Lawmakers Pressure Facebook to Pause Libra Development
Facebook is once again on the receiving end of the US lawmakers. This time not because they violated their subscribers’ right to privacy but because of their upcoming crypto coin, Libra.
The US lawmakers on Wednesday tried to pressure Facebook’s top blockchain executive to stop the development of the Libra cryptocurrency until the appropriate legal frameworks for the coin were in place, but David Marcus wouldn't budge.
Marcus, the CEO of Facebook's subsidiary Calibra, only promised that Libra would not launch until regulators’ concerns were fully addressed. Much to the disappointment of the House Financial Services Committee members, Marcus could not agree to commit to freezing technical work on the project.
The committee’s chairwoman, Rep. Maxine Waters (D-Calif) asked if the Facebook executive was willing to commit to a moratorium.
“Will you stop dancing around this question and commit here in this committee … to a moratorium until Congress enacts an appropriate legal framework to ensure that Libra and Calibra do what you claim it will do?”
Marcus, sticking to the same talking point he’s been using for weeks, said, “I agree with you that this needs to be analysed and understood before it can be launched … and this is my commitment to you. We will take the time to get this right.”
Rep Carolyn Maloney (D-N.Y.) raised the same issue Rep. Maxine had raised, and when Marcus started giving the same answer he had given Rep Maxine Waters, Rep Carolyn cut him off.
She said, “I take that as a no.”
Maloney asked if Marcus would consider a small pilot test of Libra before its launch with no more than 1 million users and overseen by the Federal Reserve and the Securities and Exchange Commission (SEC), but he remained diffident.
Marcus said he would commit to working with regulators in which Maloney said, “I don’t think you should launch a new currency at all.”
The lawmakers grilled Marcus on a wide range of topics including money laundering and financial stability, even asking if Libra should be regulated as an exchange-traded fund or a bank.
Rep. Brad Sherman (D.-Calif.), one of crypto’s loudest congressional critics compared Libra to 9/11, suggesting the crypto coin was somehow more dangerous.
While the Democrats were out for blood, the Republicans were less hostile but still concerned. For example, Rep. Sean Duffy (R.-Wis.) first complimented Marcus for Facebook's innovation before asking whether controversial speakers like Milo Yiannopoulos and Louis Farrakhan would be banned from using the coin as Facebook has done in its social network.
Marcus responded by saying, “Personally, I believe we shouldn’t be in the business of telling people what they can do with their money”. He also said that such policies would be up to the governing council of the Libra Association consortium.
Rep. Alexandria Ocasio-Cortez (D-N.Y.) the young social media savvy lawmaker compared Libra with Scrip, asking whether Facebook’s Libra currency would be a digital version of Scrip. Scrip is a type of private money that was once used by corporations to pay employees.
Marcus, a former president of PayPal, said he was not familiar with Scrip.
Ocasio-Cortez also asked about the governance of Libra. She asked Marcus, “Were the members of the association democratically elected? Who picked them?” Marcus said that the membership is open, subject to certain requirements.
Ocasio-Cortez further said, “So we’re discussing a currency governed by private corporations.” And she also asked, “Do you believe the currency is a public good? Do you believe Libra should be a public good?”
Marcus replied to the last question with “it’s not up to me to decide.”
— Financial Svcs Cmte (@FSCDems) July 17, 2019
Libra’s basket of fiat currencies
As the grilling went on Marcus further provided a detailed makeup of the basket of fiat currencies that would back Libra, telling the lawmakers that the reserve will “mainly” be backed by the U.S. dollar. The Facebook executive also said that the basket would be 50 per cent dollars, with euros, British pounds and Japanese yen in the collateral.
Rep. Katie Porter (D-Calif.) asked how different Libra’s collateral would be different from wildcat banking, factoring in the similarities. Marcus said, “A very important difference is the one-to-one reserve.”
Porter then asked if there was any way to stop the Libra Association from swapping out the reserve from 50 per cent USD to 100 Venezuelan Bolivares. And Marcus answered that the Libra Association would be regulated.
Porter asked, “By whom?” Marcus said by an oversight group of the Group of Seven (G7) nations that he’d mentioned was working with.
Expert witnesses weigh in
Expert witnesses also shared their perspectives with the lawmakers with all of them being sceptical of the project. When Rep. Nydia Margarita Velázquez Serrano (D-N.Y.) asked who agreed that Facebook should hold off on launching Libra until all concerns were resolved, all five expert witnesses raised their hands.
Gary Gensler, the former Commodity Futures Trading Commission (CTF) chairman, argued that Libra is a security and as such should be regulated.
Meltem Demirors, CoinShares Chief Strategy Officer, differentiated between Bitcoin and Libra, saying while Bitcoin is decentralised, Libra is “highly centralised.” she said, while Bitcoin is an asset, Libra is backed by other assets, and while anyone can download the Bitcoin software and run a node, the Libra Association is, in the foreseeable future an exclusive club.
“Libra is not a cryptocurrency … I want to distinguish and draw a very clear line.” Meltem Demirors, Coinshares CSO.
Demirors likened Libra to a mutual fund with two classes of shares. This is considering there will be a publicly available Libra currency and a Libra investment token reserved for accredited buyers.
Rep. Warren Davidson (R-Ohio), besides using the word "shitcoin" for the first time in the halls of Congress, asked for the difference between Bitcoin and the low-quality knockoffs in the market.
Demirors explained that Bitcoin can’t easily and quickly be changed by a single party.
"I think he skirted some of the most significant questions," said House Financial Services Chairwoman Maxine Waters about the panel’s hearing with David Marcus, the executive in charge of Facebook’s cryptocurrency and blockchain products https://t.co/u8t1GWbfWL pic.twitter.com/FIURIMPTnu
— Bloomberg TV (@BloombergTV) July 17, 2019
Want to know more? Read this article all about Libra, Facebook's cryptocurrency.
About the author:
Jay Jackson is a blockchain enthusiast and a freelance writer at topcryptowriter.com. He works closely with brands (people, businesses and startups) in the crypto sphere. He currently writes: Blog posts, Guides, Press releases, ICO reviews, eBooks & Whitepapers. You can find him on LinkedIn.
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Last updated: 19/07/2019