David Marcus testifies before the US senate committee hearing on the Libra cryptocurrency. Marcus provided a written testimony that outlined the basic features of Libra.
David Marcus, the head of Calibra association that is in-charge of the Libra Cryptocurrency, was called in front of the US Senate Committee on Banking, Housing and Urban Affairs to answer questions of regulation and oversight.
The main contention of the Committee members and other financial advisers in the US government has been that Facebook is not a bank. A bank in any country has to follow a stringent set of rules and regulations. The authorities also have a lot of power when it comes to auditing and checking the functioning of banks.
Facebook, on the other hand, is not a bank. However, with the Libra digital currency it will have similar powers and functions of bank. This has been a cause for alarm in various governments of the world. The most debated point being that Calibra is headquartered in Switzerland. Marcus clarified this decision in a statement in the written testimony –
To be clear, the Libra Associationexpects that it will be licensed, regulated, and subject to supervisory oversight. Because the Association is headquartered in Geneva, it will be supervised by the Swiss Financial Markets Supervisory Authority (FINMA). We have had preliminary discussions with FINMA and expect to engage with them on an appropriate regulatory framework for the Libra Association. The Association also intends to register with FinCEN as a money services business.
In a prepared statement, Marcus outlined the basic problem that Libra is trying to solve and how it will solve it using digital currencies and the Facebook Platform.
The goal for Libra is straightforward: A digital currency built on a secure and stable open-source blockchain, backed by a reserve of real assets, and governed by an independent association. We want to create more access to better, cheaper, and open financial services—no matter who you are, where you live, what you do,or how much you have. We recognize that the road to reaching that goal will be long, and it will not be achieved in isolation. That is why we have begun publicizing the vision for Libra and why we have been discussing, and will continue to discuss how best to achieve that goal with businesses, nonprofit and multilateral organizations, and academic institutions from around the world, as well as with policymakers, central banks, and regulators. We recognize the authority of financial regulators and support their oversight of this project.David Marcus, Head of Calibra Association
Facebook has made it clear that it will not be supporting any competing digital currency payment gateways on its platform. It will, however, provide for inter-operability between different digital wallets. This has been a major concern for governments as they see Facebooks’ dominance becoming a monopoly with Libra.
Watch the Hearing in full where most of the senators speak in angry tones and are voicing general mistrust of Facebook. They highlight the many instances of Facebooks’ disruptive effects on society and government and ask that Facebook should not be allowed to continue with Libra. Some Senators, including the chairman Senator Chapo, posed interesting questions that did not get satisfactory answers.
There will be a follow up hearing with the House of Financial Services Committee today where we may see further discussions on the topic.
In an article by Techcrunch other highlights from the “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations” hearing included Marcus saying:
- The U.S. should “absolutely” lead the world in rule-making for cryptocurrencies
- The Libra Association chose to be headquartered in Switzerland “not to evade any responsibilities of oversight” but since it’s where international financial groups like the Bank for International Settlements, though Calibra will be regulated by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network
- “Yes,” Libra will comply with all U.S. regulations and not launch until the U.S. lawmakers’ concerns have been answered
- “You will not have to trust Facebook” because it’s only one of 28 current and potentially 100 or more Libra Association members and it won’t have special privileges
- “Yes I would” accept compensation from Facebook in the form of Libra as a show of trust in the currency
- It is “not the intention at all” for Calibra to sell or directly monetize user data directly, though if it offered additional financial services in partnership with other financial organizations it would ask consent to use their data specifically for those purposes
- Facebook’s core revenue model around Libra is that more online commerce will lead businesses to spend more on Facebook ads
- When repeatedly asked why Facebook is pushing Libra to happen, Marcus noted that blockchain technology is inevitable and if the U.S. doesn’t lead in building and regulating it, the tech will come from places “out of reach of our national security apparatus,” raising the spectre of China