Libra’s congressional hearing, led by Facebook’s crypto chief David Marcus, provided some valuable insights; It brought to the fore the high degree of skepticism that regulators have over Facebook’s crypto plans, especially given its track record with handling data; as well as its alleged role in circulating fake news during the 2016 presidential election. Although we were fairly skeptical going into this one, it does seem like the senators were far more prepared this time around, as opposed to the last Facebook hearing with Mark Zuckerberg in the hot seat.
It did end up becoming a bit of Bitcoin v Libra. Although this is reductive, zero-sum framing, this also indicated a surprisingly deeper appreciation of the differences between Bitcoin and Libra than one would have expected; As was foretold, Libra’s attempt at a private, or at least a semi-private oligopolistic blockchain, is definitely making bitcoin look good. The senators were unanimously leaning towards trusting the decentralized collective that powers bitcoin; as opposed to letting the fate of the crypto universe depend upon a company that has perfected the art of converting user data into a relentless, sleek, money-printing machine.
The tone of the senators that questioned David Marcus on a wide range of topics seems to indicate that the federal government is extremely skeptical on how Libra would reach its stated goal of banking the unbanked without the risk of violating extant regulations. Some of key talking points and responses from David Marcus from the hearing are as follows:
1. The U.S. should “absolutely” lead the world in rule-making for cryptocurrencies
2. The Libra Association chose to be headquartered in Switzerland “not to evade any responsibilities of oversight” but since that is where international financial groups like the Bank for International Settlements have their offices. Calibra itself will be regulated by the U.S. Department of Treasury’s Financial Crimes Enforcement Network
3. Libra will comply with all U.S. regulations and not launch until the U.S. lawmakers’ concerns have been answered
4. “You will not have to trust Facebook” because it’s only one of the 28 current members of the Libra association. Eventually the plan is to extend to membership to over 100 Libra Association members. Facebook will not have special privileges, and no member can control more than 1% of voting. In case you have not already done so, check out some of Libra coverage here and here
5. David Marcus would accept compensation from Facebook in the form of Libra as a show of trust in the currency
6. It is “not the intention at all” for Calibra to sell or directly monetize user data directly, though if it were to ever offer additional financial services in partnership with other financial organizations it would ask consent to use their data specifically for those purposes
7. Facebook’s core revenue model around Libra is that more online commerce will lead businesses to spend more on Facebook ads
8. When repeatedly asked why Facebook is pushing Libra to happen, Marcus noted that blockchain technology is inevitable and if the U.S. doesn’t lead in building and regulating it, the tech will come from places “out of reach of our national security apparatus,” raising the spectre of China, Russia and other traditional adversaries
In the final analysis, this is not a battle between Libra and Bitcoin, as much as that was how this came to be framed during the hearing. Libra opens up another class of cryptocurrencies, one we should ideally call ‘Network Coins’. We have been doing some thinking around this emerging category, which is well worth checking out. We even had a tweet storm on this earlier today