This article comes fromArs Technica, original author: Timothy Lee

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David Marcus, head of Facebook's new Calibra payments division, had a simple message before two hostile congressional committees this week: Facebook knows policymakers are worried about Libra, and it won't move forward unless their concerns are addressed. project.

While Marcus didn't take a stand, his comments at Tuesday's and Wednesday's hearings represented a dramatic shift from Facebook's concept of Libra. In Facebook's original vision, Libra would be an open, largely decentralized network, similar to Bitcoin. Regulators cannot touch its core network. Compliance will be the responsibility of exchanges, wallets and other services, which are the "entrance and exit" to the Libra ecosystem.

Facebook now seems to recognize that its original vision won't work for regulators. So this week Marcus laid out a new vision for Libra — one in which the Libra Association would take on the heavy responsibility of ensuring compliance with laws related to money laundering, terrorist financing and other financial crimes.Ars Technica author Timothy Lee says Facebook's new stance addresses concerns it raised last week aboutsome of the issues raised in . But it also raises new questions that Facebook will need to answer in the coming months. Marcus said Wednesday that the Libra Association will require Libra service providers to comply, but he did not explain how the association would do so. Regardless, there may be an inherent tension between improving regulatory compliance and Facebook's other goals of building an open web and making it accessible to marginalized people around the world.

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Meet the new Libra — different from the old Libra

Facebook's Junewhite paperwhite paper

"The Libra Blockchain will be open to everyone: any consumer, developer, or business can use the Libra network, build products on top of it, and add value through their services," wrote the . Low barriers to innovation and innovation, and encouraging healthy competition that benefits consumers. This is fundamental to our goal of creating more inclusive financial choices for the world.”

The white paper makes it clear that Libra will not be fully decentralized. The Libra Association will organize Libra's transaction clearing process and retain the right to decide who can become validators (the equivalent of Libra's Bitcoin miners). The association will also govern the traditional currencies that will back the value of Libra.But last month, Facebook and Libra representatives stressed that the association's role would be deliberately limited — including a hands-off role in regulatory matters. Shortly after Libra's unveiling,Podcaster Laura Shin asked Libra Association representative Dante Disparte

, what would happen if the U.S. government asked the organization to blacklist Libra addresses under U.S. sanctions laws. Disparte demurred, saying "the association does not interact with any jurisdiction". He argued that compliance with sanctions laws would be "the subject of individual wallets and suppliers in this ecosystem."TechCrunchSo will the Libra Association screen "individual wallets and vendors" to ensure they comply with the law? In June, Calibra product lead Kevin Weil told

, "Libra has no plans to play a role in actively vetting developers".

In short, Facebook's vision for Libra is to follow the decentralized, user-vigilant model of traditional cryptocurrencies like Bitcoin. Facebook's own wallet service, Calibra, will follow U.S. regulations on consumer protection, money laundering, sanctions and more. But Facebook does not appear to have plans for the Libra Association, Facebook, or any related entity to police illegal activity across the Libra network.

Marcus' testimony Wednesday represented a sudden shift in Facebook's position. During Tuesday's Senate Banking Committee hearing, senators questioned Marcus again and again about the risks of money laundering and other financial crimes that could occur on the Libra network. Marcus' tone was very different from that of his colleagues a month earlier.

On Wednesday, Marcus made a more specific commitment, promising that the Libra Association “will implement safeguards requiring service providers in the Libra network to combat money laundering, terrorist financing, and other financial crimes.”

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The new Libra will not be so open

Networks such as Bitcoin and Ethereum are completely open and permissionless: anyone can create services and software for these networks without seeking prior approval from anyone. Bitcoin and Ethereum can get away with it because no one owns and controls these networks. None of the regulators can impose fines or jail terms for violations, so regulators have focused enforcement efforts on middlemen at the edge of the network.

But the Libra Association will ultimately control the Libra network — both because it decides who can be validators, and because it controls the hard currency that backs each Libra coin. Regulators could thus pressure the Libra Association to enforce money laundering and other laws across the Libra network.

This would represent a dramatic change in Libra's design. This will raise the barriers to entry for new Libra-based financial services. This will be important because lowering the barriers to entry — both for wallets and for users in underbanked parts of the world — is one of the stated goals of the Libra project.

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Uncustodial Libra Design Affected?

Another side effect of whitelisting wallet providers is effectively banning what blockchain experts call non-custodial Libra holdings. Some people use the Bitcoin network through intermediaries such as Coinbase. But others do it by creating their own public and private keys and using open-source software to submit transactions directly to the Bitcoin network.The original Libra white paper envisioned accounts being owned by "direct end users of the system as well as entities representing their users, such as custodial wallets, but this seems difficult toThe Libra Association’s repeated claim that it does not directly interact with consumers

be consistent. The owners of these non-custodial Libra addresses are interacting directly with the Libra network. No other intermediaries are involved, so only the Libra Association has the authority to require these users to provide the identifying information required for know-your-customer (KYC) regulations.

In short, there is a fairly fundamental trade-off between network openness and the effective enforcement of payment network regulation. If the Libra Association doesn't have a way to enforce compliance among wallet providers, criminals will likely flock to wallet services that don't strictly enforce the rules -- or download open-source wallet software and use non-custodial accounts.

But if the Libra Association does have a mechanism for enforcing compliance, then this inherently raises the barriers to entry and makes the Libra network look more like a traditional financial network — with all the red tape. This could be especially harmful to marginalized populations in developing countries, as developers in these markets will have the fewest resources to escape the shackles of regulation.