The House of the Financial Services Committee held a hearing on “Examining Facebook’s Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System.” today.
The CEO of the Calibra David Marcus, the research professor at Georgetown University Chris Brummer, Columbia Law School professor Katharina Pistor, MIT professor Gary Gensler, and Public Citizen press Robert Weisman answered the questions.
Interrogation with Facebook’s Libra Team
Chairwoman Maxine Walter and the committee member Mr. McHenry expressed their views and questioned David Markus. The questions were mainly related to the main concerns the committee had regarding the project Libra and the concerns were that Facebook is now trying to create a global financial system that is intended to rival the US dollar. And also to expand its reach, Facebook is making new partnerships with Uber, PayPal, Master Card, Lyft, and Spotify.
The venture is based in Switzerland, which has a history of being monetary heaven for shady criminals. There were questions on contacting the Switzerland regulators for the registration of the Libra, but the Switzerland officials denied the fact that Libra contacted them. Mr. McHenry asked Marcus how is Facebook acting to control the money laundering or the financing to terrorism.
To all the concerns, Marcus explained in similar answers that Facebook is working on the issues, and it will not release the cryptocurrency until all the concerns of the regulators were addressed. With this in mind, Marcus said that they had released the white paper first so that they could answer all the concerns.
To address the money laundering issues he said that the user had to create an account in Calibra as well before acquiring and making any transactions as well and to create an account all the required information with government-provided identification proof will be needed, and just a Facebook account will not help. In addressing trust issues, he admitted that Facebook did make some mistakes, but they have worked hard to address all those issues.
Representative Carolyn Maloney also asked similar questions to which Marcus repeated his old answers so Maloney asked him that at least he could do a small pilot test with involving a people not more than 1 million or so which would be monitored by the Federal Reserve and the securities and exchange before the launch of the cryptocurrency fully. To which Marcus again said that he would be working with the regulators before launching.
David Marcus also provided the working of and making details of the cryptocurrency and how would fiat currencies backed the Libra. He informed the committee that the U.S. dollar would back the reserve and it would be fifty percent dollars with euros, British pounds and the Japanese yen that will be included in the collateral.
Conclusion-
At the end of Marcus’s testimony, all the witnesses shared their views and perspectives to the committee. When asked who all thought that Facebook should currently put a pause in launching Libra until the concerns were resolved, all five of the expert witnesses raised their hands.
With so many concerns, it is unclear that when Libra would be launched while the other members of the committee discussed in creating a regulator fo cryptocurrencies using a more comprehensive data privacy legislation to address Libra. With the August recess nearing, it is challenging to address those issues quickly.