WASHINGTON–Senators grilled a Facebook executive here over its proposed new cryptocurrency, with the company responding by attempting to minimize concerns.
David Marcus, who heads up Facebook’s Libra program, told the Senate Banking Committee the company is not seeking to avoid oversight, and that the United States should lead the world in the development of cryptocurrencies.
Marcus’ testimony comes as CU and bank trade groups, along with the Treasury secretary and President Trump, have all called for caution and regulation before Facebook is allowed to proceed.
Marcus told the committee the company plans to include its Calibra cryptocurrency wallet in its Messenger and Whatsapp solutions, and that it has no plans to embed any competing wallets. He said the plan calls for interoperability with competing wallets to allow for data portability so users can switch to other providers if they want to.
As CUToday.info has reported, Facebook is proposing the Libra Association be headquartered in Switzerland, with Marcus saying it is doing so “not to evade any responsibilities of oversight,” but because the country is home to international financial groups such as the Bank For International Settlements. Marcus said the Calibra/Libra offerings will be regulated by Treasury’s Financial Crimes Enforcement Network (FinCEN).
The Libra Association, he said, has 28 current members and could have as many as 100 or more, but Facebook will be just one member with no special privileges.
When asked during the hearing whether he would accept his own pay from Facebook in the form of Libra as a show of trust in the currency, Marcus said he would.
The bigger risk, suggested Marcus, is to the United States in falling behind. He said the move to blockchain—the technology that underpins cryptocurrencies—is inevitable, and if the U.S. doesn’t lead the way the technology will come from places “out of reach of our national security apparatus.”
Questions from Senators
Senators had plenty of questions for Marcus, including:
- Sen. Mike Crapo (R-ID) had questions regarding an issue of interest to many, privacy, and he asked whether Facebook plans to collect data about transactions made in the Calibra wallet that are made on Facebook. Marcus responded by saying Facebook will still allow users pay with credit cards and other mediums as well as Calibra (which would still allow it to collect some data).
- Sen. Thom Tillis (R-NC) pressed Marcus for how much Facebook has invested/will invest in Libra, but Marcus said that amount has yet to be determined.
- Sen. Bob Mendez (D-NJ) wanted to know if the Libra Association plans to freeze the assets should a terrorist organization be identified as the owner of cryptocurrency. While Marcus said Calibra and other custodial wallets that hold users’ Libra could do that, it appears there is a risk, with one analyst noting “there may be no way for the Libra Association to stop transfers between terrorists’ non-custodial wallets, especially if local governments where those terrorists operate don’t step in.”
- Sen. Kyrsten Sinema (D-AZ) asked about an issue raised in a report by TechCrunch that suggested the real risk from Libra comes from “crooked developers.” Sinema further wanted to know if an Arizonan is scammed out of their Libra by a Pakistani developer via a Thai exchange and a Spanish wallet, how would that U.S. citizen recover lost funds? In response, Marcus said U.S. citizens would likely use American Libra wallets that are subject to protections and that the Libra Association will work to educate users on how to avoid scams.
The House Financial Services Committee will hold a similar hearing today.