The head of Facebook’s cryptocurrency project, David Marcus, will testify at a congressional hearing today, July 16. Based on his prepared notes, the hearing will be of great significance for Libra.
Big Day For Libra
David Marcus, the head of Facebook’s Calibra, will appear in front of the Senate Committee on Banking, Housing, and Urban Affairs today, defending the company’s recently-announced cryptocurrency project.
The hearing is titled “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations”. Based on that alone, we can expect the company to be put under fire on the matter of privacy – perhaps justifiably so, given its history in this area.
Though Facebook managed to line up a lot of payments and VC firms to support its project, lawmakers were rather scrutinous and even skeptical from the get-go.
There’s a lot that needs to happen, though, in order for Libra to roll out. Even though Facebook said last month that it was eyeing a launch in 2020, according to David Marcus’ prepared remarks for the hearing, this might not be the case.
I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.
The Main Concerns
Ever since the Libra announcement, regulators have mainly been concerned with data security, money laundering, and consumer protections.
The latest high-ranking governmental official to join this line of fire was Steven Mnuchin, the US Secretary of Treasury. Speaking with reporters, Mnuchin said that he’s not comfortable with where Libra is at currently, especially when it comes to money laundering and other illicit activities:
They’re going to have to convince us of very high standards before they have access to the U.S. financial system. […] These cryptocurrencies have been dominated by illicit activity and speculation.
Similar concerns were recently expressed by the Chairman of the US Federal Reserve, Jerome Powell.
In his prepared testimony, Marcus argues that the Libra Association, which is the Swiss-registered entity that will be responsible for the Libra reserve, plans to register as a money services business with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). As such, it is expected to comply in full with existing anti-money laundering and bank secrecy regulations.
Moreover, Libra is not intended to compete in any way with existing fiat sovereign currencies:
The Libra Association, which will manage the (Libra) Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena[…] Monetary policy is properly the province of central banks.
Since the Libra Association is headquartered in Geneva, Marcus expects the Swiss Federal Data Protection and Information Commissioner to be the project’s privacy regulator.
In any case, it appears that Facebook is taking the path of scrutinous regulation. Interestingly enough, that’s exactly what Cameron and Tyler Winklevoss, former rivals of Mark Zuckerberg, advised.