Libra's Biggest Problem

Among the barrage of commentary accompanying the Libra circus on Capitol Hill last week was a single short tweet from lawyer Marco Santori that summed up the core problem confronting Facebook's cryptocurrency project - and, for that matter, any corporate-led effort of its kind.

To understand why Facebook and its 27 Libra partners are in this dilemma, let's go back to bitcoin's roots - to the core problem Satoshi Nakamoto sought to solve.

Privacy Matters Think of the 2 billion "Unbanked" adults from the world's developing countries, the people that Libra, ostensibly, wants to serve.

If we are to bring digital, borderless commerce to the widest possible user base and expand the global economy, we must strive for privacy.

Privacy Tech Meets Increased Surveillance Sadly, bitcoin failed to achieve sufficient privacy, at least in its initial form.

This is the problem that led to the creation of cryptocurrencies with more robust privacy protections such as Zcash and Monero, along with the invention of bitcoin mixers and potential sidechain solutions for obscuring transaction trails such as Mimblewimble.

It's quite noteworthy that at the same time that regulators are expanding their purview over cryptocurrencies - see the Financial Action Task Force's new disclosure rules - and demanding increasingly more user-identifying information, cryptocurrency developers are driving in the opposite direction: toward more privacy, more self-custody, more trustless exchange solutions, more user autonomy.

That's because, quite rightly, privacy is also becoming an increasing concern with regards to tech companies' data collection, and especially with Facebook.

In essence, Marcus's response was: "Don't worry, we're decentralized." The idea was that the structure simply won't permit any member from invading a user's privacy.

We can't simultaneously insist on absolute privacy and the power to intervene in transactions to catch bad guys laundering money.