Facebook’s Libra Under Heavy Attack in Senate Hearing
- Most senators raised concerns over Facebook’s repeated history of privacy issues and lack of trust by the general public.
- AML and KYC compliance was also central to the hearing, as was the registration of Calibra in Switzerland.
Bill Ready, CEO of Braintree and David Marcus, President of PayPal at the NASDAQ MarketSite in New York City. Business Wire
The U.S. Senate Banking Committee has finished its hearing on Facebook’s Libra cryptocurrency project with David Marcus, head of Facebook’s cryptocurrency wallet Calibra, and here are the key takeaways from it.
As anticipated, the question of trusting Facebook with users’ data, considering their history, came up fairly often throughout the hearing. Marcus repeated on many occasions that the Libra Association will be the governing body of the new digital currency, and not Facebook. Facebook will be just a member of the association and, as all other members, has only one out of hundreds of votes. David Marcus also said in his opening statement that:
“We are fully committed to working with regulators, here and around the world, and Facebook will not offer Libra, the digital currency, until we have fully addressed the regulators’ concerns, and received the appropriate approvals.”
When asked by senator Mike Rounds as to why Facebook chose to set up Libra in Switzerland, Marcus assured the committee that this choice was not made to “evade responsibility or regulatory oversight”. On a similar question from the Committee chair Mike Crapo, Marcus added that they will also register with U.S. regulators, and added that the financial data would be separate on the Calibra Network.
Senator Jon Tester focused on questions regarding fraudulent purchases and loss of funds, and how Libra would make assurances against such events. Marcus responded that the Calibra Wallet will offer consumer protection against fraud, and will support account recovery, and he further added that “we will do our best to resolve those types of issues and claims as quickly as possible”, to which Tester responded with “it is critical that that is resolved before it goes live.”
The question of data portability between different wallets was raised by Sen. Mark Warner, who asked “If a Facebook user wishes to use a wallet other than Calibra, will you make it easy to allow the export of other data?” Marcus answered with a strong “absolutely”, but when the question turned to WhatsApp and Messenger, Marcus said that only the Calibra wallet would be embedded in them.
Another important question, this time asked by senator Catherine Cortez Masto, was regarding money laundering and terrorist financing and how the Libra association would ensure it is guarding against these issues. Marcus pointed out that the Calibra wallet will have an AML program, and that every Calibra account opened will require a gov. issued ID, and that the Libra association will be registered with FinCEN, and will have to comply with AML and KYC requirements.
The next hearing on Facebook’s Libra, this time with the U.S. House Financial Services Committee, is scheduled for tomorrow, July 17. Senators can submit additional questions to David Marcus until July 23.
- Coinbase has informed its customers that it will no longer provide support for Signature Bank’s Signet real-time payments network.
- The crypto exchange is now looking for an alternative payments network provider, while waiting for more clarity on the outcome of Signet.
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- NYDFS took possession of Signature in order to protect the economy and strengthen the confidence in the banking system, and assured customers that all deposits will be returned.
- The price of USDC also started to recover after its issuer, Circle, revealed that all stablecoin reserves held at Silicon Valley Bank (SVB) were safe, and that the company had new banking partners.
- Both crypto exchange Coinbase and stablecoin issuer Paxos have stated that they will no longer accept or initiate U.S. dollar payments through Silvergate Bank.
- The two noted that cash transactions for institutional clients will now be carried out through their other banking partners, and that the move had no impact on pound and euro payments.