🔋 Power Plays: Libra And China — Issue No. 70
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This week, Facebook CEO Mark Zuckerberg appeared before the United States Congress for a marathon six hour session, ostensibly to discuss the company's digital currency project, Libra. The hearing produced copious cringe worthy moments, including plenty of grandstanding by politicians who demonstrated a tenuous grasp of the subjects at hand. The questioning frequently veered into issues that had virtually nothing to do with Libra. Despite this, the hearing did provide some noteworthy new information. For one, Zuckerberg affirmed that Facebook would not launch Libra unless given the green light by regulators. He also pushed the narrative that the U.S. would be "out innovated" by China if regulators killed his company's project. Link.Zuckerberg's testimony before Congress comes a week after the inaugural meeting of the Libra Association. At the meeting, Facebook secured twenty-one signatures on the organization's charter. These signatures came from the leaders of companies which have chosen to stick with Libra, for now, despite the regulatory pressure. A number of high profile members did dropout in recent weeks. Companies, such as Visa, Mastercard, Stripe, eBay, and PayPal have all chosen not to participate. Link.
On Friday, Xi Jinping, the leader of China, said his country must "seize the opportunity" in adopting blockchain. The timing of the statement is unlikely to be a coincidence, as Xi almost certainly wanted to juxtapose his seeming embrace of "innovation" with the spectacle that unfolded in the U.S. legislative body the day before. The Chinese government is developing a digital version of their own currency, the Yuan, and while not much is known about it, it's likely to be something akin to a state run version of Libra: centrally controlled, fully permissioned, and with no privacy protections. Link.
A popular synthesis of these two events has been floating around on social media, and it goes something like this: "Our politicians are busy killing innovation while the Chinese are embracing blockchain!" On the one hand, I can see where the sentiment is coming from. Believe me, I share the visceral distaste for bloviating politicians feigning outrage as they transparently bid to score cheap points and generate soundbites.
Let's be real about this, though. Neither Libra nor the crypto-Yuan are innovative. A centrally managed digital currency with zero privacy is something that could have been built decades ago. Neither of them have anything to do with blockchain technology either, at least not in the sense that makes blockchain actually interesting: enabling global human coordination without the concentration of power.
Xi Jinping is the leader-for-life of an authoritarian regime that controls the lives of 1.4 Billion people and 15% of the world's GDP. Mark Zuckerberg is the CEO-for-life of a company with 2.4 Billion users and an unprecedented influence over the global flow of information. Do you really think either of these men— two of the most powerful people in all of human history— have any genuine interest in promoting a technology whose sole noteworthy feature is the diffusion of centralized power?
In case it's not clear: NO! They don't.
Why, then, do both men insist that they're interested in pushing "blockchain technology" forward. Simply put, they're looking to co-opt and exploit a movement that threatens to subvert their own power. People pursue their own self interest, even—or perhaps, especially— powerful people.
The strategy is one both have employed before. Rather than fighting to keep their citizens off of social media sites, the Chinese government built their own, fully equipped with state surveillance and censorship. When Snapchat, an up and coming social network, refused Facebook's offer to buy them, they simply built Snapchat's main features into Instagram and Messenger. The playbook is straightforward: rather than trying to destroy the rise of a perceived threat, you simply co-opt it, giving people an easy alternative which you oversee.
Here's how they're hoping this will play out with crypto. While Bitcoin, Ethereum, and other decentralized cryptonetworks are still in their infancy, both China and Facebook will try to hook their citizens/users on centralized versions which they control, leaving decentralized networks as niche tools for enthusiasts and zealots. As a bonus, by simply using the magical word "BLOCKCHAIN", they can convince the world they're doing something innovative, or even noble, while consolidating their own power.
None of this is surprising to me, but here's what is: seeing members of the crypto community leap to the defense of these men. We, who have inherited the ethos of the cypherpunks, ought to know better.