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CryptOsint Weekly Newsletter: October 29, 2019
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Welcome to the first official CryptOsint newsletter! Thank you all for taking the time to subscribe. Please let me know if you ever want a particular topic featured or a specific question answered. Feedback, suggestions, and questions can be sent to brenna@bellingcat.com

 

Now, onto all things Libra...

What does Libra mean for open source investigators?

Last week, Mark Zuckerberg spent a very long six hours testifying about Facebook’s cryptocurrency, Libra, in front of the House Financial Services Committee.  

As I was watching the hearing, I kept wondering: if Libra launched, what would if mean for open-source investigators? Well, if Facebook’s prior behavior is any indication, we may very well be charged with flagging misuse of the Libra token by extremists and criminals. Here’s why:

In Libra’s white paper, it states that, “The Libra Blockchain is pseudonymous and allows users to hold one or more addresses that are not linked to their real-world identity.” 

This basically just means that, in theory, people can use Libra without having their name attached to a transaction. In reality, however, most Libra users will have their name or identity attached to transactions because most of these transactions, at least initially, will be sent from a Calibra wallet. Calibra is a Facebook subsidiary that is a virtual wallet in which users can store and exchange Libra tokens. To register, users must provide a government ID.

Currently, there are not many other platforms built to enable Libra transactions outside of Calibra. Therefore, a significant amount of the initial usage of Libra will likely happen through Calibra wallets, leaving the majority of transaction monitoring in Facebook’s hands. This may seem like a beacon of hope to some with regards to regulating money laundering and terror finance. Yet we must also recall Facebook’s track record with combating these threats in other areas of its platform.

If Libra does launch, I guarantee we’ll start seeing bad actors post online with Libra addresses asking for donations to their causes. While this might seem like a problem with an easy solution — because identifying these posts is not that difficult and Facebook will have access to user information to block transactions — we have to remember that the social media giant is notoriously bad at regulating content on their site.

As the brilliant researchers at Alliance to Counter Crime Online (ACCO)  have documented, Facebook regularly fails to take down instances of human, animal, organ, and art trafficking on their marketplaces. We’re not just talking about a couple of things that slip through the cracks here and there. ACCO has collected tens of thousands of examples.

It was open-source investigators, such as the researchers at ACCO, who flagged this misuse — not Facebook. Unfortunately, Facebook has done little to mitigate these illegal marketplaces since ACCO has brought it to their attention. Maybe the current public scrutiny over Libra would elicit a different response, but who can really say when it comes to a tech company having to choose between public safety and user profits? 

Zuckerberg enters survival mode

This could all be a moot point, however, as Libra may not ever make it off the ground. Though most of the lawmakers took this past week’s hearing as an opportunity to question Zuckerberg on other problematic aspects of his company, like the rampant spread of child exploitation or the lack of fact-checking for political advertising, the tech mogul offered two key takeaways regarding Libra: First, Facebook will leave the Libra Association if it does not obtain U.S. regulatory approval, and second they also aren't quite sure who should be regulating Libra. 

To me, this wasn’t really surprising. Most crypto-ventures aren’t clear over which regulators have jurisdiction over them because the regulators themselves are often not quite sure. This confusion isn’t necessarily solely due to outdated laws and uninformed lawmakers (though those aspects definitely play a role), but because most cryptocurrencies have a very unique set of regulatory needs. Some cryptocurrencies are seen as securities, others aren’t. Some can more easily be monitored, others are programmed not to be. There cannot be one-size-fits-all regulations because cryptocurrencies are all just too dang different. 

Herein lies the predicament: If Libra’s launch is now tied to the whims of all financial regulators in the country, will it ever be able to cut across all of the red tape? The Verge’s Casey Newton, who published my favorite debrief of the hearing, doesn’t think things are looking too good:

On one hand, this hearing was always going to cast Zuckerberg in the role of a piñata. On the other, if today was supposed to advance Facebook’s case that Libra is a good thing for the world, it’s not clear to me that it succeeded. 

In the meantime, for all their dramatizing, the lawmakers who spoke today seemed sincere in their concerns about the havoc Libra might wreak havoc on the global financial system. And if they could have voted to end the Libra experiment today, it sure seems like a majority would have.


That all being said, Zuckerberg and David Marcus, the head of Libra, are trying their darndest to keep Libra alive. 

Zuckerberg made a concentrated effort during the hearing to try to convince Congress that Libra was created to help the unbanked. He also not so subtly added that if Facebook doesn’t launch this currency, China will. Though I don’t think Zuck intended to do this, the flow of his argument all but confirmed a theory Stanford Internet Observatory’s Alex Stamos put forward: Libra isn’t targeted at the U.S. It wants to compete with profitable Chinese payment platforms like Alipay.

Aside from Facebook’s narratives around making China the boogeyman and itself a humanitarian organization, Marcus also announced last week that his team is open to pegging Libra to fiat currencies instead of its initial basket of vaguely defined real-world assets. Many see this move as an attempt to assuage regulators’ fears of Libra overtaking the dollar.

This Past Week in Crypto

Phew, got through all the Libra news. Here is some other cool stuff that happened in the crypto-world:

  • An update on the Telegram debacle highlighted in last week’s CryptOsint post: Investors in the messenger app’s cryptocurrency refused to accept refunds of their investments and agreed to the postponement of the Gram token (TON) launch until April 2020. Despite this show of support, Coindesk’s William Foxley and Anna Baydakova report that not all stakeholders are confident of TON’s long-term success. [William Foxley and Anna Baydakova // Coindesk]

  • Twitter’s Jack Dorsey joined the pile up on Facebook by saying “Hell no” to joining the Libra association and instead called Bitcoin the future of the internet.  [Ashley Carman // The Verge]

  • In the midst of all the drama surrounding SoftBank’s decision to bail out WeWork, the Japanese conglomerate announced a partnership last week with IBM to “transform the telecommunications industry” using blockchain technology. Hmmm, color me skeptical.  [Bloomberg Business Wire]

  • Last week, Polish authorities arrested the president of Crypto Capital on charges of money laundering and for alleged involvement in an international drug cartel. Crypto Capital has been making headlines recently for its involvement in the potential fraud perpetrated by crypto exchange Bitfinex and stablecoin Tether. [Rakesh Sharma // Decrypt]

  • Coindesk’s David Pan wrote a comprehensive piece about the rise of hundreds of blockchain projects in China. All of the projects seem to be closely monitored by the Chinese government and are representative of the country’s larger push to mainstream the technology. [David Pan // Coindesk]

  • A fake Tor browser has been stealing cryptocurrencies from users for years. The cybercriminals advertised the fraudulent technology as the “official Russian language version of the Tor browser.” [Helen Partz // Cointelegraph]

  • And finally, Bitcoin broke $10,000 last week. Crypto-twitter was very pleased


 

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