David Marcus faced strong criticism from House Financial Services Committee over Libra. The House committee criticized Facebook’s Libra on various grounds. The committee was harsher than the previous committees statements a day earlier.
David Marcus, the head of the Calibra association which governs Facebooks’ Libra currency, faced a barrage of criticism and hyperbole from members of the House Financial Services Committee on Wednesday, 17th July 2019. The committees’ hearing titled “Examining Facebook’s Proposed Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System” was held to review the threats Libra poses as an alternate digital currency to the national security. The US officials have repeatedly pointed out that Facebooks’ Libra could potentially disrupt economies. They also fear that Libra could be used by criminals to make untraceable payments to siphon off money from an economy into a tax haven or other nefarious activities.
The committee opened with a statement from the Chairperson Congresswoman Maxine Waters (D-CA).
“I have serious concerns with Facebook’s plans to create a digital currency and digital wallet and its efforts to enlist partners that expand its reach, like Mastercard, Paypal, Visa, Uber, Lyft, and Spotify. Facebook is apparently trying to create a new global financial system that is intended to rival the U.S. dollar. This venture is slated to be based in Switzerland, which has a history as a monetary haven for criminals and shady corporations. Facebook’s plans raise serious privacy, trading, national security, and monetary policy concerns, not only for Facebook’s over 2 billion users, who will have immediate access to these products, but also for consumers, investors and the global economy. “
David Marcus read a written testimony resembling the testimony of the previous hearing. He outlined the plan of Libra as an international “payments” system that was not hindered by expensive and tedious redtape. In particular, he gave the example of a woman who wished to send money to her mother in another country. The money would take weeks to arrive and a significant portion would be lost to the fees.
Question Round in House committee Facebook Libra
According to a report by CNBC, various members then questioned Marcus on different aspects of Libra.
Patrick McHenry, R-N.C. asked Marcus to define Libra in current financial terms. To the question of whether “Libra is a security, commodity or an exchange-traded fund?” Marcus responded that it could be seen as a commodity.
Rep. Ed Perlmutter, D-Colo., wanted to know if Libra would be a bank or an app. In his words –
“We all have this same question for you and that’s the resistance you’re feeling because we think you’re a bank, but you’re not quite like a bank. And if you’re a bank, we regulate the heck out of you because we’ve seen a lot of people lose money where there hasn’t been regulation. So that’s the resistance that I feel, I want to support your innovation I want to support the efficiency that you people believe you’re bringing to the table. But I also don’t want anybody getting hurt here.”
In response, Marcus said that Facebook would not be providing any banking services and if it did Facebook would be compliant to regulations. He also iterated that Libra is a payments system and not a bank.
The question from Rep. Andy Barr, R-K.Y. was –
“Tell me how Libra will not undermine sovereign currencies and the power of central banks. Or is the point, is the very point, to undermine central bakers and to provide greater freedom away from central banking?”
Marcus’ response to this was –
“I want to be very clear, we do not want to compete with the dollar or with sovereign currencies. This is why they make the reserve. And even in our wildest dreams, never will we come anywhere close [to] the size of any of the currencies that you mentioned.”
“Who picked the founding members of this governance over the currency?”
Alexandria Ocasio-Cortez, Rep., D-N.Y, posed this question to Marcus. Marcus stated that the members were not democratically elected. They were comprised of companies that can help solve problems and make Libra mainstream.
Libra’s Future Development
Velasquez, Chairwoman Maxine Waters, D-Calif., and Rep. Carolyn Maloney, D-N.Y., asked Marcus whether Facebook would be willing to halt all development of Libra until the government had implemented proper regulations.
In response, Marcus gave the same line from the previous hearing.
“I committed to waiting for us to have all the appropriate regulatory approvals and have addressed all concerns before moving forward.”
To which Walters responded, “That’s not a commitment,” and “I take that as a no.”
Read the full report of the House committee Facebook Libra here or watch the proceeding here.