Captioning performed by vitac many have expressed concern that facebook could outcompete banks and nondepository Financial Institutions and become some sort of Financial Services monopoly. I understand facebook has demonstrated a dominance in the social media space but i want to better understand this Financial Services monopoly idea. The Libra Association is made up of 28 pounding members, more to come, many of which have played in the Payment Processing space for a long time. Some of these firms are very large, visa and mastercard have billions of cardholders and process trillions of dollars worth of transactions. Some have argued that this association is a thinly veiled attempt at facebook eventually attempting to create a bank. It may or may not be, but i am more reminded of another Payment Innovation that started in the 1950s and 1960s as associations of likeminded companies, the Bank Card Payment networks. Banks issued their own cards, but banded together as Regional Bank card associations to create networks that worked for the consumers, merchants and issuing banks. Eventually those associations were spun off as independent companies that we have and use today. Im not saying that libra and bank card Network Innovation are the same thing, but it does strike me that there are similarities and it might be helpful to look at previous case studies to inform how we look at new innovations. Ms. Da mirrors, if western to think of libra like a Payment Innovation can you talk a little about the potential similarities between card payment in its early stages and what libra is or eventually might be . I dont think any of us are saying that facebook doesnt have the right to innovate. After all, the u. S. Is the birthplace of many innovations and we are seeing a wave of Financial Technology innovations in different areas. I think what we are seeing here is that the ability to compete and to create Innovative NewFinancial Products and services should be possible regardless of an institutions size, Balance Sheet or political power. I think what facebook is attempting to do is fundamentally different from creating a card payment network. Facebook is already in the hands of 2. 7 billion users. It already is on everyones phones, on everyones laptops and has committed repeated violations of these users privacy and what they are attempting to do is not to create a new payment network, what they are attempting to do is pass off this idea as a cryptocurrency, which it is not. They are attempting to use regulatory cover to get away with doing something that would typically be regulated, which is asset management. Its fundamentally different. So differentiate go further and differentiate between the Consumer Protection concerns with what libra is and what a true cryptocurrency is. My fundamental concern is related to stability. If we think about the various type of risk that investors take when they custody of their assets or purchase Financial Products from an institution, we experience this in the United States ten years ago, you are taking inherent risk. When someone purchases a libra they are giving up their real world assets, they are giving up fiat, giving it to the Libra Association to receive tokens. These assets are placed in depository banks and institutions around the world. This is a core banking function. This presents risk from counterparties, it presents risk in consumers being able to retrieve the principal that they have used to obtain the libra tokens and it presents Systemic Risk in the context of the broader financial system. And why are permission list block chains better for consumers . When you buy bitcoin, when somebody makes the decision to purchase bitcoin they are not buying a pool of assets, they are not exchanging their principal for financial instruments, they are buying what is essentially a digital commodity that is backed by its own scarcity and the demand for it. It is not a pooled fund, there are no assets or banks that have to create an instrument that backs the value of bitcoin. This is fundamentally different. So as we as we move forward and we think about this independent association, there comes a time when one would surmise that the participants might want to monetize their interest in the association. Im curious, mr. Gensler, you nod your head, paint that picture for me. How does that work . Well, i think particularly if the association is associated with the float, the interest thats coming off of this reserve, that would be very attractive. They are monetizing that really up front called libra investment token, theres two tokens here. I think to your earlier question if i could just say, i dont know if facebook will be successful. This is their fourth attempt in payments, but we do know in china the two Big Companies, ali pay and we chat pay dominate payments, over 90 of payments. I think thats what they want to do. I yield back. The gentleman from illinois, mr. Foster, is recognized for five minutes. Thank you, madam chair and thanks to our witnesses. Id like to talk a little bit about what the regulation requirements ought to be for not only calibra but Crypto Exchanges in general. Do you think, first off, that calibra and other crypto wallets should be subject to custody and segregation requirements . Mr. Gensler, anyone else wants i would say yes and i think that the custody at coin base and gemini and the exchanges has been a honey pot for theft and cybersecurity risk and that if congress could step in, maybe not this congress, but future congress to give Clear Authority, whether its the sec or cftc, but Clear Authority to regulate even a Bitcoin Exchange which maybe could be put into this token. Id like to make a factual distinction. Libra is not a cryptocurrency. Cryptocurrencies are fundamentally different. The business of exchanging cryptocurrencies is a regulated activity and has been for the last five years in this country. I want to distinguish and draw a clear line that line bra they dont differ in terms of the sort of frauds that can take place, frauds, theft of customer assets, everything bad that can happen if you dont have segregation requirements. I think thats right and calibra is going to control the calibra wallet funds because its a custody fund. Ultimately custody is a functional activity. Even regardless as to what kind of Digital Asset youre ultimately dealing with, you have to ask and tailor custodial rules to the nature of what youre trying to regulate. So certain kinds of questions as to what happens to the custodial responsibilities of a bank when there is a fork in that cryptocurrency, those kinds of questions obviously have to be answered and its not at all clear as to what those answers in actuality will be. Okay. And could you say a little bit about the sort of sort of abuse of trading practices that are possible with current Crypto Exchanges and might be possible also with libra, things like front running, you know, wash trades, all this sort of its all possible. Is it taking place . It is a feeling, its well documented by a Company Called i think it was bit wise, but you might remember a filing at the sec about a fake trading, but most exchanges around the globe are not regulated, other than this custody issue, and for money laundering, but its rare that they are regulated for man blah testify behavior. So any anonymously held thing, is there any way to prevent things like wash trades if they are anonymously held. Its not even about the technology. Around the globe the largest exchanges are not regulated by the sec or similar securities regulators for front running. I have to point out, though, many exchanges are, in fact, regulated by the jurisdictional regulator where they operate and by the customers that they serve. This is a case that is now being tried via new york dfs that is looking at a number of exchanges. The second distinction i would make here since 2016 all of the exchanges here in the United States that are under the purview of u. S. Regulators, including the cftc, have voluntarily joined the cftc in creating a Market Oversight Committee that looks at these practices and these accusations that have been leveled around wash trading and there is effort within the industry to selfregulate in absence of clear guidance, but i will say that this wash trading activity is not happening here in the United States because exchanges here are regulated, as any other exchange would be. I differ with my fellow witness at the table, the wash trading is absolutely having it seems like not for market manipulation, they are regulated for custody of the funds and antimoney laundering. It seems like if they are truly anonymous its very hard to even identify wash trading if you just dont know who is actually participating in it. And its notable in the governance rules there are no explicit potential conflicts of interest or any other kinds of activities. Even from a selfregulatory perspective as it pertains to libra there are no Obvious Solutions to the problem. It relies on the anonymity or the pseudo anonymity of it, in fact, the fundamental design problem in that absent some way of going for the regulator to going through and finding out that the same person was on both sides, the Beneficial Owner on both sides of a trade, unless there is a way to pull the mask off and look and see who is there, just there is no way of even detecting it. Thats sort of an unsolvable problem as far as i can tell. I have eight seconds so i want to thank you for this you know, your input on this very important subject. Yield back. The gentleman from kentucky, mr. Barr, is recognized for five minutes. Thank you, madam chairwoman. Thank you for your testimony and your expertise today. Excellent panel and interesting topic. We are all learning. We have a lot to learn about this. As i was saying earlier to mr. Marcus, i think the presumption should always be on the side of financial innovation, especially when there is the promise of greater financial inclusion, reduction of transaction cost and friction. So i do i do hope that this will result in a very positive impact on our society, but i do think we should ask probing questions and i appreciate the panel for offering some healthy skepticism on one point or another. Let me just kind of start with the basics, i think i want to go back to ms. Demirors. You made the comment that libra is not the same thing as cryptocurrency. Can you elaborate and explain that to me . Yes. There are three fundamental differences i would like to point out that are also recorded in my written system i submitted. Number one is cryptocurrency is like bitcoin are decentralized, no one entity or individual can block or censor transactions. Libra by contrast has an entity of these 100 members that is able to block, censor transactions and manage the network. Secondly but only for five years, right . That is the claim. I do not know how they plan to decentralize this and they have offered no solid plans. Decentralization is a word that is used often, but it doesnt really have a tangible measure, its fairly esoteric. Im not sure how they will achieve it. The second point i will make is that bitcoin is not backed by anything but the demand for it. It is its own asset, it is a digitally scarce asset that could be likened to digital commodity. It is a new type of asset which introduces challenges in trying to fit it into a box, but it isnt backed by anything. Theres no bank that holds funds, there is no entity that holds funds that are at risk n contrast libra is the opposite, it is backed by a basket of currencies and other securities that are held by stable coin. Yes. That is what they like to call it. Stability is relative, as we have learned through history of financial crises, but libra does hold a number of assets that substantiate the value of its token and so the security of those assets in question are tantamount to securing the principal that users post to obtain libra. The last point i will make is the point of control. Anyone can build on top of the Bitcoin Network or most cryptocurrency networks, anyone can access these things, the code is open source, the network is open, just like the internet, it could be considered a public good and people can compete and build businesses. In contrast, i dont know how the Libra Network will be open when its controlled by 100 forprofit corporations that are closely affiliated with facebook. What im asking for here and what id like to just point out is competitiveness and the ability to level the Playing Field for all types of organizations to be able to compete in the same market is important. Cryptocurrencys are an open market, libra is proposing a closed controlled market. Let me switch to the table coin idea and the fact that libra is tethered to this reserve. Isnt that a positive innovation to reduce volatility . Shouldnt we think that this is a positive development . I am not commenting on whether libra is positive or negative, i am commenting on the fact that libra is not a cryptocurrency, libra is an etf for a mutual fund that is backed by assets and i am not arguing that the banks dont deserve access but its not a body shield. Mr. Gensler. I think its a very interesting innovation. It has raised 5 to 10 really important Public Policy issues, but the idea that there might be a stable value coin backed by a basket of multicurrency risk in Subsaharan Africa or in latin america or in asia, there might be a demand for it. I wouldnt count it out. What is the incentive besides this underbanked problem, what would be the incentive for a bank person or the holder of a fiat currency to exchange it for a libra . Its very simple. Just like in many countries sometimes there is a lot of transaction in dollars because they dont feel comfortable with their central bank, with their money tear authority, it could be countries in very really extremes like venezuela or ecuador adopted the dollar as an official policy or it could just be a lot of things happen. Someone addressed the risk of disruption to central banking and the disruption to traditional Monetary Policy. It would definitely disrupt the central banking and Monetary Policy in these developing countries if they libra lies instead of dollar eyes and it if it got very significant it could start to influence the four or five or six currencies they have underneath it. So the dollar is going to be half of this, but if the association said its only going to be 30 , you see, its the transitions. Thank you. I will have lots more questions im sure as this develops. Yield back. The gentlewoman from california, ms. Porter, is recognized for five minutes. Hi. I was told on my way in that im coming to give praise to the panelists was not my style, but im really here to just thank you in part for your service in being here and explaining things to the committee. I wanted to pick up on something that ms. Demirors said about the differences between libra and cryptocurrency and a lot of the concerns that i have about libra i do not have about crypto. There are issues with cryptocurrency and many of you have eliminated them, but i think your testimony is incredibly important. I wanted to pick up on the point you made about libra being, quote unquote, backed in a way that bitcoin and traditional crypto is not. So i wanted to ask, we heard mr. Marcus talk about how libra is backed and so i wondered if any of you, mr. Gensler, or professor pistor could talk about what is what do you think he means by backed and how should we have confidence in that and how is this kind of a backed stable coin different than Something Like in pesa in kenya, for example . Im going to agree with my colleague here this is very different from bitcoin for the three conditions that she said and for other reasons as well. I think it is very different than empesa but similar in this important way, the Central Banks and authorities in kenya said anything in that fund which was held by the phone company had to be in trust, could not be loaned and 100 of it had to be into the kenyan Banking System as deposits. Similarly in china they made it even more restricted, 100 had to go to the central bank. So thats where the similarities are. Its different because this is multicurrency and currently its very different because theyre saying dont treatise like a bank. Dont treatise like a narrow bank and your exposition about the wild cat banking era of the 19th century was very helpful. Others . Yes, i think backed can mean different things. I mean, its not that the customers have a direct claim against the reserve, but the idea is that the reserve will be held in save assets and therefore will be able to provide the kind of liquidity. Of course, the important thing that im trying to make in my testimony is that the safety comes from public backed stopping in the countries that provide these safe assets so its ultimately a Public Service provided to a private company. Right. When we talked with him about the corresponding approaches with fdic, for example, i asked mr. Marcus do you think that libra would be subject to fdic, to some kind of insurance scheme, what is the backstop so that when you tell customers that this is backed, that they know what theyre getting, what kind of backstop and security they have. I wanted to ask he didnt take me up on my offer to have the fdic regulate libra, i was happy to run through the alphabet soup, you can choose one of the weaker regulators like occ if he prefers, i mean, there is an plebt so alphabet soup we could comment. Which regulators and it could be more than one do you think are appropriate for libra . One comment and observation that i recently had was whether or not facebook if it was to become a bank would even satisfy the de novo review process from a banking regulator. Its uncertain as to whether or not they would receive the license. The ambiguity the term backed is played throughout the white paper. On the one hand if youre describing yourself as a currency board you are thinking backed in a monetary sense but what theyre really doing and what you see in the structure of what theyre doing is creating an etf, yet youre creating the etf but using the language of a monetary world and that obfuscation is not helpful to a potential purchaser. Certainly at a base level infrastructure, Regulatory Infrastructure level you will have to go with some securities level securities Regulatory Oversight through the 40 act and then looking at what differentiates in terms of both the breadth and any other characteristics and the systemic potentially systemic implication toss ramp up from there. Im glad this is a full Committee Hearing because it isnt clear to me whether this is a problem for my Investor Protection subcommittee or my Consumer Protection subcommittee. I think the problem is many of our categories dont easily fit and part of financial innovation is to create something that does not fit existing structures. Thats part of how you get the comparative advantage. I think theyre using the language in a very smart and discriminate way and i think to avoid the kind of Regulatory Framework that we have. Let me add one more thing, of course, we are talking about a multijurisdictional regulatory approach that would be needed for a global currency. You need to think about how complimentary regulators are elsewhere. Sec. I would welcome each of you to follow up with me on your thoughts on this. Im very interested. Thank you. I will recognize myself for five minutes and let me thank the panel for being here. You have spent some long hours, you know, while all of our members have taken the opportunity to ask questions of mr. Marcus, but i certainly appreciate your participation here today and i thank you for helping to unfold and make transparent some of the information that we should have had access to that we didnt get in the white paper. Let me ask you this because ive listened to many of the questions that you are being asked and youve covered an awful lot, but ive been thinking about the association and ive been thinking about the fact that the association includes about 28 people, 29 companies, rather, 28 27, 28 companies, and mr. Marcus said that they were targeting about 100, but do you think that its going to go well beyond that number because what are we looking at . Are we looking at Big Companies with big databases that supply whatever goods and services and with the libra, the libra will be the currency that you have to have in order to get these goods and services, or am i just daydreaming about this . Mr. Brummer, what do you think . Certainly they have not disclosed exactly what the selection criteria would be for ramping up even to 100 members, you would have to expect that given the Resources Available to the existing members that the entry point and the expectations of new members would be very large. Theres no clear path to reaching the kind of descent zags and decentralized infrastructure that mr. Marcus is promising in terms of evolving into a bitcoinlike infrastructure. So like you i do have doubts as to certainly how quickly they would be able to ramp up, much less become a permissionless system. So do you think im thinking beyond 100 members of this association because, remember, what he said, he said was, well, theres going to be a smaller governing group that will be making these decisions, i guess, for everybody. So could there possibly be thousands of companies in this association . Theres nothing that forbids it and if it helps the distribution of a product, economic rational would be to help distributing the libra. But if i may, chairwoman waters, i think what we have seen historically in attempts by multinational manymember con sore is that consisting of thousands of members to govern something that does involve profit and distribution of returns and were speaking about the Largest Consumer base in the world, 2. 7 billion users, that is going to quickly become contentious. If we look at much smaller organizations comprised of smaller membership, they have many governance challenges and my concern is in the libra paper this governance structure is not clearly laid out, its not laid out where the balance of power will be or if there is any one overriding party or entity that makes decisions in the case that the parties that are member to the association do not agree. Have there yes, mr. Weissman. I think that the facebook vision is clear, actually. I think they intend to have an al gonely that they dominate. It is a cartel. A cartel . Yes. To dominate. Past 100. Is it possible that all of these companies with big data could end up with all of this data being merged into humongous amount of individuals in this database that they could be merchandising to, they could be marketing to . Is that a part of whats going on here . I think until theres more transparency on how the association intends to make money, the organizations that joined had to have over a billion dollars in assets and contribute 10 million to join. Not just anyone can join this association and, in fact, no one was able to ask to join. I wasnt invited, none of the firms i work with were invited, and so i think thats for me the fundamental question. If facebook aspires to create this open permissionless consortium that everyone can benefit from then why is the Selection Process opaque and why does it only involve affiliates and associates of facebook and its executives. That would be my question. Thats not a criticism but i think more transparency is certainly thats my question, too. So what i basically define this as, the billion dollar boys have taken over. Okay . All right. Thank you very much. And now we are going to hear from the gentleman from california, mr. Sherman. You are recognized for five minutes. Thank you. We hear from facebook that they are absolutely dedicated to adhering to the antimoney laundering and know your customer rules. Mr. Brummer, if they were that dedicated, why would they hire as the head of the operation someone who was head of paypal when they were fined 8 million for violating antimoney laundering laws . I could not answer that question. None of us can. And will our antimoney laundering laws be binding on an institution headquartered in switzerland . And made up of International Businesses . Mr. Brummer . Well, certainly u. S. Rules would not apply. Those are the ones im talking about, yes. U. S. Rules would not comply and the bigger risk obviously lies with those jurisdictions that are so weakly regulate that had they are falling outside of International Agreements like the ones that fatif has recently agreed to in june. Certainly swiss rules particularly relating to both privacy and also relating to Financial Regulation are not just different, but have certainly historically been considerably weaker and real questions do arise as to the ability to enforce and to promote the kinds of norms and safeguards that we have here in the United States. The history of currency, and i see weve got a zuck buck behind you history of the dollar. At first it was based on how much gold we had in reserves, then and only when we got an ounce of gold did we print 35. Then we started printing more than we had in reserves, then we got to the point where we made it nonredeemable and now the dollar is valuable, gold is you know, its an interesting thing, its a nice thing to have, but nobody says, im not interested in having u. S. Dollars because they are not tri tied to gold. If zuckerberg can replicate that then he can do what only the u. S. Government can do and that is print a reserve currency. Theyve promised that they wont do that, but that it will always be one to one, but, ms. Pistor, is that promise from facebook binding on the libra committee . No, the association could with a true majority change that. And if they change that, that means they get to print money. That would be quite an incentive to change it. Yeah, i would think that a private organization has a problem with doing what the United States did in the 1970s because what this he cannot do is unilaterally basically put the productivity of an entire country on the line. Thats true. But they could try. People are creatures of habit. If i can go on amazon and buy a bunch of neat stuff for 1,000 libra or zuck bucks and then i find as long as i can do that theyre valuable things to have. So how is this i want to address this to mr. Gensler. We have a problem in that people in los angeles are sending money to their grandparents in guatemala and they are being charged the 7 , 8 sometimes to do that. How is a guatemalan grandmother supposed to buy a bag of food for a bunch of zuck bucks . Were told if we dont buy into this wonderful new thing that were disadvantaging that grandmother, but is this cryptocurrency really a solution for her . So what we found is bitcoin for all of its really innovations isnt used very much in retail transactions for the same reason youre mention things. And certainly not in rural guatemala. What would have to happen is some Service Provider would provide the technology so that behind the scenes the libra or the zuck buck as you referenced would be traded for the local currency so that the store owner could get the local currency and there would be some Crypto Exchange or hedge fund sounds every bit as expensive as whats going on now. I will yield back. Thank you. The gentlewoman from michigan, ms. Tlaib, is recognized for five minutes. Thank you, madam chair. Thank you all so much for being here. I have to tell you im learning a tremendous amount. The younger people on my team has been watching this closely and teaching me a lot, but the more i listen and was forced to stay here a little bit longer, which is okay, i was able to hear a lot more and learn more, but one of the things that come to mind and we will talk about this, is this whole thing around systematically important financial institution. We will get there. But first, mr. Brummer, how do you feel about a private company issuing currency . Sn what ramifications you l talked about t historically have you ever seen outside we have. What a private company does with money when you use other peoples money then you should normally expect that the government or some kind of Regulatory Regime is going to want to know what youre doing with it and have you rightfully accessed or received that money. Whether or not it be an example of wild cat banking where youre not just taking the money but you are not keeping it entirely in reserve, but youre lending it on to someone else, creating certain kinds of risk. You know, the challenge is when you have a private institution thats not just lending its own money, but is lending with other peoples money and when theyre trying to do that without offering the kinds of proper safeguards or disclosures to relevant stakeholders and investors. And thats when the red flags are raised. Okay. So and this question goes to everyone on the panel. In thinking about how to protect the residents, my residents at home, they are going to see this, they are not going to fully understand it just like i didnt before i came here. The possibility of Libra Associations failure and if anyone on this panel can explain the systematically important financial constitution if they get labeled as too big to fail, how is this connected to what were talking about now . This could be a possibility. Can i just mention one thing thats buried in their white paper and documents, theyre trying to negotiate with Central Banks around the globe to get accounts at Central Banks and your residents in your community have accounts at commercial banks, but an account at the central bank is quite different. It means that you get access to the discount window, the lender of last resort. I surely hope that chairman powell and others at the Federal Reserve would not give that to this association, but if it was very large that would go to answer your question. At some point in time, like in 2008 but it is possible 2008 there were decisions made by good men and women trying to stop this country to go into crisis and they made decisions that many of us you know, even say thats not the right thing to bail something out, but the Libra Association is already negotiating with Central Banks to try to get access to Central Bank Money or accounts and thats what would happen if it was if it was systemic. Did you have something, mr. Wise . Theres another argument that i dont think were talking about enough. What facebook wants is that transactions occur in libra. People sell things, provide things in libra using calibra, whatever, but when you have a borderless privatized currency, you have now created this Global Market with no reasonable regulation. They want they are talking about payday lending, they are talking about providing Financial Services in libra. So all the problems we know now with abusive financial lending, figure that orders of magnitude worse because we have jurisdictional problems and secrecy problems that have no possible plausible answer. I will also add, if i may, the disclosure aspect is very important, as many of us on this panel have mentioned, libra represents an investment product that would typically be regulated under the 40 act and so its very important that people who receive libra who may not know what theyre getting are educated as to what theyre receiving. Financial education has opinion problematic across a number of different Asset Classes in this countrys history and so the disclosure component i think is important in ensuring people understand the risk theyre taking when they choose to take their dollars and turn them into libra. Thank you. And i will put the questions into the record, madam chair, if thats permitted. But i want you all to know one of the things i told mr. Marcus is about the monopoly, the Small Group Friends group that is being created i mean, the fact that a member could vote and contrary to a position advocated for facebook, what would happen . What retaliation . I mean, there is this dynamic thats there that i think needs to be flushed out but we need another hearing for that. Thank you. Thank you. The gentleman from illinois, mr. Garcia, is recognized for five minutes. Thank you, madam chair. Id like to thank the panel for bearing with us and all the questions. The question on banking commerce for mr. Weissman, in your written testimony you mentioned that the Calibra Facebook arrangement, quote, may run afoul of the Bank Holding Companys requirements, end of quote, which enshrined the historic separation between banking and commerce. The Regulatory Framework in our country governing Bank Regulations has established a wall between banking and commerce for a long time. The guiding principle of this separation that banks should engage in impartial credit allocation helps guard against market manipulation, conflicts of interest and anticompetitive behavior. When the lines are blurred problems have emerged such as during the gilded age jpmorgan monopolized railroads and manipulated rates, more recently in 2013 the New York Times revealed that Goldman Sachs had bought up more than a quarter of the aluminum market and had used this ownership aluminum warehouses to inflate prices of aluminum costing consumers 5 billion. Mr. Weissman, would you please share why this principle is so important and what implications does libra have for the erosion of this principle . Your question illustrates many of the key examples. The problem is that banks get a lot of money and they get a lot of information and they are incentivized to use their money in risky ways, capitalizing on special information that they have. So now you think about facebook. If facebook becomes both the social media al beg your pardon list, monopolist that it is and a major Financial Services provider all of a sudden lets set aside their claim that they will respect privacy lines, all of a sudden they can combine their Financial Information with their social media platform. They can advertise to you based on what youre buying. They can go into the business of providing goods and services and give you a discount in libra. In fact, thats part of the plan, just not within for facebook to be the provider but within the association. So the possibilities both for unjust competition and kweezing out any rival who is not part of the facebook ecosystem, part of the ability to manipulate and misuse information that they get from the financial side and to the nonfinancial side, i mean, its there are problems that really dont lend themselves to regulatory solutions. There is a reason we have had that wall, it served us well, when weve breached, as you say, weve paid the price. If we breach the principles here were certain to pay the price down the line. Switching gears, there has been there have been reports that President Trump intends to nominate judy shelton to the Federal Reserve board of governors. She has come out in favor of private currencies. In a speech that she made last year she proposed a new International Monetary system saying an approach, quote, that permits the issuance of Virtual Currencies in tandem with governmentissued currencies adapting legal tender laws to permit healthy currency competition should be put forward. If the Federal Reserve loses supremacy over control of the money supply, what challenges might that create . Sn i will go first and you ca give the better answer. I mean, they are endless, that means the we have lost control of monetary policies, weve lost control of public influence over the direction of the economy. Youre also creating almost guaranteeing Systemic Risk in situations where youre going to have, again, massive bailouts because a private currency when it fails, as it will, its going to need some massive bailout from who . From the public. Any others . I think that the Crypto Movement, bitcoin and the Crypto Movement has performed one thing, its a private form of money, even bitcoin, and its putting some competition on Central Banks around the globe to take their legacy Payment Systems and move them into the 21st century more fully. So i actually say there is a balance that bitcoin and the Crypto Movement has created some competition for this public good, but then to the second part of the question, some Central Banks like sweden are looking at issuing a Central Bank Digital currency, it would still be government currency, it would still be government currency, but the public would have access directly to Central Bank Reserves and in sweden you wouldnt just rely on the corporate banks. Final board, ms. Pistor. I think we should think of the form which could be crypto but issued by a public agent such as a central bank. Thank you. I yield back. Thank you very much. Looking around, is there anyone else that seeks recognition . I think not. And let me just say to the committee how grateful we are that you have come today and you have spent time and you have helped us to formulate questions in the way that you have shared information with us and so we are very appreciative from both sides of the aisle. While we normally do not do this, with the few of us that are here im going to break another rule. Can we give them a round of applause . [ applause ] thank you. Thank you very much. And prior to leaving, we are going to take another action we dont normally take, but i would yield five minutes to the Ranking Member for a close. Well, we are each getting five minutes for closing. Yes. All right. Just to be clear. So the m1 supply of money in the United States is approximately 4 trillion. 3. 8 to 4 trillion. We are talking about a private currency that has, you know, 1 to 2 billion users that could potentially use this product. So i dont know how history is going to judge this hearing. I fear not well, though. There is a breathlessness to the hyperventilation about facebook. I get that. Weve seen that. Weve seen that because of their use of data, consumer data. Weve seen that because of how they responded as well. But theres something additional here which is that people fear something they dont understand. Facebook is using the language of cryptocurrency and digital currency, theyre using the words of block chain technology, but what theyve created is actually perfectly not either, theyre creating something different. But there is this underlying fear among policymakers here on the hill because they dont understand cryptocurrency and Digital Assets. Thats my fear is that this will not wear well historically. The concerns raised, the questions raised. And its because politicians when they dont understand innovation they want to kill it. There is a reaction and a Quick Response to it. So weve even had folks on the hearing today who actually used the very quote that i was talking about, the hyperventilating nature of the headlines around project libra and actually mr. Broadly about cryptocurrency. I opened with that and we had a member later use the exact same quote as a knock against project libra. We also had a member of the committee speak of this as a terrorist act, as one of the worst moments in the history of the last generation, an attack on our country and like an project libra to that. I dont think this is going to wear well. Now, there are legitimate concerns about this and i think of substance, i think that will wear well and including with this panel what this panel has said, but there are massive forces at play, massive skepticism of facebook, thats clear. There are also massive anticompetitive forces at play. So if you want to if you want a lower cost of payment, domestically and globally, we need innovation. It is absurdly high for somebody to remit money back to their family at home. Absurdly high. Now, we dont want terrorism financing, we want those important protections, but we also want that immigrant to be able to send their money to their loved ones or for somebody to be able to move their money more readily and more cheaply. We want those innovations so we need a new framework to do that. We have a technology here that is going to do that and it has this great opportunity to do that. So we want to ensure people are protected, in particular consumers, but you cant knock every new innovation because its a new idea, and you cannot ban a new idea from even pursuing the Regulatory Framework to operate. That is absurd, it is wrong. But what i think this hearing does and i think the discussion by our governments around project libra highlights the nature and the utility of krip toe currencies, Digital Currencies, in particular bitcoin. As i said earlier, due to the nature of the technology of bitcoin governments cannot kill it, nor should they, and you cant kill Digital Currencies broadly. They will be enduring, they will be strong, that is the new framework of the next generation of the internet. That is clear and in a generation i hope that there are some statements here today that will still be pointed to as factual and correct about what we will live through in this iteration of Financial Technology. And i hope there wont be much that is laughed at in 30 years. My fears, however, are that the reactionary element that was brought up here today in part will be dealt with great disdain after the next generation of internet technology. I do think, though, however, it was a really good hearing because we now have before congress a deeper understanding about these Digital Assets and the breathtaking speed at which the world is changing and how we have to catch up. And with that, thank you, chairwoman waters, for the opportunity to close and thank you for hosting todays hearing. Thank you very much, mr. Mchenry. Allow me to begin my close with the fact that our members did an extraordinary job today. Both sides of the aisle came well prepared to ask significant questions. As a matter of fact, i believe that we had members on our committee today that went a lot deeper than many of those observing what took place today ever expected them to do. So im very pleased of the interest, im also very pleased that we had some of our members saying that this was the most significant hearing weve had since the last election and this committee was reorganized. And so im very pleased about that. Let me just say im so pleased about the panel thats here today. This is a panel that we absolutely needed to have here. We dont know what it is and when i first saw the white paper unveiled, i went into almost a state of shock. I could not believe what i was seeing, that this massive effort was under way and we didnt know what it was, what it was, wear it was going, how it was organized, who owned it, all of that. So i determined as the chair of this commit we we were going to move on it right away. We were going to hold a hearing. We were going to get involved in this and night wait until destruction takes place. As a matter of fact, you heard some of our members today talked about i think it was mr. Meeks, he never envisioned what would happen in 2008 with the subprime meltdown we had with our Financial Institutions basically hitting the dust and leaving everybody hanging and all of the harm that was done to our constituents and communities, where foreclosures took place and people had been involved in citing in the dotted line to mortgages they didnt understand. We dont intend for that to happen with this. Were going to put a time limit on it. Were going to learn a lot more about where all of the money is, who makes all of the money and how it is done. When we say we dont know what it is, we dont know if its a bank, transmitter of payments, what it is, we will find out. This representation that the association i believe is working as a nonprofit, in corporations this big or powerful works as a nonprofit without making a lot of money. While im very appreciative of the fact it has been represented this this is all about servicing t the bank. Sounds good but im appreciative of the fact somehow libra will solv solve all of the problems with the dollar. The dollar is not very functional, but the last time i had one in my pocket, it, woulded very well. Im not only focused on it and vitally interested in it, i think we sent a message today. No matter how big or how powerful facebook and all of those aligned with facebook in this association think they are and how they have advanced in our society, in ways that theyve collected huge data and how they have used that data and selled that data and planned to sell more data, i think we sent a message to them today that we are focused. We are focused, we are watching, were on it, we are involved in it. And were going to use all of our time learning everything we can about it. For those who say we dont have an preparation for innovation, thats not true. We have an appreciation for innovation but we dont have an appreciation for those who have something masked as innovation that is a global effort of control of a cryptocurrency. Again, i thank the members of this committee from both sides of the aisle, i thank our panel and i thank mr. Marcus for coming and attempting to answer the questions we were giving to him. He didnt answer my question about whether or not he would support a moratorium and certainly did not answer the question of whether or not there should be a regulator of any kind. Even though a lot of the questions were skirted, it has been suggested that certainly we should have more hearings and we should get mr. Zuckerberg here himself. Im with that. Thank you very much for being here. Let me just say that we have some information we have to share with you before we leave. Without objection, all members will have five days in which to submit additional written questions for the witnesses and the chair which will be forwarded to the witnesses for their response. I ask our witnesses to please respond as promptly as youre able without objection. All members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record. And with that, this committee and this hearing is adjourned. Thank you. In 1979 a Small Network with an unusual name rolled out a big idea. Let viewers make up their own minds. Cspan opened the doors for washington policymakers bringing you all to see, unfiltered information from congress and beyond. Its more relevant than ever. On television and online, you can make up your own mind. Brought to you as a Public Service from your cable or satellite provider. We take you live now to the House Oversight and Reform Committee for testimony from acting Homeland Security secretary Kevin Mcaleenan about the trump administrations family separation policy at the u. S. mexi u. S. mexico border. Maryland congressman Elijah Cummings chairs this oversight committee