The second phase of the Senate Hearing for Libra with David Marcus began with his testimony. The first phase with the Housing, Banking, and Urban Affairs Committee focused on the privacy and security issues of the proposed cryptocurrency by Libra.
Today, the Committee on Financial Services headed the hearing titled, ‘Examining Facebook’s Proposed Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System.’
Their concerns were focused around the nature of the business, their plans, degree of autonomy, and most importantly, its vision in the Financial Service Industry. The Senators were evidently concerned about the challenge that Libra is currently posing to the Federal Reserve. Senator Meeks noted that,
“[it could bring] down the entire Federal Reserve and affect the Financial Services industry”
Maxine Waters, Chairwoman of the Committee, headed the meeting. She began with the fact that even though David emphasizes that Facebook will be one in a hundred members of the association, it is currently leading the Association. She said,
“No money has been invested by other members of the Association”
David Marcus Accepted the fact, however, noted that the code is open source and they will not control the codebase.
Is it an ETF, Commodity, or a Currency?
Senator Foster raised the questions around the volatility and the fact that they need to clear the 1940 act, which is designed to protect rent payers from paying excessive rent on different months. He said, “this looks like an ETF to me.”
David replied by saying,
“No will buy Libra as an investment because of its stability… You cannot use an ETF for payments.”
Similar doubts were raised in the beginning by other regulators as well. David noted that,
“Libra is not a security, not an ETF, maybe a commodity. Designed to be a payment tool.”
Chairwoman Waters noted, “That is not a commitment.”
Congresswoman Moloney was firmly against the idea and noted that currencies and economic stability are issues that must be managed by the Government. He also put a healthy condition over the release. She asked for a recorded commitment for a pilot program to be released on a small scale before the actual launch. She said,
“Creation of a currency is the work of the Government… Will you commit to a small pilot program with 1 million users with the permission of regulators… Are you willing to make that commitment right now?”
Marcus deferred in making any commitment apart from the fact that they will be dedicated in their efforts to impose KYC and AML regulations and complying with the rules.
It seemed like David Marcus has mastered the art of diplomatic replies. He refuses to make any commitment and has also deferred many questions with a strong statement that underlines the following statement,
We will take the time to get this right
“Zuckerberg can’t print money.”
Senator Sherman had the most influential views among all the others as he warned David Marcus and the Libra Association of the ramifications that they would be faced within this project. He said,
“A hundred lawyers will tell him [Mark Zuckerberg] what he is doing is legal and he, therefore, is safe. But someone within the polictic of this country needs to explain to Zuckerberg, that if cryptocurrency is used to finance the next terrific terrorist attack against Americans. A hundred lawyers standing in a row charging $200 an hour are not gonna protect his rear end from the wrath of the American People.”
Furthermore, he firmly asked for Mark Zuckerberg’s attendance before the committee. According to him, in the end, Mark is the sole orchestrator of this plan, and that could make him a higher security risk that he currently posses with privacy issues.
The senators do not feel comfortable with handling the approval to this project given that Facebook’s role in it. However, some of them have praised the initiative and innovative insight. Nevertheless, delay and a lot of regulatory hurdles are projected in the future for the Libra Associations.
The Senators continued to question about Libra and Calibra. Currently, at press time, the meeting is in a recess. Bitcoin price has reacted positively given its decentralized nature.
Bitcoin touched a low around $9000 earlier today. However, it has been on the rise since then. The price of Bitcoin rose from $9577 when the meeting began to touch a high above $9800 momentarily.
Do you think Libra will eventually be given a green signal? Please share your views with us.