The Libra hearing has been one of the most enticing topics as media houses from all over the world aired the live hearing before the US House Committee on Financial Services. David Marcus, the head of the Libra Association, was grilled for hours on the autonomy of the Libra network and specifically about Facebook’s role in it.
As it happened the day before, at the hearing with the Banking, Housing and Urban Affairs Committee, Facebook’s reputation is setting a bad precedent for the Libra network.
Both the Committees have expressed complete disregard for the Social Media Giant and hence, express dislike for its cryptocurrency endeavor as well. Moreover, the Financial Committee also established that Libra is not a cryptocurrency.
The meeting today also included a second panel of speakers. It included experts from different fields like law, economics, marketing, etc. who chose to speak on the topic. The panelist included cryptocurrency enthusiast. However, even they expressed concerns around Libra.
You can download their testimony here. At the hearing, in contrast to the one with David Marcus, the panelist and the Senators agreed. Not only, they together do not trust Facebook, but also acknowledge that ‘Libra is not a cryptocurrency.’
Libra: Mutual Fund or ETF?
The testimony that the panel presented pleased the Senate as it spoke of similar concerns around Facebook’s cryptocurrency plans. While it is usually difficult to classify these new-age tokens, the board was quick to conclude this. As Mr. Gensler noted, “It is either a mutual fund or an ETF.”
Ms. Demirors went on to say that,
Libra is a private for-profit that benefits large corporations and profit for entities that already have a tremendous amount of power.
Ms. Demirors also noted,
“The SEC has long deliberated over security laws… and recently established Bitcoin is not a security. The CFTC treats Bitcoin and some of the products around Bitcoin as a digital commodity. However, the IRS treats them as property.”
Switzerland – Jurisdictional Hub for Cryptocurrencies – But, Why?
The choice of moving the Libra Association to Switzerland was regulatory and according to the panel, served as an advantage for conducting illicit activities.
Mr. Gensler note,
Under Swiss Law, it’s probably less likely that it’s security than under US law
Ms. Demirors noted,
“Facecook has set up an Association that is supposed to be non-profit and use to it to plow back its profit to its members.”
Mr. Brummer also replied to Senator Sherman on similar lines. He raised concerns around the weakness of the Swiss Financial laws. He said,
“US would not comply… And the biggest challenge lies with those jurisdictions… that are falling outside of international agreements that the once that FATF has recently agreed to in June. Certainly, Swiss rules particularly relating to both privacy and financial not just different but have certainly historically been considerably weaker.”
Moreover, the panel even unanimously seems to agree that eventually, when the thing becomes big, they would not comply with the US sanctions laws as well.
Shitcoins, Token taxonomy and Security Laws
Senator Davidson brought into the attention of the community the necessity of further trimming the Security Laws. The current Howey test does not entirely define the conditions for the new age digital assets.
Nevertheless, the SEC has progressed a coming up with new laws that cater specifically to cryptocurrencies. Moreover, as Mr. Grenseler mentioned that a ‘good lawyer could easily exploit a simple black and white test.’ Hence, they need to be cautious while defining those laws. Furthermore, he also called upon the Senate and the lawmakers to move to escalate the token taxonomy laws.
Trust but Verify, Ronald Regan Style
Mr. Gensler noted earlier in the hearing that all business is based on ‘trust’, and the fact that we cannot trust Facebook is coming in the way of Libra. He also remarked about the Anti-Competition effects that Facebook and the members of the Libra organization can promote using this proposed network. He said,
No other company can do what Facebook can do.
Mr. Weissman then went on to elaborate on how the members will help unfair competition in the global markets that are mostly moving to the internet for conducting businesses. He said,
“If Facebook becomes both the Social media oligopolist or monopolist that it is and a major Financial Service Provider… All of a sudden they can combine financial information with their social media platform. They can advertise to based on what you’re buying. They can go into business and provide goods and services and give you discount in Libra… Unjust competition and Squeezing out any rival who is not part of the system.”
McHenry closed the hearing for the Congress. He reciprocated the doubts around Libra
“Due to the nature of the technology of Bitcoin, Governments cannot kill it, nor should they and you can’t kill digital currencies broadly. They will be enduring, they will be strong. That is the new framework of the next generation of the internet.”
He added, “And in a generation, I hope that there are some statements here today that will still be pointed to as factual incorrect about what we will live through in this iteration of financial technology.”
Chairwoman broke a rule and gave the panelist a round of applause. In her closing speech, she noted that in all likelihood, a private organization or a group of private organizations would not be granted this tremendous amount of power to control the monetary policy. She noted that she would not let ‘billion-dollar boys’ take over the Financial Services industry.
Finally, she adjourned the meeting after the following statement
“And we should get Mr. Zuckerberg himself. I’m with that”
How do you perceive the future of cryptocurrencies from here? Please share your views with us.
Nivesh from Engineering Background is a full-time Crypto Journalist at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com