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Comment by TazeTSchnitzel | Hacker News Reader

The whole “unbanked” thing is really unconvincing, because there's no way Libra/Diem will be usable for people who don't have identity documents and the evidence needed for KYC/AML forms, and that excludes most unbanked people.

As for international money transfers: TransferWise and the like are already providing better solutions in that space without forcing you to use Facebook Coins. Now you might say that mostly caters to the rich world, and that's true, but the people who can't use TransferWise are probably not going to be able to use Libra/Diem either for the same reasons they can't use TransferWise: ID documents, KYC/AML, plus capital controls and sanction regimes which aren't magically going to disappear for this new currency.

It won't provide one of the few benefits of Bitcoin etc either, namely the ability to make illegal transactions more easily.

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Even if those hurdles could be crossed, there's the hurdle of actually converting the unbanked to use their service. Unbanked people are unbanked because it's not profitable for local banks to convert them to customers, generally because they live in cash economies and don't have very much of it, and WU/Moneygram or the hawala service is difficult to beat on the last mile of remittances. M-PESA filled some gaps because it used a existing network of mobile phone stores and people's confidence in the value of their dumbphone credit in local currency. All rely heavily on shops in villages to attract and serve customers.

But Diem doesn't have any advantages over any of these entities: it's a foreign foundation with no local infrastructure to help people spend their cash and no local knowledge talking about immutable ledgers and cash equivalent reserves, as if the reason the unbanked were unbanked is because the local banks don't write whitepapers rather than because exchanging cash in developing world villages is a very expensive problem to solve relative to the size of the transactions they unbanked might like to make

I know it's a bit frowned up but just wanted to say this is a great comment.

> as if the reason the unbanked were unbanked is because the local banks don't write whitepapers

Made me chuckle.

> The whole “unbanked” thing is really unconvincing, because there's no way Libra/Diem will be usable for people who don't have identity documents and the evidence needed for KYC/AML forms, and that excludes most unbanked people.

Who says the countries this will be used in have KYC/AML? The unbanked people this would be for aren't in countries that have those laws.

> As for international money transfers: TransferWise and the like are already providing better solutions in that space without forcing you to use Facebook Coins. Now you might say that mostly caters to the rich world, and that's true, but the people who can't use TransferWise are probably not going to be able to use Libra/Diem either for the same reasons they can't use TransferWise: ID documents, KYC/AML, plus capital controls and sanction regimes which aren't magically going to disappear for this new currency.

Can't use transferwise, so can't use something else.

This isn't aimed at people who can use banking where KYC or AML apply. It's for people who are curently using other unbanking payment methods.

Anything that’s settled in dollars or dollar-like synthetic instruments will have KYC/AML.

Says who? Who is going to enforce some random African country that is in the middle of a civil war to have those?

Also, lots of drug deals are settled in US dollars, they don't have that. So your point that anything settled in dollars will have those laws is way off the mark and easily disproven.

That's not how finance works. If you don't follow the rules, you get cut off from the rest of the ecosystem which is tightly controlled by the US. So if diem wants to operate at all, they must adhere to the rules regardless of which countries they are operating in.

This is meant to be a completely different ecosystem, no? An ecosystem not controlled with the US. This isn't a normal financal service, it's not banking, it's outside of banking hence why it's aimed and people without banks.

And other companies are already in this space providing basically the same service.

It seems to me, people applying how companies 1st world countries + the US operate to how companies in 3rd world countries (except the US) have to operate.

That might be workable only if you specifically don't interface with the outside financial world.

If for example you require a third party exchange to sell to fiat currency, that should work.

But that exchange has to do the KYC stuff and the unbanked are still cut out.

Now if it's a local exchange for a local currency, not USD then is fine.

> Now if it's a local exchange for a local currency, not USD then is fine.

They can exchange in physical currency which would be acceptable in most third world countries and with the amount physical currency floating around they wouldn't need to get any from the US, no?

I don't think you could do that at any scale and escape the wrath of the US.

That runs afoul of most money laundering regulations, so if you have any presence in the US they'll go after you, and they'll prosecute anyone with any serious connection to it and extradite those people to the US where possible.

Moving money across international borders is not a problem you can just engineer around. You have to play by the rules.

If you don't play by the US's rules you can't withdraw in USD.

Which is the only fiat currency Diem supports conversion into right now.

> If you don't play by the US's rules you can't withdraw in USD.

The dollar is traded so much that I don't think they need to actually get dollars from the US to be able to use the dollar. If it's going into banks, yea, but if you're just giving people the notes, you're good to go.

It's extremely difficult to facilitate USD money movement if you're blacklisted by the US treasury. Just ask Iran. I suppose technically possible (again: ask Iran) but somehow I doubt Facebook is playing that game.

> This is meant to be a completely different ecosystem, no? An ecosystem not controlled with the US.

There is no such thing as an ecosystem not controlled by the US. You have any ties with the States (and Facebook, clearly, does), you gonna comply with whatever rules they come up with. If you don't believe me, ask Huawei's top manager. Or lots of other people like him.

>>> Says who? Who is going to enforce some random African country that is in the middle of a civil war to have those?

> This is meant to be a completely different ecosystem, no? An ecosystem not controlled with the US. This isn't a normal financal service, it's not banking, it's outside of banking hence why it's aimed and people without banks.

Last I checked, Facebook is a US company, with a US headquarters, publicly traded on a US stock market, and with an American CEO and controlling shareholder. So, unless they all want to relocate permanently to "some random African country that is in the middle of a civil war", they're going to have to deal with US regulations.

It's not legally Facebook though.

This is a global project, so it will be used in countries where this just isn't accurate.

Like, for example? Micronesia?

You may want to update your world view for the 21st century - there is no “wild west” left, every country where this matters will have financial regulations.

It's simply wrong to state every country that "matters" has KYC/AML regulations similar to those required in the US.

so again, which countries?

Many, many countries don't have KYC/AML laws as strict as the US. If you want specifics, I encourage you to look into it.

Countries like...? You must have a source or some knowledge backing that statement?

> Who says the countries this will be used in have KYC/AML? The unbanked people this would be for aren't in countries that have those laws.

You mean like Somalia? Even Somalia has KYC/AML laws: https://frc.gov.so/aml-cft-law/ (Customer due diligence is Art. 5)

Are there any countries that don't have similar laws?

For further reading on what exactly they were trying to do in the first place: Libra Shrugged by David Gerard

https://davidgerard.co.uk/blockchain/libra/

The key to this is the part of the White Paper that notes they'll need to create a digital identity standard.

This is something that's been widely advocated. But imagine a private company creating one, particularly one with Facebook's track record.

Imagine having to use Facebook to access any money - not just Diem Dollars.

(my book on Facebook's Libra/Diem plan goes into this, particularly ch 8 on privacy)

> Imagine having to use Facebook to access any money - not just Diems.

I don't think this can happen in practice. For any such system to work at all, the vast majority of the entire society needs to be using it and be satisfied with it, and then there'll always be cash anyway for which there can't be access control enforced by any one entity.

A bunch of people who bought Oculus Quest 2's are being locked out of their hardware because it requires a Facebook account and they'll automatically close new accounts with low activity (playing Quest doesn't count apparently) - so it seems that if you create a Facebook account purely to use the Quest 2, you'll be locked out if you don't share enough pictures/make enough friends.

I will NEVER use a currency that requires a connection to my facebook account.

> and that excludes most unbanked people

I don't agree, my step parents (in Romania) are unbanked and they have ID documents. A lot of people are in a similar situation there. Yet they all have smart phones.

As EU citizens with ID documents and smartphones they can open a full EU bank account in a few taps if they want to. They don't need Diem if they want bank accounts surely?

We’re actually trying to send them money from the US these days and the fees are not great, made me wish Diem was out already :)

TransferWise already exists. It requires your recipients to have bank accounts but they could easily get them.

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