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To take away
- Congressional hearings on the Libra Facebook project are likely to focus more on privacy breaches than on unresolved cryptocurrency policy issues.
- Lawmakers will also likely incite David Marcus, leader of the Facebook channel, to choose Switzerland as the seat of the Libra Association.
- Although Facebook is planning to launch Libra next year, scrutiny by Congress and Congress may jeopardize this deadline.
Facebook is about to confront Capitol Hill's music.
At Tuesday and Wednesday's hearings, the social media giant will defend its ambitious cryptocurrency project, Libra, which it revealed in June through a white paper and supporting documents. While Facebook was aligning large funds and venture capital companies to support the project, lawmakers immediately raised doubts, with US Senate banking and financial services committees calling for after his unveiling.
The Senate hearing will be held Tuesday, while the House committee will hold its hearing the next day. David Marcus, the head of Facebook's blockchain, will testify at once. The hearing in the House, at least, will also call other expert witnesses.
The timing of the launch of the Libra may be at stake. Last month, Facebook said it targeted the deployment for 2020, but the question of whether the company will be able to meet this deadline remains to be determined, and not only for reasons of technical development.
For starters, if the Securities and Exchange Commission (SEC) decides that Libra looks like an exchange-traded fund (ETF), Facebook's ability to launch cryptocurrency will depend on regulatory approval.
The Congress could also delay the launch of the Libra: if lawmakers decided to have more control over the project, they could try to write and pass a bill (a bill circulating online suggests that some legislators are already considering this possibility). Even President Donald J. Trump has criticized Libra, which could indicate that he would be ready to sign such a bill.
However, if legislators withdraw satisfied with Marcus' statements, then Facebook will have overcome a major hurdle in its Libra launching process.
Indeed, in his remarks prepared for the hearing before the Senate, published Monday, Marcus said that Facebook would not follow his famous saying of "go fast and break things".
"In fact, I think it will be the widest, most extensive and thorough supervision before the launch by regulators and central banks in FinTech's history," Marcus said. "And I want to be clear: Facebook will not offer Libra digital currency until we fully resolve regulatory issues and obtain the appropriate approvals."
Libra, as stated last month, is designed to be an open-source cryptocurrency that individuals – whether Facebook users or not – can send themselves payments. Those who use Libra will be able to send funds using Facebook, Messenger, WhatsApp or Instagram applications, or third-party portfolios.
The company hopes to be able to provide financial services to unbanked people around the world (although it does not launch in India, the largest market in the world for WhatsApp, where cryptography is extremely limited).
Companies such as Visa, Mastercard, PayPal and Coinbase have all agreed to play the role of launching partners of the Libra Association, the board of governors that will be responsible for overseeing and guiding the technical developments of the project once put into production . However, these partners have signed non-binding agreements and do not appear to have paid the $ 10 million needed to join the association, according to the New York Times.
Facebook's ad announcement was quick, bipartite and extremely public. The Senate Banking and Banking Committee convened a hearing the next day, while members of the House Financial Services Committee repeatedly called for a moratorium on the development of cryptocurrency.
Focus on privacy
Previous letters and comments from these officials provide guidance on what legislators could focus on during the hearings.
The Senate Banking and Banking Committee has been reviewing Libra since at least May, when President Michael Crapo (R.-ID) and senior official Sherrod Brown (D-OH) wrote an open letter to Facebook asking him several questions. questions about the project.
Overall, the letter related to the cryptography project, but many questions focused specifically on collecting financial data from consumers and protecting the privacy of users as part of Facebook's flagship activities.
This month, Crapo also published an article in Fox News, highlighting the importance of data privacy and how legislators could help protect this privacy as a legal right.
Last week, Facebook answered questions from the committee, telling lawmakers that the company would not hold any personal financial data, although its subsidiary Calibra collects all information related to customer knowledge (KYC) and the fight against money laundering of money (AML). Required by law.
Marcus, the editor of the response, also told lawmakers that since Libra's code is open-source software, anyone can create their own portfolio. These third-party developers would be responsible for all data collected by their portfolios, as well as for compliance with applicable laws.
Kristin Smith, head of the Blockchain Association, a lobbying group, told CoinDesk that "given the recent upheavals surrounding Facebook and the change of focus on Big Tech in Washington, it is only natural that Facebook itself gets the majority priorities, rather than the specificities of the Balance project. "
However, she thinks it's "a missed opportunity".
"We … would prefer that this moment be used to answer long-standing questions about American crypto policy, no matter what you think of Facebook's recent history," she said, adding:
"Traditional cryptography companies and Libraries face overlapping regulatory issues, but we believe the latter should be considered by lawmakers as part of a wider public policy discussion in the United States. United".
Indeed, Maxine Waters (D.-CA), President of House Financial Services, and Patrick McHenry (R.-NC), a member of the ranking, questioning the project, also indicated that their concerns were more about Facebook than crypto currency itself.
"With the announcement of the creation of a cryptocurrency, Facebook continues its uncontrolled expansion and extends its reach into users' lives," Waters said last month.
For its part, Brad Sherman, a member of the House of Commons committee, has launched a wildcard to demand a total ban on cryptography activities in the United States and may take the opportunity to criticize the asset class again on Wednesday.
Swiss configuration
Apart from the collection of user data, another apparent cause for alarm appears to be that Facebook has set up a subsidiary in Switzerland, apparently to develop hardware or software, as well as to provide financial and technological services.
Lawmakers seem to believe that Facebook may have created a subsidiary in Switzerland to circumvent US regulations.
Brown tweeted last month "we can not allow Facebook to run unguarded new risky cryptocurrency on a Swiss bank account".
Smith had another interpretation, however. She told CoinDesk that Facebook may have chosen to move to Switzerland because of lack of clarity in US regulations.
"It is no secret that Switzerland is renowned for its jurisdictional nature," she said, adding:
"The general regulatory uncertainty has a dampening effect on US-based companies and investors, which could have played a role in Facebook's decision, regardless of the benefits of Swiss law."
In this context, "it is striking that Facebook has decided not to base this project in the United States," she said.
If the legal and regulatory structure of the United States is not clarified, she hopes other projects could do the same by leaving the country and moving to other jurisdictions.
Companies based in the United States may even consider moving to another country in search of clarity.
"If regulators and lawmakers, who were focused on cryptocurrency risks up to now, instead supported the positive growth potential of the sector, as other countries have done, the United States may be able to lead the growth of this economy for decades. Come on, "said Smith.
But Marcus' prepared remarks suggest he thinks lawmakers think defensively rather than offensive.
For example, he downplayed the potential threat posed by Libra for fiduciary money, reassuring senators:
«Libra association, which will manage the reserve [of assets backing the coin], does not intend to compete with sovereign currencies or enter the arena of monetary policy. He will work with the Federal Reserve and other central banks to ensure that Libra does not compete with sovereign currencies and does not interfere with monetary policy. Monetary policy is rightly central banks. "
David Marcus image via CoinDesk archives
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