Transcripts For CSPAN Facebooks David Marcus Testifies Before House Financial Services Hearing... 20240714

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On television and online, cspan is your unfiltered view of government, so you can make up your own mind. Brought to you as a Public Service by your cable or satellite provider. Announcer coming up next, a hearing from the House Financial Services committee on facebooks plan to create a Digital Currency called libra. David marcus, leading the effort, testified before the committee and it said facebook would address the concerns of regulators before launching the currency. Rep. Waters the committee will come to order. Without objection, the chair is authorized to declare recess at any time. This hearing is entitled examining facebooks proposed cryptocurrency and its impact on consumers, investors, and the American Financial system. Facd crypto currency and its impact on consumers, i now recognize myself for five minutes to get an opening statement. Today, we are here for a hearing on facebooks proposed Digital Currency, libra, and digital wallet, and of their impacts on consumers, investors and the Financial System. Our first witness is david marcus, the libra ceo. Digital currency. Digital wallet. Their impacts on consumers investments in the Financial System. David marcus ceo. Following his testimony a faneuil of experts on facebook plans. Serious concerns with the plans. Expanding the reach like mastercard. Huber, lift and spot a five facebook is trying to have a new Global Financial system to rival the u. S. Dollar. This venture is slated to be based in switzerland which has a history of a monetary haven. Facebook plan serious privacy trading. The policy concerns. Not only for facebook over 2 billion users we will have immediate access to these products. Also for consumers, investors in the global economy. In addition, facebook has has proposed with government currencies and government guaranteed securities and holding them for the socalled libra reserve to be governed bys facebook and its partners. I want to shift our government assets on such a massive scale with our proper oversight threatening to concentrate government influence in the hands of a few elites. Ultimately, facebooks plans coming to fruition. The company and the partners will yield immense economic power that could destabilize currency. Currencies and government. Facebook propose entry into the Natural Services is all the more troubling because it has already harmed vast numbers of people on a scale similar to wells fargo and demonstrated the pattern of failing to keep consumer data on a scale similar to equifax. Facebook remains under a 2011 Consent Order from the federal trade commission for deceiving consumers and failing to keep consumer data private. In the wake of the Cambridge Analytic scandal in which facebook provided 50 million users to a political consultant firm, the company will reportedly pay a record fine to the ftc privacy failures. In addition, facebook has allegedly insecure or at least scored use of passwords dating back to 2012. Unsuspected teenagers downloading spyware. Experience the hack of nearly 50 million accounts and experienced a software bug that granted access. 6. 8 million 8 million users photos. Also sued by hud and civil Rights Groups for violations of the Fair Housing Act in what amounts to modern day redlining. Facebook also allowed malicious state actors to purchase and target ads in a campaign to influence the 2016 elections. Also concerned about the lack of diversity in facebooks upper ranks. Fears that if these plans go forward, women and minority and women minority owned businesses may be excluded from participating fully. In light of these and other concerns, my colleagues and i wrote to facebook earlier this month to call up and sees implementation of its plans until regulators and congress can examine the issues associated with the Large Technology Companies Developing a Digital Currency and take action. The independent Community Bankers of america and others, other support this commonsense step. Facebooks plan to also raise larger concerns about big tax expansion into Financial Services as it appears to inappropriately mix commerce and baking act dividends, today we will discuss a draft bill to keep big tech out of finance act which would prevent large platform utilities like facebook from becoming Financial Institutions and block them from creating their own currencies. Todays hearing is only the first step in our oversight and legislative process. I look forward to hearing from our witnesses. The chair recognizes the Ranking Member of the committee, the gentleman from North Carolina for five minutes for an opening statement. We are here to go beyond the headlines. Sift through the speculation and the hearsay. Here is one of my favorite headlines which asks is facebook forming a crypto mafia as Libra Foundation members boost each others businesses. Washington must go beyond the hype and ensure that it is not the place where innovation goes to die. Just because we may not fully understand the new Technology Proposal does not mean we should immediately call for its prohibition. Especially when that proposal is just that. A proposal. Lets face it. Lets be honest. It is facebook. I am skeptical but we can either make you a political talking point or we can choose to conduct thoughtful governmental oversight. That is my hope for this day. Thoughtful government oversight. The reality is whether facebook is involved or not changes here. Digital currencies exist. Technology is real. Facebooks entry into this new world is confirmation. Albeit scale. The world the white paper envisioned and others are building is an unstoppable force. We should not attempt to deter this innovation. Governments cannot stop this innovation. Those that have tried have already failed. The question then becomes, what are american policymakers going to do to meet the challenges. And the opportunities of this new world of innovation. Some politicians want us to live in a permission based society where you need to come to government, ask for its blessing before you can even begin to think about innovating. Those are the politicians who would rather kill it before it grows. But, there are others that believe in the vibrance of american ingenuity. American innovation. Recognizing our economy filled off generations of entrepreneurs and innovators through competition. Through testing. Getting us here today. To be clear, it is not about advocating for a break it and figure it out later approach, but, when it comes to finances, we must ensure the consumers and investors are protected. Mr. Marcus, lets get to work. Lets have that conversation. Lets answer those questions. My republican colleagues and i want to first try and understand and in turn understand what our framework meets the demands of this new technology. That is why we are here today. I dont have a crystal ball. I have known idf itll lead to greater financial conclusion. Having the opportunity and would mean families could send money to each other more cheaply and easily than today or if it is just a ploy to shoot facebook through the roof. We will see. What i do know is this. Republicans stand ready to work with innovators to implement responsible technology here in the United States. Here domestically. I asked my colleagues on both sides of the aisle to join together in supporting ingenuity in the spirit that this nation was founded upon. Im grateful for this hearing. This is a bipartisan approach to oversight. With that i would like to give the balance of my time to mr. Hill. I think the Ranking Member. Critical areas of jurisdiction within our committee. Oversight questions related to the use of an trading of crypto currency. In the intersections of Financial Services and big data. We therefore must ensure we are asking thoughtful questions as we learn about and analyze these rapidly emerging trends. I understand the importance with appropriate regulation and balance to benefit American Consumers. As lawmakers, we all need to ensure that the companies that operate here in america with American Consumers are in full compliance of those laws. America is evolving into a digital era and we need to make sure we are asking the right questions. The last two months and also identifies himself as working for facebook. Prior to this, mr. Marcus explored block chain and served as Vice President for messaging product for facebook. He has also served as president of paypal and other tech companies. Mr. Marcus, without objection, your written statement will be made part of the record. You will have five minutes to summarize your testimony. When you have one minute if remaining, a yellow light will appear. At that time i would ask you to wrap up your testimony so we can be respectful of both the Committee Members time and to others. Mr. Marcus, you are now recognized for five minutes to present your oral testimony. Thank you, chairwoman. Chairwoman waters, Ranking Member mchenry and members of the committee, thank you for the opportunity to appear before you today. My name is david marcus, and im the head of libra at facebook where most of my life ive been a entrepreneur, or Building Products aimed at improving peoples lives. My focus has been in Financial Services. I became paypals president after it acquired my last startup, and i moved to facebook five years ago to run messenger and more recently to lead our block chain efforts. I describe the mechanics of libra. Today i want to explain why im optimistic about what libra can offer the world. Before i get there, i want to make clear we recognize we are only at the beginning of this journey. Fed chair powell has said we need to be patient and thorough. Secretary mnuchin reinforced those views at his recent press conference. We strongly agree with both of them. We will take the time to get this right. We expect a review of libra to be among the most extensive ever. We are fully committed to working with regulators here and around the world. Chairwoman waters, speaking on behalf of facebook, i pledged to you i pledge to you that facebook will not offer the libra Digital Currency until we have fully addressed regulators concerns and received appropriate approvals. Id like to start by sharing the vision for libra. Libra is intended to address an important problem. Imagine a daughter who wants to send money home to her mom in another country. Of the 200 she sends, 14 on average will be lost because of fees. It can also take several dayses or even a week for the mother to receive the money, a delay that can prove disastrous in an emergency. Not to mention lines may be long, and collection points may be in highcrime areas. But it doesnt have to be that way. Wouldnt it be easier and safer if people could securely and inexpensively receive money transfers through their smartphones just like they do for so many other things today . Thats what libra is about, developing a safe, secure and low cost way for people to efficiently move money around the world. To realize libras promise, facebook and 27 other organizations have founded the independent Libra Association. These include companies in the payments, technology, telecommunications, block chain and Venture Capital industries and nonprofits like womens world banking who is here today along with staff from the Libra Association. The Libra Association will govern the libra block Chain Network and administer the libra reserve. It will establish the rules of the road and will prioritize privacy and consumer protection, and it will implement safeguards that require Service Providers in the Libra Network to fight Money Laundering, Terrorism Financing and other financial crimes. We expect these safeguards will at least meet, if not exceed, existing standards and improve the integrity of the Global Financial system. When fully formed, we expect the Libra Association to include 100 diverse members. Facebook will only have one vote and will not be in a position to control the association. Nor will facebook or the Libra Association position themselves to interfere with monetary policy. In fact, the association will work with the Federal Reserve and other Central Banks to minimize the risk of any competition with their currencies or interference with their monetary policy. These are areas properly the province of Central Banks. Finally, i would like to turn to facebooks role in razeeing the potential realizing the potential of libra. To facilitate use, facebook has established a subsidiary that will offer one of many ding wallets. Consumers will be able to save, spend and send libra right from their smartphones. If this is successful, facebook will benefit from more commerce across the family that it operates. Calibra will be affordable, accessibling and also safe and secure with strong safeguards to protect users accounts and information. We expect that the calibra wallet will be governed by rules administered or enforced by the ftc, also regulated by state financial regulators. Calibra is committed to protecting the privacy of its customers, will not share individual customer day data wih the Libra Association or even with facebook except in limited circumstances such as complying with the law. Im excited about the potential that libra and calibra hold, and i am proud that we have initiated this effort here in the United States. I believe that if america doesnt lead i novation in Digital Currency and payments, others will. If our country fails to act, we could soon see a Digital Currency controlled by others whose values are dramatically are different from ours. I believe that libra can direct positive change for many people and provide an opportunity for leadership consistent with our shared values. I look forward to answering your questions. Thank you. I recognize myself for five minutes for questions. Mr. Marcus, facebooks 2. 7 billion users entrust you with their most intimate thoughts, pictures, feelings, ideas and sensitive information. Yet at every opportunity to demonstrate growth, competence and and responsibility, facebook has let are us down. Let us down. As i already noted, facebook has a long list of scandals including its repeated failures to safeguard its users data. You said that we dont need to trust facebook because it will only be one of 100 members in the Libra Association that will manage this product. This project. But thats not entirely true, is it . The project was facebooks idea. Facebook is spearheading it and recruiting partners. Facebook subsidiary, calibra, will provide consumers with a digital wallet to store libra tokens. As i understand it, no member of the association has paid anything towards the project. So my question is, why should we trust facebook to do these activities . Thank you, chairwoman. I think trust is really essential, and its clear weve made mistakes. I believe were owning these mistakes and working hard in remedying them and working hard at improving on all fronts. But as far as the Libra Association is concerned and the way that this project has been developed, we have invested everything that has been invested so far in libra, youre absolutely right, and we have built all of the code base of technology up to this point. But we have also given, donated if you will, the technology, because its now open source for the whole world to be able to use and leverage. As a result, we are not controlling the code base. And by the time we launch, we will be one of a hundred members with no special privilege. As far as the wallet is concerned, i believe that the idea here often is that one day we will launch and suddenly two billion people will arrive on the calibra wallet. This is not the approach were taking. People will have to open specific calibra accounts so theyre not going to be able to use their facebook account. They have to open new accounts. And in order for them to do that, they will have to upload a governmentissued id to identify so that we can meet our kyc requirements. Thank you. Mr. Marcus, i can appreciate that you understand that there is a trust problem here given its disregard for u. S. Law and its massive scale, i think Foreign Countries could find it difficult to effectively regulate facebook, libra or calibra. It isnt clear the Federal Reserve or other u. S. Regulators have the authority to regulate you. And yesterday the swiss regulators that youre saying would regulate you actually said that it has never been contacted by facebook about this project. So, mr. Marcus, you responded to a request by members of this committee for a moratorium on your activities by with stating that you would continue to work with regulators before going forward. But if the regulators lack the authority to adequately oversee you, how can you work with them to resolve concerns . Will you stop kind of dancing around this question and commit here in this committee before the duly elected representatives of the American People to a moratorium until Congress Enacts an appropriate Legal Framework to insure that libra and calibra do what you claim it is intended to do, which is to serve the public good . Let me just say that we are all in support of innovation. Its not one side of the aisle versus another side of the aisle. But if you talk to any member on this committee, they will know nothing about libra, they will know nothing about calibra, they will know nothing about how it is organized, they will know nothing about the role that facebook is going to play in this Big Association that now has 28 companies and looking to get 100 companies. And so despite the fact that we all support innovation and we all understand what is important for our economy to grow and for development and for the future of this country, we need to be on top of and understand something as massive as this project. And that does not say we dont support innovation. With that, i will turn to the gentleman well, if he has time to answer. Please, go right ahead. Chairwoman, i agree with you that this needs to be analyzed, understood and the proper oversight needs to be set up before libra can launch. And this is in this spirit that we released a white paper very early before any launch so that we could have the time to engage with all of the proper regulators and Central Banks and lawmakers to insure that we will get this right. And this is my commitment to you, chairwoman, we will take the time to get this right. Thank you very much. The gentleman from North Carolina, Ranking Member mr. Mchenry, is recognized for five minutes. Mr. Marcus, ive read your white paper. I understand the nature of Digital Currency and digital technology. What is a libra . Congressman, libras a Digital Currency, a reservebacked Digital Currency. Is that a security . We dont believe it is, congressman. Is it a commodity . Congressman, based on current u. S. Law, i believe it might be a commodity, but we see it as a payment tool. Is it an exchangetraded fund . It is not, congressman. Okay. So when you say that so its none of the above if any pure form. Like other digital currencies, correct . Congressman, it is designed to be a payment tool. A payment tool. Okay. So if its none of the above in our current regulatory structure, what im really getting at is how do you comply with regulations . Congressman, the way that we comply with regulations is in a number of ways. First, as far as the calibra wallet is concerned, its registered as a Money Services business with treasury and with fincen, it will operate the same way other wallets operate as far as thats calibra. Im asking about libra. As far as the Libra Association is concerned, these are active conversations were having, notably with the working group of the g7 as well as finma which is the swiss financial regulator. Okay. So theres tension between the notion of a decentralized currency or something decentralized and, ultimately, privacy. And ultimately, antiMoney Laundering and know your customer elements. These things stand in conflict with one another and very difficult things to resolve. In your white paper you say after five years therell be a transition point, and you will go from a permissionedbase to a permissionless system. How do you reconcile the need for controls which allow you to comply with antiMoney Laundering and kyc, know your customer regulations with that decentralized notion of a fully decentralized Digital Currency . Its a very good question, congressman, and the way that this will work is that the association will still have the ability to set the rules when it comes to any if Money Laundering programs, kyc requirements for the network. And what we expect even when the Network Transitions to permissionless without getting lost in the weeds is that the vast majority of validaters will likely be the ones providing services or likely Larger Companies so youre saying in the nature of the wallet, thats how you get to any Money Laundering know your customer, not in the nature of the Digital Currency. So going from permissioned system with these to a permissionless system, youre saying its not going to be in the nature of that technology of a libra, youll be in the nature of the wallets on either side of this . That is correct, congressman, but on top of that the Libra Association will continue to have an email program and will still be under the purview of fincen. In complying with fincen, is your view that youre going to be like western union, or is it your view youre more like your former employer, paypal . Congressman, i believe that the it depends about the entity youre talking about as far as the wallets are concerned. It will definitely be more like the paypal types of businesses that operate in the payments space. And as far as the Libra Association is concerned, that is the conversation were having because so is in your view, for you to be a competitor to alipay and we pay . Congressman, yes and to be a competitor of venmo and paypal . Yes. We have a number of wallets that are working with us on the network site but that will compete on the wallet side on the network. Will that consumer data be kept separate or a part of the calibra Data Collected from consumers . Will that be a part of facebooks overall knowledge of consumers, or will it be separate and distinct . This. No, congressman, we will make strong commitment to keep that data separated from social data. Separate and distinct. Yes. Final question here. So if youre seeking to be a competitor to alipay and to we chat, why are you doing this in switzerland, and why are you using a basket of currencies . Why not the good old american dollar and to bring down the transaction costs which, seemingly, is the ultimate goal here . Congressman, first, i want to say that the choice of switzerland has nothing to do about evading responsibilities or oversight. The goal with switzerland is to hone this Libra Association in an International Place that is okay, lets get beyond that. And so thats really why. The second thing is for the same reason we would like for libra to be a digital global currency, and as a result, to be one unit of Digital Currency for the whole world, and this is why we believe it was the right approach. Thank you. The gentlewoman from new york, mrs. Maloney, who is also the chair for the subcommittee on investor protection, entrepreneurship and capital a markets, is recognized for five minutes. Thank you. Mr. Marcus, as you can see, there are a lot of questions about this project. Its big and very bold. Some would say its too bold. The chairman of the Federal Reserve, jay powell, was in here just last week saying that he thinks it could be a Systemic Risk. The former chairman of the cftc is going to testify later that he believes it should be covered by the Investment Company act. Is so we have a lot of concerns and a lot of questions. And i take it that its a no to chairwomans question about requesting a moratorium on libra until policymakers can figure out how to handle it . Was that a yes or no to her question . When she called for a moratorium . Congresswoman, the commitment is that we will not launch until we have addressed all concerns fully and have i tabling that as a no. I take that as a no. Okay. So what i want to ask you, will you commit right here in this hearing room to walk before you run . Will you commit to doing a small Pilot Program for libra First Limited to no more than one million users and overseen by the Federal Reserve and the sec . Will you commit to that . Congresswoman, thats steps we have taken. And this is the reason why we announced the white paper and the plan. Instead of launch canning and then figuring it out afterwards which is what happens sometimes with Technology Products most often, actually. In this very case, we are deliberate about taking the time to get this right but thats seriously, with all due respect, thats not what i asked you. And given the lack of trust of people have in facebook, you breached the trust of users over and over again. Just last week you were reportedly fined 5 billion for selling your users private data without their knowledge or permission. So i would like to ask you again, will you commit to walking before you run . Because if you go ahead and launch libra without doing a Pilot Program first, there are too many risks. The libra reserve could be managing too much money, which could make it systemic. Too much money could be pulled out of banks in order to buy libra which former finishing dic chair fdic chair sheila bair has warned about and written about. So the risks are very great. Now, personally this is only my own personal belief i dont think you should launch libra at all, because the creation of a new currency is a core government function. And should be left to democratic canicallyaccountable institutions democraticallyaccountable institutions that are accountable to the American People. But at the very least, you should agree to do this small Pilot Program first fully overseen by you and the Federal Reserve and the sec. I think thats a mod request. So will you modest request. So will you commit right now to doing a small Pilot Program first, yes or no . Congresswoman, we will continue to engage with regulators and the working group at the g7 that is notably looking after the issues that you raised to insure that however we launch this, it is responsibly and it is with the appropriate oversight and in a very responsible way. You have my commitment on that. Well, if you will not commit to testing this out as a Pilot Program first, i think its a reasonable request, then i think that congress should seriously consider stopping this project from moving forward. Now, theres a lot of concern about facebook a lot of people think that its really become too powerful, that its become a monopoly. And now youre telling us that facebooks digital wallet for libra called calibra will be the only wallet that can be embedded into whats app and Facebook Messenger. Given how dominant these two two apps are, i think that raises serious concerns about market concentration and potentially monopoly concerns. So will you commit to allowing third Party Wallets on whats app and Facebook Messenger . Congresswoman, may i answer the one point about what you said earlier . I just want to address it really quick which is that the Current System is really not working for people. And for way too many people, and others are leading and plowing ahead. And i believe please, sir, would you answer my question . I get to ask the questions in this, in this committee. And will you commit to allowing a third party wallet on whats app and Facebook Messenger . Yes or no . Its a simple question. Yes or no. Other wallets are actually going to be interoperable with the calibra wallets which will be integrated so do you believe in competition and Market Access . If you believed in it, then you would allow them to be embedded also, third parties. The gentleladys time has expired, thank you. The gentlewoman from missouri, ms. Wagner, is recognized for five minutes. Thank you, madam chairwoman. Im concerned that a 2020 launch date demonstrates deep insensitivities around how libra could impact u. S. National security, the Global Financial system, the pryce of people across privacy of people across the globe, criminal activity and International Human rights. Mr. Marcus, i have a number of questions, so im going to try and move as expeditiously as possible. Are you taking any steps to insure that the dollar is not overtaken as the leading International Currency that undergirds Global Economic stability . Yes, congresswoman. And the first of many steps is that the dollar is most likely going to be the predominant part of the reserve 68 , generally speaking. I dont know what your numbers are in terms of well, congresswoman, first, the dollar will be one of the predominant currencies backing libra. And then the other part is really the engagement that we currently have with the g7 working group, with the fed and with the Financial Stability board. Wellnt continue to engage in those conversations i serve also as the vice Ranking Member of the House Foreign Affairs committee, and im hoping to understand how the government could effectively implement sanctions if libra were to take off. As you likely know, name uses cryptocurrencies to evaded our sanctions all the time. If the Treasury Department demand canned the Libra Association blacklist certain addresses in order to comply with u. S. Sanctions, how would libra respond . Congresswoman, i want to make a strong point because its really important. Whether libra launches or doesnt launch, there will be other networks. There are other cryptocurrencies, and those are not coming here youre not suggesting its okay if others face sanctions its okay if libra does . I am absolutely not saying that, congresswoman. Thats why we are engaging with fincen. The Libra Association will be also registered with fincen, and we will have strong kc programs as well and full enforcement of sanctions and then some. Libra could have significant geopolitical implications. Frankly, from a human rights perspective, for instance, despotic leaders could ban libra and penalize users. How are you approaching establishing appropriate human rights safeguards as you develop the libra platform . Congresswoman, i believe that one of, that the driving forces of the association being Financial Inclusion, we will have the right representatives around the table which specific organizations . Because your folks sure couldnt answer that to us yesterday when i asked. Which ones are you specifically working with to address potential human rights impacts . So we have mercy corps, women worlds banking and k irk va that are already kiev v. A. That are already founding members of the Libra Association, and there will be more organizations that have dedicated all of their lives and energy into addressing the very problem im curious to understand how you think the libra platform would interact with section 230 of the Communications Decency act which prevents state can and local Law Enforcement from protecting citizens from illicit, illicit activities . For instance, if libra is expolice setly being used to further a criminal act negotiated on facebooks messenger . Congresswoman, section 230, as i understand it, is relating to Facebook Technology product, and we have the protections of section 230. I dont believe that this applies to payments. Criminals use facebook to fundraise, recruit and connect with buyers. Facebooks moderation just does not seem up to task, and libra could make it, i believe, even easier for these nefarious actors to move money. Before launching libra and potentially compounding the situation, uhuh how will you how will you be addressing the digital back markets that run rampant on the facebook platform . Congresswoman, the first way is insuring that on the calibra wallet everyone who opens an account has to identify with a governmentissued id, and as a result we will have strong identity and a fullstaff thed team to address my time has expired. I yield a back to chair. I have other questions i will submit for the record. Thank you. Thank you. The gentlewoman from new york, ms. Velazquez, is recognized for five minutes. Thank you, madam chair. M mr. Marcus, we do not want to stifle innovation, but we do have a healthy dose of skepticism. So this is not income value. You cannot work out problems as you grow. So all those programs need to be reconciled before you launch libra. So for the third time on this side, i posed the question to you will you commit yourself to not launch libra before all the concerns from the Federal Reserve and all the regulators are addressed . Yes or no . Absolutely. Yes or no . Absolutely, congresswoman. Okay. And i want to reiterate this commitment that this was the spirit in which we announced early, and we will okay, okay. I just want a yes or no answer. Thank you. So, mr. Marcus, we gave the Federal Reserve increased oversight over nonbanks. We do not yet know what you are. If you were designated, will you submit to enhanced oversight . Congresswoman, i dont believe that but you dont know what you are, so congresswoman, the Libra Association or calibra have no plans in engaging in banking activities and and, you know, as far as the calibra wallet is concerned, we will be active in the payment someplace if like many other nonbanks. We, of course, comply with all regulations. Is. So we want to make sure that companies that did not fall into the normal bucket of Regulatory Authority could not threaten the u. S. Financial system. So i would like to ask you according to the Libra Associations white paper, members of the Libra Association will consist of geographicallydistributed and diverse businesses. Not for profit, a Multilateral Organization and academic institutions. Third, by what cry tier were the initial members of the criteria chosen. Thank you for your question, congresswoman. The way that the official members joined was as the result of a wide outreach. And its a combination of companies that can shirt the acceptance and utility of libra Like Companies like imer, lyft and spotify. That can inform how to drive Financial Inclusion like mercy corps, civa and womens world banking. And now we are starting at the Libra Association, starting that that phase of welcoming more members that will be okay. Okay, i hear you. You want to get to 100, right . That is correct. Yes. So if a member were to determine that they do not, they no longer wish to participate in the association, what is the process for withdrawal . Congresswoman, at this stage were in the process, all of us the 28 organizations about ratifying the charter. And as a result so you dont know yet. As a result of this process, if members do not wish to participate, they can drop, and there will be a process on an ongoing basis for members who do not wish to participate. So do you think a members withdrawal could threaten the value of the libra can currency . No, i dont believe thats the case, from congresswoman. According to the Libra Associations white paper, the Libra Association has a target launch further first half of 2020. When you expect the charter to be finalized, and will the charter be able for view, lawmakers and the public. Absolutely, congresswoman. According to this question was asked before, so i will yield back. The balance of my time. Thank you. Point of clarify caig, mr. Underpar cuts, did you commit to moratorium . Chairwoman excuse me, i just need a yes or no. Congress chairwoman, i just wan to be precise. I committed the waiting for us to have all the appropriate Regulatory Approvals and have addressed all concerns. Thank you very much. Thank you very much. Thats not a commitment. I wanted to clarify that. The gentleman from arkansas, mr. Hill, is recognized for five minutes. Thank thank the chairwoman. Mr. Marcus, thank you for being here. I wanted to talk about what a appears to be a core business element for libra, that is the issue of remit tapses. The World Bank Says its the single most important challenge in remittances a around the world, lack of transsanta and i and cost. Transparency and cost. So tell me what fees youll be charging for moving money inside the calibra system. Congressman, the goal for calibra is to charge very little or nothing at all for persontoperson transactions. Were hoping that we can offer that part of the service for free. And then, therefore, on b to b or b to c be charging something finish. There will likely in libra currency. This will be small agencies that will be very competitive with the fees paid by merchants. Anded inside the calibra no, congressman. The revenue streams, when we start working on that which we havent at all, and if we dont balloon to for a couple of years will will be with Financial Services and banks. So in those remittances which are so important to countries all over the world, we know what percentage of gdp remittances represent particularly in central and north america, mexico, for example, 20 in honduras. Both sides of that to decision would be subject to kcc . Yes, congressman, you will not be able to open an account without having proper ky one of the issues in the real world is they dont have a available currently. I think i i read a note that 94 puns representing 48 of the worlds population, 16 president world gdp experience 10 or more percent of inladies and gentlemen every year. The do not allow their consumers to take action outside their home currency. They do not allow their home currency to be taken out of the country. How does libra plan on handling that . Lots of countries have the problems you highlighted and do not have currency controls we think we can address right away. For other countries, it will definitely be a country by country approach. The one thing i want to highlight is the fact any wallet built on top of the Libra Network will be interoperable with one another, meaning to provide the value we intend to provide for so many people, we dont need to be the only wallet. In certain regions, it will be other wallets that would still benefit from interoperability. I thought that was an interesting conversation with our friend from new york about the exclusivity of the calibra wallet and whatsapp, for example. You have 100 members that are not interested in facebook having any more of a monopoly than they do now. Debit,ou have visa, Credit Systems available as a wallet . We will have a number of other Payment Methods on the facebook platform and instagram as well, including debit, credit cards, other wallets. As far as p2p payments, there will be more. There will be competition on p2p payments, even on facebooks application . There will be on traditional currencies, the same way in messenger you can currently use debit cards. Yield back. The gentle than from new york who is also the chair the gentleman from new york who is also the chair on the committee for Financial Institutions is recognized for five minutes. Mr. Marcus, thank you for your testimony. That say with confidence lehman brothers, bear stearns, and the entire subprime mortgage ecosystem did not set out to bring the Global Financial system to its knees. I can say with confidence the Brilliant Minds and nobel prize did notbehind ltcm set out to trigger the financial crisis. I can also say with confidence the deregulation of the early that bankers did not set out to trigger the savingsandloan crisis, but it did. That, they all typically founded their logic and innovation, expanding is access to Financial Services and arguments of inclusion. And yet they all broke the system. And the people at the bottom of the socioeconomic ladder systemically paid the heaviest price. So you may be speaking earnestly when you tell us the lofty goals, but i was here in congress when secretary paulson came to us and told us we were within days of a complete shutdown of the Global Financial system. I dont expect you to understand what that was like, but i assure you it was absolutely terrifying and one of my worst moments in congress. And i want america to remain a Global Leader in Financial Services innovation, and i believe that we have regulators that are the best in the world. But lets do this, lets assume that facebook manages to get even just 10 of its current users, user base to Facebook Libra wallet. Do you understand that would absolutely make you a systemically risky financial institution, and that would and that we would expect fsoc to designate you as such . And the fed to create a special Regulatory Oversight program for facebook accordingly . Would you agree to this . Congressman, first of all, i want to recommit, we will actually yes or no, would you agree to this . I do want to share that if we had 10 ive only got a small amount of time. I want to answer your question to best of my ability, congressman. And if we have 10 of our user base which is 200 Million People using the calibra wallet, we would be the same size of many other nonbank wallets around the world including here in the u. S. , including another one that is let me reclaim my time. Youre not answering my question. Let me ask you this, do you agree that defined simply an organization that holds deposits and makes loans is a bank . Similarly, banks in the past did issue their own currency or ious and cleared their payments . Finally, some banks are run as nonprofit organizations or cooperatives. Therefore, they are both therefore, are both facebook and Libra Organizations manning to establish planning to establish Bank Holding Companies with full organization and capital structure we require to protect the Global Financial system from risk . We will not engage in banking services. We will focus on payments. Well, youre taking peoples money and holding their money, right . The same way that you have venmo and paypal and square cash and a number of other payment so what youre telling me is youre not going to organize as a bank, you didnt answer my first question which would put you under the regulation of fsoc and others so that we could make sure theres no Systemic Risk here because of what youre doing and your size that could bring down the entire federal government, the entire Financial Services industry. Let me ask you one more. In doddfrank we established the cfpb to serve as the financial regulator focused specifically on the best interests of consumers. Do you believe that the cfpb currently has authority over both the Libra Organization and the Facebook Libra wallet . And why did you not conclude well, do you think the cfpb has jurisdiction . Were engaged in conversation with the cfpb, and this is not for me to decide who has appropriate oversight. So why didnt you include, did not include compliance with cfpb in your prepared testimony . Congressman, this is because were currently engaged with all of these agencies, and i wanted to share where we were right now at this point in time with the knowledge we have at this time. But we will have a more complete outreach by the time we are ready for launch because were going to take the time to get this right. Clarification. I understand that youre absolutely opposed to fsoc oversight and that you dont think they should be allowed to designate you as a sifi, is that right . Chairwoman, im not opposed to any regulation, and we have had conversations with fsoc. Thank you very much. Thank you. Well move on to the next person. The gentleman from missouri, mr. Luetkemeyer, is recognized for five minutes. Thank you, madam chair. Over here, mr. Marcus. Thank you. You know, you mentioned a while ago, you said that the Current System is not working. And i, that concerns me because i think the Current System is working. Its not working as efficiently maybe as youd like to see that it works, but i think, you know, the system right now works because its kind of like Traffic Control. You know, if youre on a country road and you have five cars going through an intersection, you dont need Traffic Control, and you can go wherever you want to do, and it doesnt cost you time to go through an intersection. If youve got an intersection thats got 30,000 cars a day, you need Traffic Control to protect people, for safety purposes as to be able to transact their ability to go through that thing in an efficient way. And i think, you know, youre talking about the size and scope of money transactions and, yeah, it costs a little bit of money right now to be able to transfer money around the world, but thats because of safety and security concerns as well as the mechanisms that are in place to be able to do that. I think what youre trying to do is take away some of those costs, but were concerned about the safety and transactional transparent transparency of whats going on high school. Er youd like to improve it, i think thats what you meant to say. Is that right . Congressman, first, i really believe that the system is not working for way too many people right now, and i dont believe that the reason that people who earn less, who have less pay more is because of the regulations and having kyc and aml. I believe we can do that at a much lower cost. Okay, what youre trying what you just said though is you agree the system is working, its just not working as efficiently as youd like to see it. Well, i sent that. Something i accept that. A while ago you said you want to offer more Financial Services as you go down the road, and just a minute ago you answered you want to offer no banking services. So which one is it . Are you going to have deposits down the road that you pay interest on . Are you going to take deposits it all . Are you going to have lending to customers . What kind of banking or Financial Services are you intending to grow into . Congressman, its too early, but if we are to engage in those services, we will partner with existing banks and Financial Institutions the same way that other Payment Companies have done it. And talking here exclusively about the calibra wallet with, and i think i need to be precise here. Okay. With regards to specific as assets that youre going to hold in the reserve, who puts the money in, who puts the assets in to begin with . Who owns those assets . What do you do with any dividends or interest or any returns on those investments that you make . Who shares in those profits . Congressman, the way the reserve is built is if consumers buy into libra, the fiat money they use to buy libra ends up in the reserve and is actually custodied with large banks or potentially a better form of custody even depending on the outcome of some, of the conversations were having with the g7 working group and the recommendations that they will come with. And so the reserve is always proportional through the number of libra coins in circulation. And if the are reserve generates a return, it will be used for two things; number one, to pay for the association and the operation of the whole Libra Network and, number two, to return some of the investments back to original investors and backers of the system that will put a lot of resources to get it off the ground. One of the things that as we look at this, you know, if i have a business and im trying to sell, you know, a thousand widgets to some company in france and i want to use the libra system to be able to facilitate this, i want to get them with this transaction, i have income off that, and so i have to report that to irs. So is there a cost to change back from the libra to dollars so that i then can explain to irs the kind of transaction and the kind of, you know, money i earned off this transaction . Is there a fee for doing that when you transfer it back from libras to dollars . Congressman, there will be probably small fees because there will be agents is and exchanges that will be involved in the process of converting fiat into libra and back to fiat. But from an irs and tax standpoint, as far as the calibra wallet is concerned we will have the proper tools built into the product so that people can report their tax. My time is up. Thank you. The gentleman from georgia, mr. Scott, is recognized for five minutes. Yes, mr. Marcus, over here in this direction. This way. [laughter] all right. Now, ive listened very intently to your testimony and to the response of several of my colleagues questions here, ms. Waters, mr. Mchenry, and you keep mentioning your white paper as a defense to answer to their questions. But i want to call your attention to fact that neither your white paper nor your subsequent facebook posts offered any concrete details as to how you plan to implement or enforce strong antiMoney Laundering, how you plan to enforce know your customer protections, and most importantly to insure. Thats what all of us are concerned about, the safety of our Financial System. So right now tell us what specifically dont say the white paper what are you going to do . What do you see as the responsibilities of libra to combat antiMoney Laundering, to protect our Financial System . Could you tell us right now . Yes, congressman. Two parts to that answer. First, at the Libra Association itself, Libra Association will be based in switzerland but will still rebellinger is with fincen and as a result will have an email program and will have guidelines for all the members to enforce the right kyc, aml standards. As far as the calibra wallet is concerned, for every account opened, we will insure everyone kycs appropriately, and well have very strong email programs. Okay, what about this, mr. Marcus . Currently, the full responsibility to file suspicious activity reports are on our banks or other Money Service businesses which Law Enforcement uses to investigate and prosecute criminals. And in your july post, you spoke only after the ability of the ability for these Law Enforcement and regulators to conduct their own analysis of off the chain activities. So do you feel that this represents a shift away from libras own responsibility to monitor and enforce antiMoney Laundering or can customer protections . No, congressman. The reason i wrote this is that that the approach that libra is taking is using a block chain, and block chain gives additional visibility to Law Enforcement and regulators compared to Current System to conduct their own investigations instead of solely depending on banks or regulated entities selfreporting. But that doesnt mean that we on the calibra wallet side and all of the other members operating on top of this network will not have very strong programs and will not file suspicious activity reports. All right. So, now, youre marketing this currency as a new entity to Financial Services. And with that will surely come new and innovative methods of committing financial crimes. What you bring is new, criminals out there are going to invent ways to deal with it. So let me ask you what are you anticipating as some of the new ways that criminals may attempt to export and exploit libra for illicit use . And how are you combating to do this . I mean, youre planning something new, but you also got to have the ability to be able to not take a look down the road, but able to look around corners to see what that criminal has in store for us. What say you . I couldnt agree more with you, congressman, and i believe that we can improve on the Current System because we have a chance this time around to think through the way that the network is designed, the way that the on and offramps are properly regulated with proper kyc controls, the proper way to monitor activity and report it with new technologies, and i think that this system might be potentially better on these fronts. Thank you, mr. Marcus. The gentleman from michigan, mr. Huizenga, is recognized for five minutes. Thank you, madam chair, and there is so much and so little time. Im going to try to go through and get to some new territory. I was not planning on doing this, but you had used the term fiat currency a couple of times, and i thought i knew what that meant, and it seemed a little odd that you were using it in the way that you were. And so i went to wikipedia. Fiat money is currency without intrinsic value. Fiat money has value only because the government maintains it values or parties exchange to agree on its value. Wikipedia might need to up grades its definition because when you see people are using cryptocurrencies with no backing, and i am curious why you feel the need to have a reserve. Because it strikes me as youre using a fiat currency to create a fiat currency and to have a reserve of that. You would fit perfectly into washington with the yes and no. As one of the me goals to get them involved of the financial space. Oftentimes, they are notbecause they have a distrust of Financial Institutions. Does not take much time to find wellpublicized issues of trust with a number of Companies Involved in calibra. I am not sure exactly how you will address this. Let me get back to the regulatory implications of this. Indications implications. I was the chair was on the capital subcommittee and as we have been looking at these Crypto Assets, crypto currencies, and as the Ranking Member has asked, is its security and Exchange Trade prospect, what is this, fish or foul and its more of a platypus to me, evolves into different parts, and im curious, are you able to actually maintain the core in essence of a crypto currency and asset if youre under all this regulation. We have we can, congressman, because we believe that in order for any form of Digital Currency and Payment System to reach would you like to see all of the other Crypto Assets and crip toy currencies under the exact same regulation or trying to carve out a new product. Congressman issue cant speak for other Crypto Assets. Sortly muss have some thoughts on that because if youre going thats not working for them, otherwise why be coming and asking for this Regulatory Burden . We believe this is a digital current si. If you compare it to other digital current South Carolina crypto currency it serves a different purpose, this payment tool and when it reaches so many people we belief that appropriate regulation . Oversight is required. As we had a confab up here and my friend said you might be the equivalent of americans and travelers checks. Of days of old. I dont think of it that way, congressman. Okay. For the lower dyas and the staff they were paper and you carried them with you. [laughter] bought them at a back. Put in a fiat currency towards it. All right. The chair started you 1 2 not been in contact with the swiss. Is that true or not true . You said you have. We have been the touch with finm, the other agency is a private agency we have not reached tout but finma we have had engagement with. The gentleman from colorado, is recognized for five minutes. Thank you, madam chair. Im going to take if where we just live off, just to help me understand the deal. So, i have five dollars. I go and i buy one toke of lieb token of lee bra for five bachs hamp do you do with that. the five dollars you would use to buy libra would end up being in the reserve and so in the current contemplated basket, it would mean that two and a half dollars will be in the reserve and another two and a half of your dollars will be in a basket of euro, pound, yen, and because the reserve is oneforone, your libra unit of value will always be backed by the same value in the reserve at all tame all time. That reserve in a bank in a cloud, where . That reserve is custody of with very large global bank that provide custodial services to a number of companies, but this is something that were also in discussions with g7 working group tone sure theres proper Regulatory Oversight how the reserve is managed and custoddedded well. You have this medium, currency of some sort, called libra and now its half here, half limit want to use it. I want to buy something in paraguay. If i were using dollars would cost me four bucks. Die then good to co libra and colibra is like my credit card and it wires fourfifths of a token of lieb where to paraguay . Congressman, you would any any pallet, colibra being one of them to transfer the money you want to transfor the other country and it would work the same way you use in the payment apps in the u. S. , like vein mow or pay pal. Its a wiring system except im using libra. Colibra is a wiring system. Its just vinmo, i vinmo my daughter 20 bucks. Its wired and over. Could have gone to bank and they could have wired it to her but i use vinmo. Very similar to your experience on vinmo. I that whack were struggling with is what are you . Youre a medium, youre an enter mideast area, youre facilitating financial transactions, and i isnt as if we havent had problems with that in the history of the world. You have a Money Changer in the process, turning my buck into a libra to a euro. So thats biblical. Youve got i mean, the transaction is something we have had from the beginning of time. But its a faster kind of wiring and more immediate transaction. Am i mistaken in that . No congressman, also much, much lower cost for the people who end up needing it the most. I appreciate that. But for us, we have seen banks fail. We had the old saying, whats good for gm is good for america. And they had to go through a chapter 11. Back in the recession. I dont think that will happen to facebook or whoever is backing this whole process, but its possible. Its certainly possible. And so our responsibility is to your depositors or people that buy tokens or use your credit card system. Were trying to figure out what kinds of regulations i think youre getting good questions because we have the same question for you and thats the resistance youre feeling, because we think youre a bank but youre not quite like a bank and if youre a bank, we regulate the heck out of you because we have seen a lot of people lose money where there hasnt been regulations. So thats the resistance i feel. Want to support your innovation and support the efficiency you people believe youre bringing to the table but i also dont want anybody getting hurt. We are align en. We dont want anybody hurt and we want proper oversight and thats why we have announces plans early and were here and engaging with the regulatory buddies here in the u. S. And around the world to make sure we have the right Regulatory Framework and oversight and address all the concerns raised today, yesterday, and raise i by the chairman ands. Thank you for your testimony. The gentleman from wisconsin, some duffy. Thank you, madam chair, mr. Macmash markus, this is brill nantz. Innovative, creative, and to come from facebook and leverage a network is pretty amazing. Was shocked how bright it was. Who gets to use colibra and libra . Anyone that can open a colibra account, goes through kyc in countries where we can operate. This is a 20 bill. Who can use a 20 bill. Yes, congressman. Who can better question, who cant use a 20 bill. The answer to your question is anyone host everybody can use a 2. This 20 bill doesnt discriminate on anything. You can be a murderer, say horrible things, say great things. This 20 bill can be used by every Single Person that possesses it with regard to your network. Can milo or Louis Farrakhan use libra . I bring that up because those two individuals have been banned from facebook. Congressman, first, i want to say that are simple question. Give me we only have five minutes. You have to answer a question so we can vet what you want to do. I know but we must be thoughtful so im trying to respond appropriately. I want to stress that platform that enables you to communicate and share ideas, while facebook, we believe, i is a platform that accepts ideas across the political spectrum, it has to protect from hate speech and others. I dont have can milo use that . Milo use can Louis Farrakhan use this system . Been banned from facebook. Can theyite yes or no. Congressman yes or no. I dont know yet. If im a gun dealer who i can use the 20 bill because if its a lawful gun, that happens all across america. On facebook, you dont allow gun sales so can a gun dealer, who is abiding by american law, can they use your system . So this is a question that is really important to get right, congressman, and we havent written the policy yet. Thats what concerns me. I love this but when we say we at facebook will set the social policies who can use this cryptocurrency in a way we get to set the social policy of who is in and who is out and whats is great is everybody gets to use it, and what i fear is, marsh in a roundabout way what is happening in china with the social scoring, and you can get a loan or an apartment and access the train. Maybe facebook is doing the same thing here where if you meet our social standards, which a lot of people here dont necessarily agree with your social standards though wey your platform, thats the way to access the network so we have to conform our behavior to the standard of facebook to get on the network and the right answer would be, listen, everybody, youre abiding by the law, has access to this system. Congressman, personally i believe we shouldnt be in the business of telling what people can do, deciding what people can do with the money but that being said, this is an important question and we need to be thoughtful. Youll get some major pushback when we look at your network and you say who is on and who is off and youre the judge and jury, for this system. I think youre going to see a lot of pushback from both sides. Go ahead. This is why i believe we need to be very thoughtful about this and my commitment im going behave like the fiat currency. The thoughtful answer if you abide by the law, you have access. Thats the thoughtful answer and you havent given me and i am concerned about the data privacy and how to use the data. We have had concerns about the data use on facebook. What we post on facebook and who were friends with is one thing. Howl we spend our money is really powerful information, and you have access to that, too. And id like to dig deeper withyou on that point and also the freedom and lisch that comes liberty that comes from the 20 you should offer the same freedom and liberty on your network. Kudos on the innovation, i yield back. Thank you. The gentleman from connecticut, mr. Himes, recognized for five minutes. Thank you for being here, its been one of the more interesting hearings he last congress i had the honor of chairing chairing the new Democrat Coalition of 104 democrats and we get excited bit innovation but thats app doesnt measure your heartbeat, this is a complete overhaul of the global economy. So a lot of the concern youre hearing here i think is just round its shocking ambition and i want to ask you a specific question and take you there a speck scenario that gets at a larger concern i have and so folk at home can follow along, lets imagine im an american user of ebola and my rent is of libra and my rent is a thousand dollars a month and lets say its a thousand libra a month. Now, because lieb where is backed by basket of currency, lets say sterling devalues dramatically in two weeks. I think i will fine in the next month, my rent in libra will be, lets just pick a number 1100 libra, but still a thousand dollars a month. So, you know what im getting at. Users will have the profoundly unfamiliar experience of assuming foreign currency risk. Am i correct in that . Congressman, yes there will be fluctuations but the way that were intending to design the reserve, again in consultation with the g7 working group of finance ministries and Central Banks, is going to be in such a way that we have looked historically at the volatility that the dollar would have had in the last 20 years compared to libra, with the proposed basket, and if you look at the fact that half of the basket is dollars, it should be a fairly stable. That being said wait. Wait. I got it. You acknowledge that consumers everywhere, users of lieb where will for the first time if they have been previously been using their domestic current si, they will experience foreign currency risk. They will have some degree of volatility. Right. So my question i think thats an important point for people to understand and im not saying thats good or bad but traditionally, the regulatory apparatus here has said if youre going to assume an unfamiliar risk, that risk will be disclosed to you with full transparency. And the mechanism we have used to disclose that kind of risk is through public filings and disclosure. You said this is not an Exchange Traded fund. Im a former banker. Looks to he me exactly like an Exchange Trade fund backed by a shortterm instruments and foreign currency. It has a creation and remittances mechanism. So elaborate for me why this is not an Exchange Trade fund and if theres any ambiguity, what i really am getting at here is you if in fact the regulators determined its an etf. You need to clear the registration hurdled. Thats designed to protect the rent pair who discovers their rent went up for reasons they dont understand. Tell me why this not an Exchange Traded fund. Three points why we believe its not. Despite the fact youre right that users operational mechanisms are similar we believe is it not because lieb where is a payment tool, and typically if the question youre asking is whether wait. I need to stop you there the sec doesnt say if youre a payment tool, youre not an Exchange Trade fun. The sec says if you have security backed by a by other securities, youre an Exchange Traded fund and you may quibble youre not a security but youre backed by other securities. Is that not correct . Congressman, manly currency but i want to answer your question. First no hundred we believe that no one will buy libra asen investment because its designed for taliban, number one. Number two when you look at the definition of the securities or how we test has been used by the sec, it actually uses the idea that you invest for a profit that will nut the management of the product and this product is not a product, its a payment troll, not going to be actively managed and you cannot use an etf for payments. This is designed as a payment tool to enable people to retain lets come back to my original question. How will you make transparent what you acknowledged is foreign currency risk that consumers will face . How do you envision dog that. As far as the colibra wallet is concern, youll have transparency and education built into the product. Thank you. My time has expired. Thank you, madam chair. The gentleman from ohio recognized for five minutes. Thank you, madam chair and welcome, mmarcus. He we all want to encourage innovation and i appreciate your innovation and really do want to encourage innovation. Just like to kind of walk through a timeline so we know where we are in the innovation process here. Correct me if im wrong or just ask a couple of yes or no questions. 60 days ago you announced the idea, correct . Congressman it was on june 18th. That was the who it paper was june 18th but iing to in may you nothing in pay . So peer 30 days from the white paper so this is a really early congressional hearing. Just want to and with that ill understand that you wont have the answer to every question. I do appreciate your commitment to be willing to ensure that you meet all the regulatory hurdles and comply with the law. The value i see in this innovation is for crossborder payments because that is so expensive today, and second, for the unbanked and you talk about those domestically, but can you just tell us what is in it for somebody domestically that already has a bank account. There is isnt looking for crossborder payments indont see a big application for those folks. Im glad you asked because i doubt that people will pay their rents with libra anytime soon to just relate the question earlier. The general use case that we believe will happen in the u. S. When you have a bank account and youre possibly banked, of you want to send money abroad you will connect your debit card with a wallet, buy the right amount of libra to make the crossborder transaction and save a lot in the process, but if money comes back youll redeposit it back to your bank account. You dont expect people to be holding libra because the wept is is to have a stable currency, not a volatile currency. 60 to the worlds population lives a country that does not have a stable currency. Have something concerneds about the potential of money lawnerring, cryptocurrencies and the silk rod started as a way to anonymously finance Illicit Activity or is one of the early things that was used for. So, im corned but crossborder payments that then are going to people that have sort of bad intent and im curious, will you put a limit on the amount of any individual transaction . I know its early. I recognize the timeline of where we are, but do you expect to put a limit hon how much something can transfer in libra to someone else. Well continue our engagement with treasury on this top and my expectation there will limits depending wrong the money is sent or coming from. My hope is that between two consumers of american regulated wallets, like coebola and others, that will have proper kyc and aml can avoid having artificial limits but we will probably need limits across the network to ensure those activity im not asking you to put artificial limits. Just curious. Want to make sure you comply with knowing your custom and antimoylan at thing because thats complying with the law you said youd do. We will, congressman. You expect to have the Libra Association vote to exclude Companies Like chickfila or anybody else that might have social views you disagree with . Congressman, this is actually not going to be my decision or facebooks decision. Its going to have to be a decision that is going to be taken by the Council Members of he Libra Association and the Libra Association itself. I recognize that. Urge you not to use this for social engineering but use it to meet the intent we talk about of helping the unbanked and helping people withcrosser border payments. I hope thats thats person and not just social engineering ump i appreciate your time. A lot of unanswered questions. I may send some in writing. I appreciate the innovation and your time and i look forward to working with you as you work to make sure you physical follow every law and regulation. It will be a challenge because youll be dealing with 200 countries regulations. Thank you. The gentleman from california is recognized for five minutes. Madam cheer we need to get Mark Zuckerberg here. This is the biggest thing or tries to be the biggest thing this committee will deal with this decade and while we have one of his employees here, this zuckerbergs program. Were told by some that innovation is always good. The most innovative thing that happened this century is when Osama Bin Laden came up with the idea of flying two airplanes into towers. Thats the most consequential innovation. Although this may do more to endanger america than even that. People call this the libra. Its not the libra, theyre going to cull azuck buck. This is zuckerbergs baby. Gave me two promises yesterday both he knows they wont my with. All the know your customer and antiMoney Laundering will be adhered to and that applies only to colibra wallet and hopes to have other wales crests by others. As to bitcoin, 36 presidency of the transportation satisfactions are for illegal bit coyne has will be. Theres no offramp no way to by something with a bitcoin. You can eventually with a zuck buck, and finally, the white paper put out by facebook says, the libra protocol does not link accounts to real world identity. A user is free to create multiple constant biz generating multiple key pairs. So this is a god send to drug dealers and sanctions evaders and tax evade hes. Zuckerberg has millions but doesnt have the authority to print nor until he gets this. We went nor u. S. Dollar, went from the u. S. Dollar being linked to gold and only printed a number of dollars equal to gold we had to the dollar becoming valuable and now we can print how many doors we present has nothing to do with how much gold we have inner to. Mr. Mark cuss prompt mills i had to never dot and then testify heres the Libra Association will make the decisions and facebook wont be the control. So so much for the promises. Americas power cams from the dollar more than they power of our military. It lowers the Interest Rates in the United States by at least a thousand dollars a family. The senior rich has allowed the fed to transfer 100 billions in some years, often less to the treasury. Our sanctions in iran which i worked on for over 20 years are effective only because of the power of the dollar and were able to go after human traffickers, drug dealers and taxpayers because of the power or the dollar. Were told theyre going to solve two problem. This with, wont solve the problem. Transborder transmission. Lets do that in dollars or send you have a multi billion dollar carr, trillion dollar company, help people make those transmissions also low fees but use dollars or the local currency. Then were told theyre going to deal with the unbanked. I they wanted to hundred the unbanked the wouldnt being a cryptocurrency because cryptocurrency are illegal in india, this the place where we have more unbanked than issue in else. Than would solve problems such as zuckerberg cant print money yet, and problem number two, zuckerberg is unattack because attack because the invades the privacy of ordinary americans and sells to its highest bidder. He needs to be an advocate for privacy and is creating a device chill will provide privacy so drug dealers, human trammingers and tax evaders. We need zuckerberg here because we need to tell hem he probably has the dollars and will throw joined tens of millions of dollars in washington and his supporters will call zuck bucks in u. S. Dollars. 100 lawyers will tell him what he is doing is legal and therefore his safe but some with the understand offering the politics needs to explain to him if cryptocurrency is used finance the next horrific terrorist attack against americans, 100 lawyerses standing in a row, charging 2,000 an hour are not going to protect her rear end from the rag of the American People. This is an attempt to transfer enormous power from america to facebook and a number of its allies. Im surprised we need zuckerberg here. The gentleman from kentucky, mr. Barr is recognized for five minutes. Thank you, madam chairwoman. I think given the commentary we have heard today and the very pointed questions directed your way i think were discovering why a decision has been made to locate in switzerland as oposed to the used. I want to address some of the concerns raised today and ask you about them. I think there are some legitimate questions we can ask but does seem like in washington, whenever the private sector produces some kind of innovation or New Discovery or new advancement, politicians and bureaucrats rush to criticize and wreck late and theres always a presumption that the private sector innovating is a bad thing. I think should presume that innovation goods and provides Financial Inclusion, reducing friction in transactions and the opportunities created by the innovation is laudible, to be commended. Thats not to say we shouldnt ask questions but the presumption in this hearing room today seems to be in the wrong place. Let me ask you about the possibilities, the opportunities this presents. Particularly with respect to Financial Inclusion. What percentage of users on facebook are unbanked or unbank ped the United States . Congressman i dont have the answer for facebook specifically but i know that over 8 million household friday the u. S. Are why dont you know how many facebook is often criticized for invading the privacy of americans. Why doesnt facebook know exactly how many of its 2. 6 billion users are unbanked or underbanked. Because theres no way for us to know that information. Okay. Do you have any idea how many users of Facebook Live and Rural America or socalled bank deserts . I dont have the exact number, congressman, but i can fine out and follow up with your office. Well, if you know or dont know, we thats wayd like to know that. How libra promote greater Financial Inclusion in the United States. Congressman, we believe that having the ability to access digital money, where you can safeguard the val you want to safeguard and moe importantly transact with the people you want to transact for free, with just a 40 smartphone and a basic dat plan is something that would enhance the ability for people, even here in this despite the fact we believe this is not going to be the main market for libra, it will solve a lot of problems for people in the u. S. , notably the very people who are unbanked and send money abroad, home, which makes for the bulk of the income of their families back at home. I wont ask you a question but i will just jump on to the point that mr. Duffy was making earlier. I think the opportunity for Financial Inclusion with project ebola is enormous and very possessive. I share mr. Duffys concern but what that inclusion actually means and the extent that facebook other social Media Enterprises have been criticized for political bias, thats fortunate earn the credibility of the American People that this marx this financial platform, be viewed and earned the confidence as a neutral player so that the adoption can serve all and really serve that ultimate purpose of Financial Inclusion. Final question and this is relates to the testimony you delivered that this project will not compete with Central Banks or interfere with monetary policy. We havent heard from the chairman of the fed, where as bitcoin or other Digital Currency endeavors do not present a challenge for central backs, that this could because of facebooks 2. 7, 2. 8 billion users and 1. 6 billion daily youerses that has the potential for Widespread Adoption big enough to potentially dismace the u. S. Dollar as the worlds reserve currency and therefore interfere with central banking tours and interfere with monetary policy. Tell me how like bra will not undermine sovereign currency or is the point to undermine central bankers and to provide a greater freedom away from central banking . Congress mon i want to be very clear with do not want to compete with the dollar or sovereign currencies. This is why they make the reserve, and even in our while this dream never will we come anywhere close from the size of any of the current sis you mentioned, but we will make sure to work with the fed with the Financial Stability board and with the g7 working group etch sure that the proper the gentlemans time has expired. Thank you. The gentleman from illinois, mr. Foster is recognized for five minutes. Thank you, madam chair, id like to thank you for over here. I guess the cochair of the congressional block chain caucus is perhaps the only block chain programmer and a. I. Programmer in the u. S. Congress. Thank you for having a residenter detailed individual briefings with me on this and there are couple of thing is was promised during the briefings my staff tells me have not didnt delivered. One us when we got into a detailed discussion how you would prevent this from being used as ransom ware . Are you pred to give that answer . If not id like to drill down how anonymous these transactions in libra would be. Ransomware is a really important issue and the way were think about it as far as the colibra wallet is concern im interested in libra. Libra, which is, as i understand it, an anonymous bearer strumpf is that correct. Congressman exnot not anonymous. Host is selfcustody allowed in libra. Yes, within limits and as a result, we believe that especially countries like the u. S. And others, you will have all the wallets that will have im not worried about wallets. Im worried but abusive selfcustody. If i own the code for libra toy own the libra full stop or not. Yes, you do jew. If i go on the dark web and try to trade that do you have any way to stop me anonymously. Yes because there are on and off ramps ramps and theyre proy kyc. All of them yes. Once a large fraction of libra will be transentered so into self confidence and then games to be a significant flaw between entities. How do you prevent that from actually allowing things like ransomware. Again, very important problem, and the way that were tracking, the way that the association will enable tools so that Law Enforcement and the different wallets can understand where the movements are happening to prevent those issues, going to be one way well address this. Were going to have to be absolutely dependent on the fact that every single wallet is in a regulatory regal we trust. Irtheres one neal some islands or Something Like this that doesnt follow u. S. Are we just out of luck there and all of the elicit transactions will flow through there. No, congressman. If youre a u. S. Resident and want to use the wallet, the wallet willed in to be properly regulated in u. S. All rightment we have to have an ongoing discussion. Id like to mention sign per security and one of the many jobs of fkos is to overform Cyber Security. You have scene fit to make a new programming language from here and i spend a little while looking over that. Theres some creative stuff. Some are copying other things, some brand new. Even if itself had zero creativity it there would still be a problem that one incredible line could crash the entire system and the governance of that language and every all the truck i minute you will be distributing runtime execute alls and things like that. So all of that has too be bulletproof Cyber Security and i wonder how youll deal with the governance of that. Congressman work ways. We agree with you that this is an absolute importance, and the way were dealing with that is that the louvre language that youre referencing will have formal varves in place to avoid issues to the extend there are no compiler bugs. Yes, but we the compiler will not execute the code. If the coat is not formally verified and we have the chance of having david dill, who is a professor from stanford helping us. The other thing want to say is the score, will have guidelines what thirdparty code can be published or and not at the very early statements it will be very limited to a set of templates that will avoid the issued youre raising. It will be an ongoing target because if libra is taken to scale it witness be a fat target for cyber attacks, indrugs, insertion of Insider Threats and this is something that in terms of overall Financial Stability, as crucial as anything else. I yield back. The committee stands in reassess for a fiveminute break. Conversation] [inaudible conversations] the gentleman from colorado, mr. Tipton is recognize for five minutes. Thank you, madam chair. Mr. Marcus, thank you for being here. Fascinating conversation and a lot of the questions going on are expressing concerns, not for innovation but just in terms of what were going to be seeing come out the end once the process is completed. Did have one question because there does seem to be some confusion and you didnt actually clarify in terms of exactly what were talking about with lieb where in terms of being a security and etf. Youve said possibly a commodity that could be there. Along those lines, when youre looking at your association, Libra Association, you have visa, mastercard. Are you doing any active recruitment, talking to any other Financial Institutions to be able to be on the association . Congressman, the Association Membership is actually open as long as members meet criteria that that has been published. That could be subject to change and in control of the Libra Association but we expect that there will be a number of Financial Institutions, including banks, joining its ranks. Will that have continued monitoring was you bring in Association Members to make sure the bad actors dont get into the association . Yes, congressman. One thing that we have had a fair amount of conversation on is knowing your customer. The ability to be able to identify who those people are and wanted to be able to follow up on that in term odd the commitment youre seeing coming out of colibra. We passed and signed into law last year the mobile act to be able to open up a bank accountive your drivers license but followed with a commit. From the banks that information would be eliminated once the account was opened. Wasnt going to be retained. Are you making the same type of commitment . Congressman, the general desire as far as colibra wallet is concerned, is to only retain the data for as long as it actually is required to operate the service, not any longer. So if the government issued i. D. That is captured is not of any use notably for protection we well commit to the same rule. I think its important because not to parse on words but when you sea desire, to its something we would like to see a commitment to in terms of the policies youre going to put in to protect privacy, because i think its been spoken here several times there are real concerns over facebook and issues with privacy right now. You have talk but also wanting to be able to reach out to the underserved. Talk about overseas payments but we have actual banking deserts within the United States right now. One of the key components is to be able to have highspeed internet access. My home state of colorado, 14 of the population which does not have access to highspeed internet. Do you have any plans to be able to do outreach to build out some of those networks to be able to provide the access youd like to see for underserved markets. Congressman, not as part of the colieb where effort per se. That being said, facebook has invested and continues to invest in thing provide access around the world but as far as the colibra wallet is concerned we are focused on the population that currently has smartphones and a basic data plan. One question from our constituents concerns some of our Community Banks. Theyre saying they have some worries that libra, colieb practice, the Libra Association, represents a point of competition or two traditional Financial Institutions and the Payment Systems as the overlap on the Core Functions between your proposal and the kind of products that your proposal could lead to in the regulated institutions. Tuoyo believe that colieb where, and Libra Foundation association should be subject to some of the same regulations on the banking side as are Financial Institutions are . Congressman, first i want to recognize the role that Community Banks play. Its absolutely essential and i hope they can participate in services on top of the lieb where network as well. And as far as banking regulation, ifey ever enter into providing banking services, which right now were not considering, then, yes, we need to have proper banking regulations that as its contemplated right now as far at colibra wallet is concerned well focus on payment. Thank you, i yield back, madam chair. Thank you. The gentle woman from ohio, who is also the chair for the subcommittee on diversity and inclusion is recognized for five minutes. Thank you, madam chairwoman and thank you mr. Marcus for being here today am great segway for me with my colleagues talking about the underand unbanked. You have heard a lot today and we have tried to gather a lot of information, whether it was Cyber Security, governance, antitrust, investment, ownership, and now the unand underbanked. As you heard i am the chair of the diversity and inclusion subcommittee. So, when i hear underand unbanked, traditionally that goes a lot of people who have challenges economically. I have pulled and gone through your white paper, and as i look at that, it wasnt very unique in your problems statement to me when you were citing 1. 7 billion adults globally remain outside of the Financial System and that libra will connect the world to them in a unified financial ecosystem. I think thats a lot of words but when i think about the underand unbanked, here is the question that i want to ask you. I want to focus on one of the reasons that i read that libra gives us for why we need global currency and that is to address the millions of unbanked and under banked people in the world. Despite this claim some response to a question at yesterdays at some Banking Committee hearing from senator brown you stated lee lee bra is not designed to compete with Bank Accounts and you said in response to senator ken that libra will not engage in banking. Can you tell me how libra banked and unbanked and underbanked how you will work with them its at not mean the to compete with Banking Conditions and youre not engaging in banking. Id glad you asked the question, and i want to separate the different types of service that will be provide he. You have to do that quickly because i have two more questions. Ill do my best. Os or now, are you competing with banking or not in your opinion. No. Congresswoman, but we do you consider yourself a bank. No because we will at the time. Are you taking peoples money and letting them pay for things, letting them