As elaborated on in previous blog posts this is the day and age of digital advancements – one of those being broader usage and adaptation of Blockchain technology. This field has recently been entered by a digital player well known by everybody: Facebook
Summing up the U.S. Senate Hearings
Planned to launch in 2020, Facebook’s cryptocurrency Libra is supposed to provide a relatively cheap and accessible transaction provider to its users. The idea is for the currency to not only be available online but also to buy funds at local stores to then upload online – A concept media providers and even Facebook itself have made use of in the past. This makes the idea seem more like a evolution of PayPal, rather than a speculative coin or a contract-based platform.
The wallet associated with the currency is called Calibra – accessible to developers in Beta right now. According to Facebook higher-ups it will be linked to WhatsApp, the Facebook messenger as well as a standalone platform – but not via Facebook itself.
Concerns and Libra Association
This linking to the biggest social media platform is one of the biggest concerns with the project – and the concern is exclaimed loudly. Data security, privacy and selling of users’ purchase behaviour are topics Facebook has been accused of and admitted to in the past.
While therefore promising a complete independency from Facebook, to secure it, it is mandatory to decentralize control over Libra and Calibra – Which is why Facebook founded the Libra Association.
This association, made up of 28 for-profit and non-profit companies at this point is planned to expand to a number of 100 members, each having 1% of a vote over the processes and decisions taken. The association is seated in Geneva, Switzerland and each member will only take interest from reserve funds kept in-app, rather than transaction fees – so far Facebooks promise.
Officials and Senate hearing
But the topic of undergoing such a huge process and “digital revolution” was never going to happen without the U.S. government taking a stake in it.
While president Donald Trump has voiced concerns toward cryptocurrencies as a whole, since their value “is highly volatile and based on thin air.”, the senate has summoned the current head of Facebook Messenger and vice president of Blockchain at Facebook David Marcus to two separate hearings. Those have been scheduled and held on July 16th and July 17th.
Senate Banking Committee Hearing – July 16th
Being questioned by each senator in two rounds of five minutes per senator, David Marcus has committed to several things and tried to clarify some of the government’s concerns:
- He committed to interoperability – Transactions inbetween different kinds of wallets will be possible, not only between Calibra and Calibra wallets
- Regarding the question whether settling the Libra Association in Switzerland was about evading responsibilities, Marcus emphasized that the choice was purely based on Switzerland being the home of international financial groups
“You will not have to trust Facebook”
An argument senator Sinema raised was how exactly support would be acting when international wallets are used and being scammed by 3rd parties. Marcus responded that U.S. citizens would most likely be using American Libra wallets, that are protected and also that the Libra Association will heavily work toward educating users on how to avoid scams. Since one of the main ideas behind Libra is to enable the poor and often less educated the target group will also be more susceptible to scams – according to Sinema, who picks up on an argument made in a techcrunch article.
The parties split with a few questions remaining and being submitted to be answered by Marcus later.
You can find the entire first day hearing here.
House Financial Services Committee Hearing (17.07.2019)
If you watched the Senate Banking Committee Hearing and thought it was opposing the idea of Libra, House Financial Services were even more severe. In the more than 6 hour long hearing the house, that is currently led by the democratic party asked similar questions to the day before. Focusing more on the topics of money laundering, trafficking and financing terrorism rather than on privacy.
The most significant outcome though was the representatives urging Marcus to halt the project – at the very least until every regulatory and legislative issue has been resolved – or to not launch Libra at all.
“The witness” – David Marcus – did not commit to this, at least not in a way that was satisfactory to the House.
You can find the hearing here.
Facebook’s project Libra is definitely an ambitious one, that will shape the landscape of Blockchain – for better or worse. While most of the U.S. government’s objections are reasonable and understandable, some of the measures Facebook is taking to ensure independence seem to be steps in the right direction.
Whether Facebook is to be trusted with payments and bank data after the scandals of the last few years is for everyone to decide for themselves – Libra is projected to launch in late 2020.