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Facebook answers how Libra taxes & anti-fraud will work

Facebook provided TechCrunch with new information on how its cryptocurrency will stay legal amidst allegations from President Trump that Libra could facilitate “unlawful behavior.” Facebook and Libra Association executives tell me they expect Libra will incur sales tax and capital gains taxes. They confirmed that Facebook is also in talks with local convenience stores and money exchanges to ensure anti-laundering checks are applied when people cash-in or cash-out Libra for traditional currency, and to let you use a QR code to buy or sell Libra in person.
A Facebook spokesperson said the company wouldn’t respond directly to Trump’s tweets, but noted that the Libra association won’t interact with consumers or operate as a bank, and that Libra is meant to be a complement to the existing financial system.
Trump had tweeted that “Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity. Similarly, Facebook Libra’s ‘virtual currency’ will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International.”
For a primer on how Libra works, watch our explainer video below or read our deep dive into everything you need to know:

In a wide-reaching series of interviews this week, the Libra Association’s head of policy Dante Disparte, Facebook’s head economist for blockchain Christian Catalini and Facebook’s blockchain project subsidiary Calibra’s VP of product Kevin Weil answered questions about regulation of Libra. Here’s what we’ve learned (their answers were trimmed for clarity but not edited):
Would Facebook’s Calibra Wallet launch elsewhere even if it’s banned in the USA by regulators?
Calibra’s Kevin Weil: We believe that creating a financial ecosystem that has significantly broader access where all it takes is a phone and lower transaction fees across the board is good for people. And we want to bring it to as many people around the world as we can. But as a custodial wallet we are regulated and will be compliant and we will only operate in markets where we’re allowed.
We want that to be as many markets as possible. That’s why we announced well in advance of actually launching a product — because we’ve been engaging with regulators. We’re continuing to engage with regulators and we can help them understand the effort that we’re taking to make sure that people are safe and also the value that accrues to the people in their countries when there’s broader access to financial services with lower transaction fees across the board.

TechCrunch: But what if you’re banned in the U.S.?
Weil: I’m hesitant to give a blanket answer. But in general, we believe that Libra is positive for people and we want to launch as broadly as possible. The world where the U.S. does that I think would probably cause other regulatory regimes to also be concerned about it. I think that’s very much a bridge that we’ll cross when we get there. But so far we’re having frank, open and honest discussions with regulators. Obviously, that continues next week with David’s testimony. And I hope it doesn’t come to that, because I think that Libra can do a lot of good for a lot of people.
TechCrunch’s Analysis: The U.S. House subcommittee has already submitted a letter to Facebook requesting that it cease development of Libra and Calibra until regulators can better examine it and take action. It sounds like Facebook believes a U.S. ban on Libra/Calibra would cause a domino effect in other top markets, and therefore make it tough to rationalize still launching. That puts even more pressure on the outcome of July 16th and 17th’s congressional hearings on Libra with the head of Facebook’s head of Calibra, David Marcus.
How will users cash-in and cash-out of Libra in person?
We already know that Facebook’s own Libra wallet called Calibra will be baked into Messenger and WhatsApp plus have its own standalone app. There, those with connected bank accounts and government ID that go through a Know Your Customer (KYC) anti-fraud/laundering check will be able to buy and sell Libra. But a big goal of Libra is to bring the unbanked into the modern financial system. How does that work?
Weil: Because Libra is an open ecosystem, any money exchange business or entrepreneur can begin supporting cash-in/cash-out without needing any permission from anyone associated with the Libra Association or member of the Libra Association. They can just do it. Today in a lot of emerging markets [there’s a service for matching you with someone to exchange cryptocurrency for cash or vice-versa called] LocalBitcoins.com and I think you’ll see that with Libra too.
Second, we can augment that by by working with local exchanges, convenience stores and other cash-in/cash-out providers to make it easy from within Calibra. You could imagine an experience in the Calibra app or within Messenger or WhatsApp, where if you want to cash in or cash out, you’ll pop up a map that highlights physical locations around that allow you to do it. You select one that’s nearby, you select an amount, and you get a QR code that you can take to them and complete the transaction.
I’d imagine that most of these businesses that we work with will support Libra more broadly, so even if we get these deals started it will benefit the whole ecosystem and every Libra wallet, not just Calibra.

TechCrunch: Have you struck relationships with any convenience store operators or money exchangers like Western Union or MoneyGram, or Walgreens, CVS or 7-Eleven? Are you in talks with them yet?
Weil: I probably shouldn’t comment on any specific deals but we’re in conversation with a lot of the folks you might think, because ultimately being able to move between Libra and your local currency is critical to driving adoption and utility in the early days . . . If you’re banked there are easier ways to do that. If you’re not banked and you’re in cash — those are the people we really want to serve with Libra — we’re working very hard to make that process easy for people.
TechCrunch’s analysis: This approach will let Calibra largely avoid the complicated and potentially error-prone process of KYCing people in person or handing out cash by offloading the responsibility and liability to other parties.
How will Libra stop fraud or laundering while offering access to unbanked users without ID?
Weil: There are very important populations that don’t have an ID. People in a refugee camp may not, as an example, and we want Libra to serve them. So this is one example of many of why it’s important that Calibra isn’t the only option for people who want to participate in the Libra ecosystem  . . . Others of these will be run by local providers and they have programs to meet customers face-to-face and other ways to serve people and even KYC them that we may not . . .  We’re not going be the only wallet, we don’t want to be the only wallet.
This is one of the reasons NGOs have been members of the Libra association from the start, because we want to encourage the monetization of identity processes both through working with governments issuing credentials for more people and also making use of new types of information for identity and authentication. We hope this process will hep the last mile problem.
In the case of a non-custodial wallet, the user isn’t trusting anyone. The way the regulations have worked and this is evolving as we speak. The on-ramps and off-ramps to the crypto world are regulated and they have direct customer relationships and it’s their responsibility to KYC people. In our case we’ll be a custodial wallet and we’ll KYC people. There are a number of wallets in the Bitcoin or Ethereum ecosystem — non-custodial wallets that don’t have a direct relationships with the users. . . They have to get that Bitcoin somehow. Usually they’re going through an exchange where usually as part of the process they’re KYC’d.

In a lot of emerging markets you have LocalBitcoins.com where you can find a representative or agent who will meet you in person and exchange cash for bitcoin in whatever market you have to be in. And I believe that they just started making sure that they KYC everyone, but they’re doing it in person. And they have more flexibility in how they do it than you might otherwise. I think there are lots of ways that this will happen and the fact that Libra is an open ecosystem will enable people to be entrepreneurial about it.
There are lots an lots of people who are underserved by today’s financial ecosystem who have government ID. So even with requiring everyone go through a KYC process, we’ll be able to serve many, many people who are not well-served by today’s financial ecosystem. We want to find ways to support people who can’t KYC and the important part is that Calibra will fully interoperate with any other wallet, including ones that people in local markets are using because it’s a better fit for their needs.
TechCrunch: Through that interoperability, if someone with a non-custodial wallet receives Libra and then sends it a Calibra wallet user, does that mean you Libra coming into Calibra from users who weren’t KYC’d and could be laundering money?
Weil: So it’s part of the regulatory situation that’s evolving as we speak. There’s something called the Travel Rule . . . If there’s a transfer above a certain value you have to make sure that you understand both who the sender is, which you do if they’re using a custodial wallet, and who the receiver is. These are evolving regulations, but it’s something that obviously we’re going to make sure that we implement as regulations solidify.
TechCrunch’s Analysis: Calibra appears to be inviting regulation that it can strictly abide by rather than trying to guess at what the best approach is. But given it’s unclear when concrete rules will be established for transfers between non-custodial wallets and custodial wallets, or for in-person cashing, Facebook and Calibra may need to establish their own strong protocols. Otherwise they could be guilty of permitting the “unlawful behavior” Trump describes.

How will Libra be taxed?
Dante Disparte of Libra: Taxing of digital assets is something that’s being designed at the local level and at the jurisdiction level. Our view of the world is that like with any form of money or any form of payment or banking, the onus in terms of compliance with tax is with the individual user and consumer, and the same would hold true broadly here.
We expect that the many, many wallets and financial services providers building solutions on the Libra blockchain would begin to provide tools that make it much easier than it is today [to calculate and file taxes] for digital assets and cryptocurrencies more generally . . .  There’s plenty of time between now and Libra hitting the market to begin defining this more strictly at the jurisdictional level among providers.
TechCrunch’s Analysis: Again, here Facebook, Calibra and the Libra Association are hoping to avoid shouldering all the responsibility for taxes. Their position is that just as you have to take the initiative of paying your taxes whether or not you use a Visa card or your bank’s checks to transact, it’s on you to pay your Libra taxes.
TechCrunch: Do you think in the United States that it’s reasonable for the government to ask that Libra transactions be taxed?
Disparte: Tax treatments of digital assets broadly hasn’t been entirely clarified in most places around the world. And we hope that this is something that this project and the ecosystem around it helps to clarify.
Tax authorities will see a benefit from Libra at the consumption level and at the household level, while some cryptocurrencies have avoided taxes until the point they tried to cash out. But the nature of it and the lack of speculation and its design we think should give it a light tax treatment the way you would find with traditional currencies.

Christian Catalini of Facebook: Cryptocurrencies are taxed right now every time you have a sale on the differences in gains and losses. Because Libra is designed to be a medium of exchange, those gains and losses are likely to be very tiny relative to your local currency . . . Sales tax would likely be implemented the exact same way on Libra as it is today when you pay with a credit card.
At launch giving current regulations, the Calibra wallet will have to track every purchase and sale of Libra for a U.S. user and those differences will have to be reported on tax day. You can think of the losses, albeit they may be very small gains and losses relative to USD, as similar to the what people do today when they have a Coinbase account with Bitcoin.
The sales tax I think could be implemented in the exact same way as it today with any other sort of digital payment, it would be no different. If you’re buying goods or services with Libra you’ll be paying sales tax the same way as if you used a different form of payment. Like today when you see a percentage, that is the sales tax on your total.
Disparte: Maybe the best way to frame how taxes work all over the world is that it’s not up to Libra, Calibra, Facebook or any company to make that determination. It’s up to regulators and authorities.
TechCrunch: Does Calibra already have plans in place for how to handle sales tax?
Weil: That’s also a pretty rapidly evolving part of the regulatory ecosystem right now. It’s really an ongoing discussion. We will do whatever the regulation says we need to do.
TechCrunch’s Analysis: Here we have the firmest answers of our interviews. Facebook, Calibra and the Libra Association believe the proper approach to taxes is that Libra transactions carry a country’s traditional sales tax, and that Libra you hold in your wallet will have to pay taxes based on the Libra stablecoin’s value (that’s pegged to a basket of international currencies) relative to the U.S. dollar.
If the Libra Association recommends all wallets and transactions follow these rules and Calibra builds in protocols to handle these taxes simply, at least the government can’t argue Libra is a method of dodging taxes and everyone paying their fair share.

Facebook announces Libra cryptocurrency: All you need to know

Facebook answers how Libra taxes & anti-fraud will work

CardMunch founder returns with HiHello, a new app aiming to replace business cards

A new app called HiHello is taking aim at business cards. While plenty of apps in the past have tried to kill the business card, they never achieved critical mass. Mainly, this is because most required that both parties — the business card holder and recipient — have their app installed. HiHello is different. Instead of forcing everyone to download its app, it simply generates a QR code that can be scanned by anyone with a modern smartphone.
HiHello specifically takes advantage of the fact that today’s smartphones now have QR code readers built in — users no longer need to download a separate QR code scanner app to exchange information over this format.
On iPhone, you can use the native iOS Camera app to scan QR codes. And on Android, Google Lens (a part of Google Assistant) offers similar functionality. (Although this should really be in its camera, too, ahem.)
What this means is that when a HiHello user wants to share their contact information with another person, all they need to do is have the recipient scan the QR code the HiHello app generates. The recipient doesn’t have to download or install anything, and is able to quickly save the contact information right into their phone’s address book.

HiHello also allows you to create different types of cards with different information on them.
For example, you could have one card for your business, one for your side hustle and one for personal connections. This way, you can keep some of your information private, as needed.
You could create a card without your cell number for those contacts you didn’t want to be able to reach you by phone; or you could create a card with your virtual number (e.g. a Skype line or Burner) for dating prospects. You could create a card with your home address, cell and personal email for your family and friends. Or you could make one with your office address, work email, fax and office line for business contacts. And so on.
The idea for the app comes from K9 Ventures founder Manu Kumar, who along with co-founder and Caltech and Columbia alum Hari Ravi, and a small team of fewer than half a dozen, has been working on the app following the release of iOS 11, which introduced the QR code reader functionality in the native camera app.
Kumar, in particular, has been trying to solve the problem of business cards for years. In 2009, he co-founded CardMunch to turn business cards into digital contacts. The company was sold to LinkedIn a few years later, but LinkedIn abandoned it and shut it down.
“LinkedIn…failed to recognize the potential for what this could do for them, and in a typical big company fashion proceeded to ruin and eventually kill the product,” Kumar wrote in a blog post about HiHello’s launch. “Yes, I’m still peeved,” he added. (So are we.)
Kumar also noted that another problem with business cards is that people have to carry around different ones to represent their different roles or jobs.
“The information you choose to share with someone is often dependent on the context in which you are meeting that person,” he said.
To address this issue, HiHello allows users to create multiple cards with different information on them, which can be shared via the QR code scan in person, or sent out via text message or email — without exposing the email or phone number tied to your phone.

HiHello has also made it easy to find the right card quickly through its iOS and Android widgets that let you choose which card you want to share with just a tap.
The app is straightforward to set up and use. You’re first walked through a form where you enter your basic contact information to get started, and can then proceed to customize the different card types like “work” and “personal,” for example. You also can just choose to share your phone or email. (See above photo).

When someone scans the QR code, it launches a website hosted on hihello.com where there’s a link to save the information directly to their phone’s contacts. This link can be sent in other ways right from the QR code screen as well, thanks to buttons at the bottom for “Message” and “Mail.”
The new app is the first step in a bigger vision the company has for contact and relationship management, Kumar notes. In the near future, this will include premium features aimed at business users.
“We’re not trying to become a social network,” said Kumar. “We do have aspirations of being a ‘Business Relationships Network.’…As we build and are ready to introduce new features, we will unlock new pieces of the puzzle that show how this will be valuable to users. It goes back to the fundamental premise of believing that who you know is often more important than what you know,” he added.
Palo Alto-based HiHello, a team of five, is backed by Kumar’s K9 Ventures. The app is a free download on iOS and Android.*
* There is currently a registration bug affecting 20% of users. The bug is being resolved and affected users will be emailed when there’s a resolution. 

CardMunch founder returns with HiHello, a new app aiming to replace business cards

How Apple And Google Could Make QR Codes Mainstream

QR Code

Editor’s Note: Brenden Mulligan is an entrepreneur and product designer who created Onesheet, Webbygram, TipList, ArtistData, MorningPics, and PhotoPile. You can find him on Twitter at @mulligan.

QR codes are everywhere. Frustratingly everywhere in my opinion. Countless companies put them on marketing materials, but not a single person I know actually scans them. I’m friends with lots of smartphone owners, and I’ve literally never, ever seen someone pull out their phone and scan a QR code.

There are even a handful of startups that consider QR codes part of their core offering to small businesses. They’re relying on people actually scanning these stupid things for their products to work. Silly.

However, as negative as I am about them, QR codes actually make a lot of sense. One of the most challenging things about the gluttony of digital offerings is bridging the gap between the digital and physical world. Mobile devices present the opportunity to do this better than ever. If I’m standing at a store, and they want me to follow them on Twitter, mobile devices allow me to follow them immediately, as opposed to waiting until I get home to do it.

QR codes simplify it even more. It’s much easier for me to scan a code and have it take me directly to their Twitter page than have to type in their username. Or even better, if I get a reward for taking a digital action, like filling out a survey, it’s easier to get me to the survey with a scanned code than giving me a URL to enter.

But in my opinion, up to this point QR codes have been an overall failure mostly because I don’t feel like the majority of people use them.

When asking around about why friends don’t use QR codes they claim they don’t have a way to scan them, even though doing a search for “QR scan” in Apple’s app store returns over 500 results.

If the problem is that people don’t have scanners installed, one straightforward solution would be for Apple and Google to include a standalone QR Code app with iOS and Android. Then at least most people with smartphones could scan the code without having to download another app. But I’m not convinced this would solve the problem. Asking someone to launch a specialized app to complete a task is asking for a change in behavior that most users probably aren’t willing to do.

Another solution is to fix the problem by using another technology, like location gating or NFC. But implementation of both of these would be costly and difficult. It would obviously never make sense for a business to embed NFC chips in every coffee cup they sell, and marketing materials are not always associated with just one location.

So what’s the ideal solution, assuming the goal is to get people to actually use these codes? My suggestion would be to make the camera software just a little bit smarter.

To truly take QR codes to the mainstream, Apple and Google should actually build a scanner into the camera logic. Similar to how the camera senses how much light there is, or if a picture is in focus, it could scan whether or not a QR code was in the frame. This would essentially turn your camera into a constant QR scanner.

If a QR code happens to be in the frame, a message would pop up asking if you’d like to follow the link. If you hit ignore, QR codes would be ignored until the next time you launch the app. No separate app, no new behavior. Just an extension of existing behavior. And of course, you could always turn this off in settings.

Probably not as simple to implement as it seems, but think of the implications.

Imagine how different this experience would be for consumers. Instead being told “Scan this code with a QR Code Scanner app on your phone”, the user would be told “Take a photo of this!” That experience would make so much more sense to 90% of users. Open camera, point phone at code, get sent where you need to go.

Simple. It might make having these codes all over the place actually worthwhile.


How Apple And Google Could Make QR Codes Mainstream

With 12M+ Downloads, Scan Launches Scan-to-gram, A New Way To Follow People On Instagram

Screen shot 2012-05-10 at 4.29.24 PM

Three guys from Provo, Utah set out on a mission to make QR codes, those boring pixellated, black-and-white squares come alive — in other words, to extend their functionality by turning them into realworld “like,” “follow,” and “buy” buttons. And it’s been working. In February, Scan announced a seed funding round from Shervin Pishevar, Google Ventures, CRV, Start Fund, Social + Capital, Ludlow Ventures, and more. The company moved their operations from Utah to San Francisco, and is currently sitting at just over 12 million downloads across iOS devices.

How did it become one of the top downloaded QR code scanner in just over a year? Because, beyond the basic scanning functionality offered by a host of iOS and Android apps, Scan offers a variety of services and features that let SMBs and enterprise companies create mobile optimized QR code, NFC, and other tech experiences to let users can QR codes with their phone and immediately “like” products or businesses on Facebook, follow on Twitter, check in on Foursquare, etc. Check out how businesses are using it here.

As Scan is in the business of creating apps that extend the potential application of QR code tech, Scan is today leveraging the buzz around Instagram to let businesses, organizations, etc. build their Instagram user base via QR codes. The new app, appropriately called Scan-to-gram, lets users scan QR codes and instantly follow a company and its employees.

The company has already lined up a bunch of notable Instagrammers to be part of its initial launch, including Warby Parker, Zooey Deschanel, Nike, Marc Jacobs, GQ, Vevo, Audi, Nat Geo, and the L.A. Lakers — to name a few.

With Instagram’s acquisition by Facebook, the platform is becoming increasingly appealing — beyond what it already had. Brands are excited because it provides early adopter-types and mobile enthusiasts with a simple way to boost their followers, which gives them access to another social media channel and potential branding opportunities.

On top of that, it can be a clever way to draw users into the Scan.me ecosystem, which already allows businesses and individuals to create QR codes that represent their online presence — like an About.me for QR codes. Of course, QR codes have a less-than-terrific reputation, which is why Scan has focused on the content and the experience — in other words, what the person or business is trying to accomplish.

With Scan-to-gram, it’s Instagram, and obviously the potential permutations are numerous. Plus, they’ve expanded to 1-D barcodes, and are preparing for NFC and image recognition, whenever the mainstream becomes ready to adopt.

Currently, Scan is using barcodes as its rev stream, so that when a user scans a barcode, they are taken to a page where there’s a Google button, an Amazon button, and a third for an ad. Scan makes affiliate dollars as well as ad revenue, but the long-term model, CEO Garrett Gee tells us, is to build out more valuable mobile experiences, increasing the depth of its analytics and reporting tools, offering those to businesses at a price.

The barcode revenue is just starting to pick up, Gee says, at over $1K-per-day.

Oh, and even though Scan-to-gram was just pushed live this morning, the Instagram team reached out to them today, and has created their own page as well. Find it here.

For more, here’s Scan-to-gram at home, and an intro video below:


With 12M+ Downloads, Scan Launches Scan-to-gram, A New Way To Follow People On Instagram

Barely 3 Months Post-Launch, Loyalty App Punchcard Is Live In 15M Locations, Nears Profitability

punchcard-ios

The mobile apps from stealthy loyalty startup Punchcard have only been on the market since February, but the company is now reporting it’s close to being cash-flow positive. Like a digital version of paper punchcards which reward repeat customers for their business, Punchcard’s app lets customers snap photos of their receipts in exchange for cash payouts or other rewards directly from the merchant.

While not a new concept in and of itself, what’s interesting about Punchcard is how it’s been acquiring its business: it just switched on loyalty programs for millions of locations across the U.S., even if they didn’t ask for it.

“We’re looking at this as seeding the market, essentially,” explains Punchcard CEO and serial entrepreneur Andy Steuer of why the company has seemingly put the cart before the horse. In other words, usage and rewards first, paying customers (i.e., businesses signing up) second.

“If you look at other location-based apps, they’ve turned on the ability to check in anywhere,” says Steuer, “and we’ve turned on the ability to check-out anywhere.”

Consumers use the app, which now works at 15 million (!) locations in the U.S., to verify their purchases by snapping a photo of their receipt. As they collect punches on their virtual cards, they can earn their way to cash, freebies and other rewards. Generally (unless a merchant has specified otherwise), the rewards arrive after the 10th purchase, and, if cash-based, are the equivalent of the average order value up to $30.

But how many of these businesses are actually paying for the system? Steuer declined to give exact numbers, only saying that Punchcard is “generating revenue from the sales of several thousand locations.” Nor is he sharing the download numbers or active users numbers associated with the mobile applications.

He did note, however, that the company has paying customers, mostly in southern California where Punchcard got started, including a newly added Subway franchise. He also says that Punchcard is seeing a “huge conversion rate” from app download to usage and repeat usage, with transactions doubling every week. (But again, no exact numbers were provided.)

However, Punchcard has just partnered with KDA Group, one of the largest local marketing agencies, which will begin selling Punchcard to their network, which includes major retailers and chains, operating at around some 300,000 locations nationwide.

The company currently offers the service in two tiers (one for $29/month, another for $99/month), which provides businesses with access to an analytics view into who their customers are, and an automated re-marketing program that pushes offers back to customers to incent them to buy again. The solution works best for retailers, restaurants, grocery stores, coffee shops, and other local businesses that want to increase the frequency of their customers’ purchases.

Punchcard isn’t the only startup trying to digitize the loyalty space. Facebook just acquired loyalty play Tagtile, for example, Google acquired Punchd, while others like Perka and Perkville are also working on similar programs, to name just a few.

But Steuer says that Punchcard has some advantages over other efforts, as it doesn’t use QR codes, in-store hardware, nor does it require connecting a credit card to your account to use. Having to snap photos of receipts, though, does involve some friction, he admits, but he says the company is working on other solutions that would allow customers to earn rewards in other ways. (More on that later).

Punchcard was founded in Q3 2011, but the mobile apps didn’t officially launch until February 8, 2012. You can try Punchcard on iPhone or Android by downloading it from here.


Barely 3 Months Post-Launch, Loyalty App Punchcard Is Live In 15M Locations, Nears Profitability