystem…open to
everyone

12. A financial ecosystem…open to
everyone
This sounds…cool

13. A financial ecosystem…open to
everyone
This sounds…cool
…or maybe not

14. A financial ecosystem…open to
everyone
This sounds…cool
…or maybe not
And also…
Can it be true?

15. Anti-trust vs financial law regulation
The openness of the Libra blockchain ecosystem would be necessary to foster
competition in the market of crypto-assets and contrast Libra’s potential dominance
in the domain of online payments

16. Anti-trust vs financial law regulation
The openness of the Libra blockchain ecosystem would be necessary to foster
competition in the market of crypto-assets and contrast Libra’s potential dominance
in the domain of online payments
However
unless specific barriers are put into place, such openness would entail the entrance
of unregulated entities: non-custodial wallet providers, peer-to-peer exchanges

17. Anti-trust vs financial law regulation
The openness of the Libra blockchain ecosystem would be necessary to foster
competition in the market of crypto-assets and contrast Libra’s potential dominance
in the domain of online payments
However
unless specific barriers are put into place, such openness would entail the entrance
of unregulated entities: non-custodial wallet providers, peer-to-peer exchanges
Can they, really?

18. non-custodial wallet providers
& p2p exchanges
 are not covered by financial law requirements (e.g. MiFID’s recordkeeping,
disclosure, reporting, transparency requirements; 5th Anti-Money
Laundering Directive; BSA obligations under FinCEN)

19. non-custodial wallet providers
& p2p exchanges
 are not covered by financial law requirements (e.g. MiFID’s recordkeeping,
disclosure, reporting, transparency requirements; 5th Anti-Money
Laundering Directive; BSA obligations under FinCEN)
 Even if they are (e.g. Switzerland), the enforcement of existing requirements is
impracticable (e.g. who is the responsible operator?)/ they are technically
unable to comply!

20. non-custodial wallet providers
& p2p exchanges
 are not covered by financial law requirements (e.g. MiFID’s recordkeeping,
disclosure, reporting, transparency requirements; 5th Anti-Money
Laundering Directive; BSA obligations under FinCEN)
 Even if they are (e.g. Switzerland), the enforcement of existing requirements is
impracticable (e.g. who is the responsible operator?)/ they are technically
unable to comply!
 supervised service providers would not be able to prevent uncompliant
payments from being executed, with potential consequent liability for them

21. non-custodial wallet providers
& p2p exchanges
 are not covered by financial law requirements (e.g. MiFID’s recordkeeping,
disclosure, reporting, transparency requirements; 5th Anti-Money
Laundering Directive; BSA obligations under FinCEN)
 Even if they are (e.g. Switzerland), the enforcement of existing requirements is
impracticable (e.g. who is the responsible operator?)/ they are technically
unable to comply!
 supervised service providers would not be able to prevent uncompliant
payments from being executed, with potential consequent liability for them
 their presence in the ecosystem jeopardizes efforts in monitoring and tracking
transactions in crypto-assets

22. Openness and decentralisation do not fit
the governance of the financial sector
■ The regulation of the financial sector relies on the existence of centralized
intermediaries (firms or institutions) that are ascribed direct enforcement duties

23. Openness and decentralisation do not fit
the governance of the financial sector
■ The regulation of the financial sector relies on the existence of centralized
intermediaries (firms or institutions) that are ascribed direct enforcement duties
■ decentralization and lack of centralized controlling actors prevent both the
formal applicability and practical enforceability of norms

24. Openness and decentralisation do not fit
the governance of the financial sector
■ The regulation of the financial sector relies on the existence of centralized
intermediaries (firms or institutions) that are ascribed direct enforcement duties
■ decentralization and lack of centralized controlling actors prevent both the
formal applicability and practical enforceability of norms
■ the governance of the financial sector does not accommodate systems where
transactions are cleared by persons that have no obligations to do so or
accountability for failure

25. Which enforcement duties would the Libra Association
have in relation to third-party applications built on top of
their system?
 How are enforcement duties shared among the Libra Association and
financial authorities/law enforcement agencies?

26. Which enforcement duties would the Libra Association
have in relation to third-party applications built on top of
their system?
 How are enforcement duties shared among the Libra Association and
financial authorities/law enforcement agencies?
 Is the Association liable for non-compliant third-party services and activities
operating in the Libra ecosystem?

27. Which enforcement duties would the Libra Association
have in relation to third-party applications built on top of
their system?
 How are enforcement duties shared among the Libra Association and
financial authorities/law enforcement agencies?
 Is the Association liable for non-compliant third-party services and activities
operating in the Libra ecosystem?
 If so, how would such liability impact the level of openness of and
competition within the ecosystem (e.g. would there be a duty to impose
barriers to enter the market, to prevent unregulated activities to populate
the ecosystem)?

28. Can businesses compete in
Facebook’s “open” environment?
■ barriers for unregulated/decentralised business models are likely to be imposed

29. Can businesses compete in
Facebook’s “open” environment?
■ Libra will be the standard setter: minor service providers could be unable to
withstand the requirements set for it

30. Towards a new digital identity standard
?
“[a]n additional goal of the association is to develop and promote an
open identity standard” because “decentralized and portable digital
identity is a prerequisite to financial inclusion and competition”.

31. Towards a new digital identity standard
?
“[a]n additional goal of the association is to develop and promote an
open identity standard” because “decentralized and portable digital
identity is a prerequisite to financial inclusion and competition”.
Does this sound familiar?

32. Decentralized identity
 The establishment of a standardized, decentralized, and open identity is among the oldest unsolved
issues on the Internet.
 Technical standardization efforts were the main gateway of private companies or organizations to
create a unified identifier for individuals online.
 The concept of Self-sovereign identity is reemerging in the context of decentralized
technologies in order to describe a technological tool that enables individuals to own and control
their identity data without the need for intervening administrative authorities who will store and
create the trust between transaction parties.

33. Decentralized identity
 The establishment of a standardized, decentralized, and open identity is among the oldest unsolved
issues on the Internet.
 Technical standardization efforts were the main gateway of private companies or organizations to
create a unified identifier for individuals online.
 The concept of Self-sovereign identity is reemerging in the context of decentralized
technologies in order to describe a technological tool that enables individuals to own and control
their identity data without the need for intervening administrative authorities who will store and
create the trust between transaction parties.

34. Decentralized identity
 The establishment of a standardized, decentralized, and open identity is among the oldest unsolved
issues on the Internet.
 Technical standardization efforts from many companies or organizations in order to create a unified
and persistent identifier for individuals online (see OpenID and OAuth).
 The concept of Self-sovereign identity is reemerging in the context of decentralized
technologies in order to describe a technological tool that enables individuals to own and control
their identity data without the need for intervening administrative authorities who will store and
create the trust between transaction parties.

35. This looks promising, right? Right?
“ to bank the unbanked”
“Lack of documentation and distrust in the financial system were
both cited by roughly a fifth of adults without a financial institution account”

36. Right?

37. This looks promising, right? Right?
“ to bank the unbanked”
“Lack of documentation and distrust in the financial system were
both cited by roughly a fifth of adults without a financial institution account”

38. This looks promising, right? Right?
“ to bank the unbanked”
“Lack of documentation and distrust in the financial system were
both cited by roughly a fifth of adults without a financial institution account”
 To increase economic empowerment around the world
 to increase financial inclusion through the creation of a perpetual unique digital
identity.

39. But do we want this?
A privately issued –more specifically, Facebook issued- identity becoming the
dominant identifier for both online and offline transactions is hard to imagine as
anything other than a dystopia.
Besides the privacy-related existing (and future) mishaps of Facebook, the identity
standard is promised to become progressively decentralized, permissionless and
open. Is an open permissionless ecosystem ideal for the management of
identification credentials and of the transactions based on these credentials?
it would still remain a Facebook monopoly, which would get intertwined in the system
and social interactions forever.

40. THANK YOU!
a.giannopoulou@uva.nl
v.ferrari@uva.nl
You can find our presentation online at
www.slideshare.net/alex_giannopoulou
@alex_giann
@ferrari_bv