Calibra Chief Avoids Committing Facebook to Digital Currency Moratorium
Calibra head David Marcus on Wednesday avoided committing Facebook to a moratorium on its cryptocurrency plans (see 1907150051), despite repeated calls from House Financial Services Committee Democrats at a hearing. Afterward, Chairwoman Maxine Waters, D-Calif., told us Marcus would leave Capitol Hill understanding her committee is serious about blocking the project until concerns are resolved. “We have oversight responsibility, and we’re going to live up to our responsibility,” she said.
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Waters is circulating a draft bill, the Keep Big Tech Out of Finance Act, which would prohibit big tech companies from creating digital currencies or acting as financial institutions. “It’s pretty clear people are saying don’t move ahead on this,” Senate Banking Committee ranking member Sherrod Brown, D-Ohio, told us. “We want to look at [Waters’ bill] and see where it goes.”
Another draft bill, circulating from Sen. Brian Schatz, D-Hawaii, would prohibit reserve-backed digital currencies like Libra, according to a document we obtained. “It is obvious to me that a social media platform that has been screwing up serially over the last many years is not best positioned to execute,” Schatz told reporters Tuesday. “I don’t get why Facebook gets some first mover advantage because they have capital laying around.”
Just because lawmakers don’t understand a proposal doesn’t mean it should die in infancy, said House Financial Services Committee ranking member Patrick McHenry, R-N.C., during Wednesday’s hearing. Entrepreneurs shouldn’t have to ask the government for permission before they even think about innovating, he argued: “But let’s be honest. It’s Facebook.” Like Senate Banking Committee Chairman Mike Crapo, R-Idaho, McHenry said digital currency offerings will evolve regardless of Facebook’s involvement. He asked Waters to hold a hearing on Libra more than a month ago.
Waters’ biggest concern is Libra's potentially competing with the dollar. “I think the dollar is very important, and I just don’t understand why they organized the headquarters in Switzerland. Why Switzerland?” she said. There will be more hearings and more questions on the issue, she told us.
The purpose of organizing a global currency like Libra in Geneva is to have an international base, Marcus told the committee, echoing comments he made before the Senate Banking Committee Tuesday. Libra will compete with other digital financial services like PayPal, he said.
Several Democrats asked Marcus for a moratorium. He wouldn’t explicitly commit but said repeatedly the company won’t offer Libra until all regulatory issues are addressed: “We’ll take the time to get this right.” Rep. Carolyn Maloney, N.Y., one of the Democrats behind the moratorium, asked Marcus for a Libra pilot program limited to 1 million users and subject to Federal Reserve and SEC oversight. Marcus dodged that suggestion, as well. If Facebook won’t commit to such a reasonable request, Congress should seriously consider blocking the project, Maloney said.
Rep. Ann Wagner, R-Mo., questioned the need for Libra’s expected 2020 launch date. She has concerns about Libra overtaking the dollar, as well as foreign adversaries using the digital currency to circumvent U.S. sanctions. Marcus noted Libra won’t be the only digital currency available, but Facebook is at least engaging Congress.
Lawmakers have a “healthy dose of skepticism” for Facebook, said Rep. Nydia Velazquez, D-N.Y. Marcus told Velazquez that Facebook won’t launch the project until all Federal Reserve and regulatory concerns are satisfied. It’s clear the company has made mistakes, and it’s working hard to own and correct those mistakes, he said. Marcus conceded the Libra Association contacted Swiss financial regulators but hasn't contacted regional privacy regulators.