Should Libra Be Legal? Here's Why Congress Should Ask Linden Lab to Testify

Congress is currently debating the status of Libra, the cryptocurrency backed by Facebook, with one bill proposed to ban it and other cryptocurrencies like it outright:

Called the Keep Big Tech Out of Finance Act, the bill would apply to any company with at least $25 billion in annual revenue that offers “an online marketplace, an exchange, or a platform for connecting third parties.”

Covered firms would be banned from creating and operating digital currencies, a provision clearly targeted at Facebook’s Project Libra. But the measure’s broad parameters could also effectively outlaw financial products offered other major tech firms.

Companies subject to the bill — which appear to include Facebook, Google and Amazon — would also be banned from offering a slew of financial services such as banking, investment management, securities exchanges, financial advice and money transmission.

Lawmakers and regulators in both parties have expressed fears about Libra and Facebook’s ambitions in the financial services industry. Even so, the proposed bill would likely face substantial opposition from Senate Republicans concerned about regulatory overreach in the financial sector. 

This might be a good idea, but the problem is that the wrong people are talking about it in the public arena.  Treasury secretary Steven Mnuchin may have serious concerns about Facebook's Libra, but he's seriously ill-equipped to express any opinion on virtual currency. But for that matter, the top executives at Facebook and the other big tech companies also have little to no direct experience with virtual currency.

Which is really why the people Congress should be talking to executives at Linden Lab, creator and publisher of Second Life. Here's why:

• To this day, the virtual world's currency, Linden Dollars, remains the most used -- even more than Bitcoin.
• Unlike Bitcoin and other cryptocurrency, Linden Dollars are regularly used to buy actual goods and services -- mostly virtual fashion and other 3D digital content -- but that still means dealing with billions of transactions by millions of consumers over the years.
• Unlike any cryptocurrency, Linden Dollars has seamless, built-in processes for selling and converting the virtual currency to real cash.

Just for starters. For these reasons and more, Linden Lab is likely to be the only company in the world with direct, hands-on, day-to-day experience with how virtual currency with a real world monetary value is used -- and abused. They can share concrete data and examples of virtual currency's use by criminals and bad actors of all kinds, and just as relevant, how it's used by average consumers. And when pressed, the company can probably point why, for legal/liability reasons, Linden Dollars went from being described by the company as a virtual currency, to being called a "license". (The recent move to offload Linden Dollar transactions to Tilia, a separate business entity, is also likely instructive.)

In short, talking to Linden Lab and its founders would do much to help Congress decide how to regulate Libra. Then again, if Facebook had talked to Linden Lab and its founders beforehand, they might have decided not to make Libra at all.

Post inspired by Ysabelle Stewart.

Comments

[lin]

This conforms nicely to the old rule which states "if an article title takes the form of a yes or no question, the answer is definitely no."

[sirhc desantis]

I can think of 535 reasons why the Lab should keep away from this.

[Joey1058]

Allow me to share the underlying fear from the federal government with this link from the FinCEN page that goes into more detail.

[Matt]

Yet again facebook is screwing up good things to try and control people and take from other services available online. Linden labs had been around for nearly 2 decades with second life, and their currency exchange market mostly supplies content creators and artists a revenue from customers for their hard work with various projects involving coding and prim/mesh 3d modeling. Things that take training and a lot of time to produce.

[Wagner James Au]

"low me to share the underlying fear from the federal government with this link from the FinCEN page that goes into more detail."

What specific passage from that long document are you referring to?

[amandamagick]

I wonder if this bill will affect LL? Virtual currency then being converted to USD... this can be a tricky thing and LL has been doing for like you said almost 2 decades. But then again does LL make that much 25 billion? Maybe not so it would be the BIG DOGS like Facebook that would.