The hearings were surprisingly smooth: the senators and the top manager were prepared.
On June 18, Facebook introduced the Libra cryptocurrency and launched Calibra. The project will be integrated into Messenger and WhatsApp, and will allow users to transfer money worldwide. Facebook did not specify when and in which countries the cryptocurrency will be available, but noted that it is managed by a consortium of companies, and its headquarters are in Switzerland.
Against the background of recent privacy scandals, the US government distrusted Facebook’s cryptocurrency. Regulators and individual politicians urged the company not to launch the project until several hearings were held.
The first of these was a meeting in the US Senate Banking Committee, at which the head of Libra, David Marcus, spoke. TJ chose the most important of the conversation.
On the timing of the start and check regulators
Marcus said that the company is not going to run Libra until it receives regulatory approval and the necessary permissions. He noted that in the first place cryptocurrency will be regulated in the Department for Combating Financial Crime of the US Treasury.
Chairman Powell made it clear that the Libra review process should be patient and thorough, not a sprint to implementation. We completely agree. I think that this [study of Libra] will be the widest, most extensive and thorough preliminary supervision by regulators and central banks in the history of financial technology.
head of libra
According to Marcus, Facebook is not going to compete with government currencies. The company does not intend to enter the territory of the monetary policy of the countries.
About owners of cryptocurrency and value for the United States
The head of Libra also reminded that Facebook developed cryptocurrency, but it manages it not alone, but with at least 27 other companies from different industries. According to him, the social network does not have special privileges in such a structure, and in the future there can be about a hundred partners – and everyone will have an equal share. Marcus also explained why the project is important for the United States, as for the country.
I believe that if America does not lead innovation in digital currency and payments, others will. If we fail, soon we will see digital currencies controlled by someone else. Their goals will be completely different and they will not be available for our national security apparatus.
About monetization and work with competitors
The head of Libra said that the company will not monetize user data and use it for advertising targeting. In addition, the cryptocurrency will not charge transfers from payments, and instead will earn on small and medium businesses.
We do not expect Calibra to make money right away, but the wallet will immediately pay off for Facebook in a broader sense. It will allow many of the 90 million small and medium enterprises using Facebook to interact more directly with users. This is likely to bring big advertising revenue for Facebook.
Marcus also said that Libra is an open ecosystem, and developers will be allowed to create their own wallets and services around it. Facebook will not restrict users to use other wallets and banking services. At the same time, the social network will incorporate its wallet into its own products.
About the reasons for placing headquarters in Switzerland
According to Marcus, the company is located in Switzerland not in order to avoid observation and supervision, but vice versa. The head of Libra explained that this way the cryptocurrency will undergo additional checks by international financial institutions.
Since the Libra Association is located in Geneva, it will be checked by the Swiss Financial Market Supervision Authority (FINMA). We have already consulted with the department and are planning to interact with it to create the necessary legal framework.
As noted at TechCrunch, the hearing was consistent and calm. The senators had previously studied the basics of the work of Libra, and Marcus was ready for discussion. At the same time, the head of the cryptocurrency project did not answer a number of serious questions from the senators, and they can be asked again at the next hearing on July 17.
- Marcus did not give a direct answer to the question of whether Facebook will collect data on transactions made on Facebook. In response, he said that the social network would allow paying with credit cards on a par with Calibra;
- The head of Libra did not answer the question about investing in cryptocurrency from Facebook. According to him, while the amount is not determined. Marcus also did not answer the question why Libra considers itself a non-profit organization if it pays interest to its owners;
- The project manager also did not fully explain what happens if terrorists are discovered in the service. Mark replied that Libra would be able to block funds from withdrawing to real money at the request of regulators;
- One of the toughest moments of the hearings was a quote from TechCrunch, which said that Libra’s main risks are irresponsible developers. Then the vice-president of the social network said that the company has no plans to check the developers. Marcus did not say anything in reply;
- One of the senators wondered what would happen if an American becomes the victim of a fraudster from Pakistan who withdraws money through a Spanish wallet. The head of Libra did not answer whether the company would return the money, but noted that he would train users to recognize frauds.