To Counter Libra Criticism, Facebook Highlights Tracking -- WSJ
31 July 2019 - 5:02PM
Dow Jones News
By Paul Vigna
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 31, 2019).
Lawmakers were up in arms this month about whether Libra,
Facebook Inc.'s proposed new cryptocurrency, would be a haven for
money launderers and other criminal activities.
Facebook, though, says Libra could be a valuable tool for law
enforcement, partly because of the vast amounts of information that
will be generated about its users. That was the message Facebook
executive David Marcus took to Congress during hearings this
month.
The conversation represents how some portions of the crypto
world are trying to move beyond the industry's Wild West heyday and
become a viable payments option.
The ability to use crypto to help catch criminals is ingrained
in its structure. Cash is valuable to criminals because there is no
transaction or ownership record. Bitcoins carry an unalterable
transaction record with them, but not always an ownership record.
With Libra, both the transactions made and who made them will be
recorded.
"You're going to see an expansion of exchanges and wallet
services that have stronger (anti-money-laundering) protocols and
restrictions," said Yaya Fanusie, a former CIA analyst and security
consultant. "That would be good for law enforcement."
Mr. Marcus implied in his testimony on June 17 that law
enforcement could have access to that information when needed.
Facebook and the nonprofit group that will govern Libra, the
Libra Association, will impose rules on the companies that use the
network. Companies like exchanges and wallet providers that want to
use the Libra network will have to comply with regulations around
money laundering. That is something that can't be forced on the
bitcoin network, where there is no one party or group controlling
access.
"I believe that we can improve on the current system," Mr.
Marcus told Congress in his recent testimony. "I think this system
might be potentially better."
Facebook declined to comment beyond the testimony given by Mr.
Marcus. The Libra Association also declined to comment.
Law enforcement has previously used bitcoin to its advantage.
Federal officers used the bitcoin transaction history of Ross
Ulbricht to help convict him in 2015 of running the online drug
site Silk Road.
The crypto sector has been moving in this direction for several
years. Many prominent businesses adhere to standard banking rules,
and several nations, notably Japan and Switzerland, have crafted
laws specifically for digital currencies.
In the U.S., Attorney General William Barr discussed in a speech
last Tuesday how encryption was "enabling dangerous criminals to
cloak their communications and activities," reviving a debate over
whether technology companies should be required to provide law
enforcement a way to unlock some communications.
The software than runs blockchain-based digital currencies,
including bitcoin, maintains a public ledger that records every
transaction. That ledger is maintained by groups whose work is
publicly reviewable. That means any attempt at altering the record
should be visible for everyone to see, making voiding or
counterfeiting difficult.
For bitcoin, so-called "miners" process the transactions, and
"nodes" broadcast them publicly. Anybody can download the software
to run either process. That means there is no central authority to
force compliance with the law. Bitcoin service providers that
submit to regulations do so voluntarily.
On Libra, the members of the Libra Association would determine
who gets to perform those tasks. That would give the association
significant control over the network, and could allow it to force
companies on the network to maintain data on the identities of all
its users and make it available to regulators.
Mr. Fanusie said the eventual outcome will be two worlds of
cryptocurrencies: one regulated and one unregulated.
Mr. Fanusie said law enforcement's job will be easier because
officials will know where to look for crime: at the point where the
unregulated space mixes with the regulated space. Eventually, even
drug smugglers need to cash out.
"The unregulated space will be there," he said, "but it will be
smaller."
Write to Paul Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
July 31, 2019 02:47 ET (06:47 GMT)
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