- Facebook’s head of blockchain, David Marcus, is slated to address U.S. lawmakers in the House and Senate this week
- Ahead of his testimony, Marcus provided written testimony in an effort to answer some questions surrounding Facebook’s Libra
- Marcus said Libra won’t launch without regulatory approval
Facebook won’t be launching Libra without regulators’ blessings, and there is apparently no grand scheme for the social network giant-issued token to subvert global monetary policy, according to the testimony of David Marcus, head of Facebook’s blockchain efforts. In a written statement to the Senate Banking Committee, Marcus said he expects Libra will incur the most oversight from regulators and central banks in FinTech history.
“I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals,” said Marcus.
These are the first whispers of Facebook’s intentions to comply with the moratorium called for by U.S. legislators. U.S. Representative and House Financial Services Committee Chair Maxine Waters called for a halt in Libra development last month, until lawmakers received sufficient answers to questions surrounding the impending crypto. Hearings in the U.S. House and Senate were soon after scheduled for July 17 and 16, respectively.
Ahead of the Senate hearing tomorrow, Marcus broke down how Facebook views Libra and attempted to assuage concerns of Facebook’s control in the project. In his statement, Marcus distinguished Libra as a payment tool rather than an investment. Some have pointed out that Libra’s structure, which has the coin’s value pegged to a basket of fiat currencies, looks like a mutual fund.
“People will not buy it to hold like they would a stock or a bond, expecting it to pay income or increase in value,” said Marcus. “Instead, Libra is like cash.”
Pegging Libra to a basket of national currencies held in cash bank deposits, short-term government securities and other vehicles is meant to safeguard the stablecoin from fluctuations in any one place, according to Marcus. They are not meant to make Libra into a sovereign currency itself.
“The currencies represented in the Libra Reserve will be subject to their respective government’s monetary policies—policies those governments will continue to control,” he said. “The Libra Association, which will manage the Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena.”
Indeed, Libra’s effects on monetary policy has been a concern uttered from all corners of the world, with financial leaders like Wang Xin, director of the People’s Bank of China research bureau, indicating their worry that Facebook will disrupt the world financial order for the worse. In response, Libra is taking an active stance against the narrative that it could become a competing currency, with Marcus saying the coin’s governance will work with the Federal Reserve and other central banks to ensure Libra won’t affect monetary policy.
Marcus also called for the U.S. to lead innovation in digital currency and payments, saying if the country fails to act, the space could be governed by those with differing values. Despite Marcus’ affinity for the U.S. and assertions that Libra will continue to work with U.S. regulators, Libra’s primary regulator will be the Swiss Financial Markets Supervisory Authority (FINMA), since it’s headquartered in Geneva. However, it also intends to register with FinCEN as a money services business, according to Marcus.
Privacy remains a concern in the conversations surrounding Libra, as Facebook contends with mistrust after events like the Cambridge Analytica scandal. Marcus said public user information will be limited to that of most blockchains, with transactions including only the sender and receiver’s public addresses, the transaction amount and timestamp.
Similar to other blockchains, other financial service providers can build on Libra, which is why Facebook set up its subsidiary, Calibra, according to Marcus. In the same vein, Marcus also sought to dispel privacy concerns related to the subsidiary, saying the value of providing financial services to all rates higher on Facebook’s priorities than turning a profit.
“We do not expect Calibra to make money at the outset, and Calibra customers’ account and financial information will not be shared with Facebook, Inc., and as a result cannot be used for ad targeting,” he said.
The Calibra wallet will comply with FinCEN regulations, according to Marcus, as well as the Office of Foreign Asset Control. In addition to this, the subsidiary has filed for money transmitter licenses on state levels.