Congress takes on Facebook’s Libra

And so it begins, Facebook’s efforts to convince the world of the efficacy of its Libra currency project. David Marcus, the mastermind behind Libra and head of Facebook’s Calibra wallet, will be on Capitol Hill this morning for two days of hearings. First up, the Senate Banking Committee. Tomorrow, he’ll face the House Financial Services Committee, chaired by Maxine Waters of California, who has called for Facebook to pause the project. 

 I’ve read Marcus’ opening statement and it’s clear there will be no pause, but he pledges that the company will be deliberative and cooperative with regulations as it moves forward.

 There’s little that’s new in the opening statement but it gives a deeper sense of Facebook’s thinking as it prepares to launch Libra next year. Here are a few highlights and some thoughts:

  • As we mark the 50th anniversary of the moon landing this week, I get a sense that Facebook is thinking of its Libra project in a similarly transformative way. As Marcus puts it, their goal is to “help deliver a giant leap forward toward a lower-cost, more accessible, and more connected global financial system.” And if the U.S. doesn’t lead on this, he says, others will.

Security is key

  • Security is on everyone’s mind, perhaps because it could make or break the project. “I expect that this will be the broadest, most extensive, and most careful pre-launch oversight by regulators and central banks in FinTech’s history,” Marcus says. “We know we need to take the time to get this right. And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”

 

  • Facebook has made it clear that it’s going after money transfer companies, initially. “It is too expensive for people around the world to use and transfer their money. We believe Libra can offer a more efficient, low-cost, and secure alternative,” Marcus says.
  • Libra will be managed by the Libra Association, based in Geneva. Marcus promises that all of the association’s decisions“will be made democratically and transparently.”
  •  I’m struck that there hasn’t been much announced traction on the Libra Association. Facebook has said that it expects 100 companies to join at $10 million each. It announced 27 members when it released its white paper a month ago. Despite the avalanche of publicity that followed, Marcus says that the number remains 27. Looks like many companies have adopted a wait-and-see attitude towards the project.

Money Laundering

  •  Those seeking to launder funds might best look elsewhere. Marcus says that the Libra Association will be committed to supporting efforts by regulators, central banks and lawmakers to ensure that Libra contributes to the fight against money laundering, terrorism financing and more.
  •  The Libra Association will not hold any personal data on people who use the blockchain. And,  Marcus says, Calibra wallet will not share consumer data with Facebook – wait for it – “unless people agree to permit such sharing.” The question that many will ask is whether that permission will be easy to find in the fine print of its terms and conditions. 
  •  Finally, what’s in it for Facebook? Marcus offered some insights. Facebook expects the 90 million small- and medium-sized businesses on its platform to use the Calibra wallet, which will result in more users for Facebook. “That increased usage is likely to yield greater advertising revenue for Facebook,” Marcus said. So, although Marcus talks a lot about helping the unbanked and underbanked around the world, it’s apparent that Facebook hopes this move will grow its wallet.

 Don’t know how far Marcus will go beyond his statement. It will be interesting to find out. You can watch the hearing on the committee’s websiteLet me know what you think. Leave a comment below.