US Government Reviews Facebook’s Libra
Congress Reacts to Facebook’s Offering
On July 16th, 2019, the Senate Facebook Committee held a hearing to discuss Facebook’s Libra digital asset. During this hearing, lawmakers raised concerns about Libra, fearing that the currency may attempt to challenge or destabilize the US dollar, as well as questioning Facebook’s decision to base their Libra Association in Switzerland. Libra stands to challenge the status quo in the US banking system with a reach that no other digital assets to date have been able to manage and this disruptive model has been able to gain the attention of lawmakers at an unprecedented level. However, there is a key difference in how the attention’s sentiment has shifted over time. While previous discussions have been rooted in fear and apprehension, lawmakers have now begun to seek greater understanding in not only Libra but digital assets at large.
Facebook’s Appearance at the Meeting
David Marcus of Facebook represented the company at the hearing; Marcus heads Calibra, a new subsidiary of Facebook responsible for maintaining Libra. Marcus opened his statements by making it clear that Calibra intends on being as open and forthright as possible with legislators, stating that “Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.” As Facebook has spent time recently in the Congressional spotlight for other reasons, Marcus’s cautious stance is a wise choice, as he is representing not only Calibra in front of lawmakers, but the digital asset space as a whole.
Marcus went on to outline his vision for Libra, extolling its benefits of “stability, low inflation, wide usability, and fungibility.” He stated that while innovations have created great leaps forward in communication and connection, the ability to send currency has lagged. He made it clear that Libra is fully intended solely for value transfer and is not to be treated like an investment. Furthermore, he stated that Facebook does not want Libra to compete as a sovereign currency. Facebook will also only have one vote among the anticipated 100 members that the Libra Association will have before the offering launches. Clearly, Marcus has noticed many of the criticisms that have been levied by both the press as well as lawmakers. There have been concerns raised that Libra would impact the US dollar or other sovereign currencies, or that Facebook would attempt to use its new positioning as leverage in politics or finance. Marcus is taking great pains to distance the project from such outcomes and ensure Facebook’s reputation remains intact.
How Legislators Responded in the Hearing
A significant portion of lawmakers in the hearing gave Libra a chilly reception. However, much of the criticism was not levied at the merits of Libra itself, but merely at Facebook’s recent scrutiny over subjects not at all related to the subject at hand. Sherrod Brown (D-OH) stated, “Facebook has demonstrated scandal after scandal that it doesn’t deserve our trust,” and went on to reference Facebook’s recent hearings over data privacy. Martha McSally (R-AZ) added, “I don’t trust Facebook’s repeated deceit, and I am not alone.” Bob Menendez (D-NJ) merely brought a list of reasons as to why Facebook should not be trusted as a company. Reviewing the negative feedback from legislators reveals some common themes, though: there is a subset of members of Congress that are merely assuming Facebook is a bad actor simply because of these already-discussed concerns.
On the other hand, legislators that had taken the time to educate themselves on the topic came prepared with constructive questions. Catherine Cortez Masto (D-NV) described it as “innovative” and “exciting” before inquiring how Libra will curtail money laundering. Thom Tillis (R-NC) provided a great deal of constructive feedback on how Libra could monitor and detect when it is being used for illegal or exploitative purposes. Senators that had done prior research on Libra and that were better versed in the technology behind it seemed far more interested and engaged than those that simply relied on Facebook’s reputation alone to make their decision.
Education After the Event
Legislators have taken the initiative to educate themselves on blockchain after the hearing. On July 18th, the third Congressional Blockchain Education Day was held representing over 200 companies from a range of industries that have implemented digital assets into their workflows. The event saw attendance from nearly 120 members of Congress including the chairs of the Congressional Blockchain Caucus.
Representative Tom Emmer (R-MN), co-chair of the caucus remarked, “The Chamber is best to represent the many branches of the blockchain ecosystem…they are the foremost authority of educating Member of Congress like me.” Members of the Chamber were similarly optimistic; Matthew Trudeau, chief strategy officer of ErisX stated, “We were pleased with the depth of discussion and quality of questions we received during the meetings ErisX participated in.” Given the sheer breadth of industries that members of Congress must be aware of to perform their duties, it is understandable that it has taken time for them to become aware of these new developments, and the fact that nearly a fourth of the legislative body took time to learn at this event shows that they are taking this space seriously.
That is not to say, however, that there is not more work to do on this front. There is still some level of unfounded, alarmist rhetoric; Brad Sherman (D-CA) stated that Libra’s rollout could do more damage to the US than 9/11 and reiterated that it could be used for illegal purposes such as drug deals and sanctions evasion. The general tone of lawmakers following the hearing showed that those that are less familiar with digital assets are interested in learning about how they work so they can write better laws instead of merely dropping the regulatory hammer on something they do not fully understand.
Facebook does have challenges to overcome regarding Libra, but after the hearing it seems like it has to do more with their reputation regarding prior events rather than regarding the asset itself. For those Senators that brought forth technical questions, he was able to provide full and complete answers. As far as Facebook’s reputation from prior events, that cannot simply repaired overnight regardless of how many resources are invested. David Marcus’s cautious, pragmatic, considerate approach regarding working with Congress to iron out regulatory concerns and his policy of careful openness regarding Libra’s technical workings will do a great deal of moving them forward in this public relations arena.
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