Transcripts For CSPAN3 Senate Banking Hearing On Facebook Digital Currency 20240714

Free cspan radio app. Earlier today facebooks david marcus testified before the Senate Banking committee to address concerns over the companys proposed Digital Currency. This is 2 hours and 20 minutes. This hearing will come to order. Today we will receive testimony from david marcus, head of libra at facebook. On may 9, senator brown and i sent a letter to facebook shortly after it was reported that the company was recruiting Financial Institutions and online merchants to help launch a cryptocurrency based Payment System using its social network. Our letter asked facebook for more information about how the system would work. Its access to and use of Consumer Financial information, and facebooks access to and use of information on individuals or groups of individuals in credit, insure, employment or housing. I appreciate facebooks response last week. Shortly after the letter was sent, facebook formally announce ds its intention to launch the Payment System libra and issued a white paper providing some information about the project. Since then, u. S. And Global Regulators have taken notice, including the Federal Reserve, uks financial conduct authority, Financial Stability board, g7 and others. Last we can during the Federal Reserve semi annual Monetary Policy report to yes, sir, chairman powell raised concerns about the cryptocurrencys potential for insighting Money Laundering and financial instability problems and also expressed concern over customers privacy. Yesterday secretary mnuchin stated the Treasury Department has serious concerns that it could be used by money launders and terrorist financers. The bank of England Governor Mark carney said libra if achieves ambitions would be systemically important. As such it would have to meet the highest standards of prugh contention regulations and regulation. It must address Money Laundering, Data Protection and operatingle resilience. Concerns including but are in no way limited to how the Payment System will work, how it will be managed and how libra, the Libra Association, ca libra and facebook all interact. What Consumer Protection apply and potential kbrikss for consumers are with respect to financial loss from fraud or the projects failure . How individuals will be protected and how individual privacy will be preserved. How is sbrkts with the Bank Secrecy Act and other antisecretariry Money Laundering protections. And the steps that could be taken preemptively to mitt git risks. Despite uncertainties facebook stated goals for the Payment System are commendable. According to the world bank, 1. 7 billion adults remain unbanked. But two thirds of them own a mobile phone or otherwise have access to the internet. If done right, facebooks efforts to leverage existing and evolving technology and make innovative improvements to traditional and nontraditional Payment Systems could deliver benefits such as expanding access to the Financial System for the underbanked, and providing cheaper and faster payments. Still, libra is based on a relatively new and continuing evolving technology in which its not entirely clear how existing laws and regulations apply. Im particularly interested in its implications for the protection and pr i havecy of individuals dat fab has massive reach with over 2 billion monthly user and access to vast amounts of personal information including that received directly from users and information that can be derived from their behavior. Both on and off of facebook. Libra and ka libra will only expand the reach by increasing examiners on facebook, inc, platforms. This raises several questions. The Banking Committee has held hearings on data privacy including as it pertains to the European Union general Data Protection regulation, data brokers and the fair credit reporting act. Given the significant amount of user information already held by the largest social media platforms, and the prospect of gaining more Financial Information Congress Needs to give individuals real control over their data. Europe has already done this by imposing obligations on companies and establishing rights for individuals with respect to their dat. We need to establish similar obligations for data collectors, brokers and users. And implement an enforcement system to ensure the collection process is not abused and that data is adequately protected. Individuals are the rightful owners of their data. They should be granted a certain set of privacy rights and the ability to protect those rights through informed consent, including full disclosure of the data that is being gathered and how its being used. Regulations should be clear and understandable for both collectors and consumers and should not punish those who opt out of collection practices. Individuals should also have the ability to review their duty, correct inaccuracies, and have ample opportunity to opt out of it being shared or sold for marketing appear other purposes. Chairman powell also said last week that the privacy rules that we apply to banks we have no authority to apply to facebook or libra. He added that we may even need to create a new regulator to address such issues. As we determine the next steps, what is clear is the importance that financial innovation happen here in america. In this which the libra announcement has heightened the need for policy makers and regulate tors establish clear rules of the road. During this hearing i look forward to hearing more about facebooks project, the steps it plans to take and has taken with regulators to ensure compliance with all laws and regulations, and how it intends to ensure individuals privacy is maintained and information is protected. Senator brown. Thank you, mr. Chairman. Facebook is dangerous. Now, facebook might not intend to be dangerous, but surely they dont respect the power of the technologies they are playing with, like a toddler who has gotten his hands on a book of matches. Facebook has burned down the house over and over and called every arson a learning experience. Facebook has two competing missions, make the world more open and connected within make a lot of money. And as facebook attempts to serve both missions they wreak havoc on the rest of us. Look at its version of disrupting the newspaper industry. Facebook has made it easier to share what you are reading with friends. The same time, facebook is redirecting most of the media media industrys profits away from actual journalists and into its own coffers. They have done it without the benefit of recreating a local news desk, without conducting the hard nosed journalism that keeps politicians in businesses honest and without meeting even the most basic journalistic standards. In kind of creative disruption that doesnt create anything is just disruption. A look at the impact facebooks profit motive had on the way it connects people. Facebook and other Tech Companies will tell you the internet just holds up a mirror to society and reflects what we are already. But thats not true. To be profitable facebook has juiced its algorithm to hold up a to use a magnifying glass to burn a hole in a piece of wood. Concentrating our focus on the most divisive issues and pushing the most controversial opinions to the top of the newsfeeds are supposed to play on fear and their worst impulses but may not be based on any sort of fact. Facebook does all it can to manipulate aliens of users so we can direct our eyes toward their advertisements and turn an even bigger profit. This is no exaggeration. Facebook tested whether he could manipulate our emotions. The Court Corporation ran a psychological experience to see if it could manipulate our moods. Turns out it can. Those led to horrifying results. I dont have to tell you what amplifying divisions has done to discourse in our country not just between political parties. I bet half of the people had to block a High School Classmate or Family Member on facebook. A look around the world is more troubling. A report detailed how facebook was used to spread propaganda in me on more in a country that led to genocide. More than 600 people were killed, more than 700,000 refugees had to flee the country. I dont think for a minute that facebook created hate but we know there are missions of connecting people and turning a profit which created an algorithm and Business Model. Its hard to remember a World Without facebook and a time before we had to tell our kids be careful what you do on the internet because it wont go away. We expect everyone to know that what happens online has consequences offline. Its just common sense. Thats why its so hard for us to understand why facebook, the company that ushered this revolution cannot comprehend that actions have realworld consequences. They dont seem to understand why there tension to run their own currency out of a swiss bank account, the topic of todays hearing, has been met with such fierce opposition. Mark zuckerberg has said that it may be more like a government than it is a company but no one elected mark sucker berg. What kind of dystopian death government wants to turn families and friends against each other rather than bring people together . It is demonstrated scandal after scandal that it does not deserve our trust and should be treated like the profitseeking corporation that it is just like any other company. Mr. Zuckerberg and his Associates Show over and over that they they do not understand. None have been harmed by facebook experience the model has been move fast and break things. They move fast and broke political discourse. They broke journalism and helped insight genocide. They move fast and are hoping to undermine democracy. Now facebook asks people to trust them with hardearned paychecks. It takes a breathtaking amount of arrogance to look at that track record and i think you know what we ought to do next . Lets run our own bank and for profit version of the Federal Reserve and lets do it for the whole world. I understand given the financial crisis and given the massive inequality to workers in the country and given the fact that there are so many who forget what happened 10 years ago, its hard to think that anyone could do a better job at the last thing that we need is to concentrate even more power. Would be crazy to give them a chance to experiment with Bank Accounts, to use powerful tools they dont understand. This is a policy with fewer protections for constituents. Thank you. We will now proceed with testimony mr. Marcus. You may proceed. Ranking member brown and members of the committee, thank you for the opportunity to appear before you. My name is david marcus and im the head of libra. Ive been an entrepreneur Building Product that aims at improving peoples lives. I became paypals president after it acquired my last startup and i moved to facebook a few years ago to move to messenger and to lead the blockchain ever. I described the mechanics of libra and i want to explain why i am optimistic about what libra can offer the worlds. I want to make clear that we recognize we are only at the beginning of this journey. Chairman powell has said publicly that the process for launching libra its to be patient rather than a strip sprint for implementation. These views were expressed yesterday and we agree with both of them. We will take the time to get this right. We expect a review of libra to be among one of the most expensive ever. We are fully committed to working with regulators and let me be clear and unambiguous. Facebook will not offer the Digital Currency until we have fully addressed concerns and received appropriate approvals. Id like to start by sharing the vision. Libra is intended to address an important problem. Imagine a daughter that wants to send money home to her mother. Of the 200 that she sends, 14 on average will be lost because of fees. It can also take several days or a week for a mother to receive the money, a delay that can prove disastrous in an emergency. Not to mention collection points may be in high crime areas. It doesnt have to be that way. Wouldnt it be safer and cheaper of people could receive money transfers through their smart phones just like they do for so many other things today . Thats where theres a balance. Developing a lowcost way for people to efficiently move money around the world. To realize the promise facebook and 27 organizations have found that the end and didnt association including companies in payments, technologies, as well as nonprofits like womens world banking along with staff from the association. It will govern the block cham network and administer the libra reserve. Will establish rules of the road and will implement safeguards that require Service Providers to fight money long laundering and other financial kinds. We expect they will meet if not exceed existing standards and improve the integrity of the global Financial System. When fully formed we expect the association to include 100 diverse members. Facebook will only have one vote and will not be in a position to control the association. None position themselves to be with other currencies. In fact the association will work with the Federal Reserve to minimize the risk of any competition or interference with monetary policies. They are the property of central bank. Finally i would like to turn to the role of realizing the potential of libra. To facilitate use one of many digital wallets will be offered on the network look using the wallets consumers will be able to save spend and send libra from their smart phone. If this is successful facebook will benefit from more commerce across the family. It will be affordable and accessible and will also be safe and secure with strong safeguards to protect the accounts of users and information. We expect the wallets will be governed by rules administered or enforced and will also be regulated by state financial regulators. It is committed to protecting the privacy of the customers and will not share individual Customer Data with the Libra Association or with facebook. Im excited with the potential that they hold and am proud to have initiated the expert initiated it. If our country fails to act we could see a Digital Currency controlled by others whose values are dramatically different. I believe that libra can drive positive change and provide an opportunity for leadership with shared values. Thank you very much. Im going to start out with the question you purchased anticipated. With regard to jurisdiction frankly and the regulatory rules of the road, it seems that Digital Technology innovations may be inevitable and could be beneficial. I believe they should develop what the rules of the road should be. You vindicated your awareness of the sec. s remarks yesterday, a statement that chairman powell gave and responses to the chairman of the committee and other concerns that have been raised by federal regulators. By setting up libra in Geneva Switzerland it makes me wonder whether the rules of the road and supervisory oversight will be focused more on the swiss financial supermarket authority but in your testimony you state as you stated today that facebook will not offer Digital Currency until we have fully addressed regulatory concerns and received appropriate approvals. My first question is do you agree with me that the United States should lead in establishing the rules of the road in the oversight of libra and similar initiatives . Thank you for your question. Yes, absolutely. I agree that the us should lead and i want to reaffirm that we chose switzerland not to evade oversight and is a well established place for headquarters, even in the bank of international settlements. Despite the fact that the association will be headquartered in switzerland it will register and will have oversight from us regulators. I appreciate that. Youve already indicated that you see in the United States that you will need to deal with ofd c, sec, and state regulators. The United States approaches regulation of data and data privacy in a sec tour away. We have multiple regulators over different pieces of economic tivoli and other types of social like tivoli. Europe does this differently across sect theres. In the financial world we have the treasury, the Federal Reserve, the fcc, fdic, cfpb, and f hfa. My question is have you analyzed and determined which have all of these regulators would have a piece of creating the rules of the road if the United States stays on this approach . This is not for me to say but all i can say today is that we are committed to the working until satisfying all the concerns and beat the regulatory bar before we proceed. In the us there are a number of regulators that we are engaged with and are also engaged with working groups including the finance ministries and Central Banks looking into libra. We are working collaboratively with them as well. I understand that you cannot tell us which agencies are really going to take a claim to some piece of what is happening with the establishment. You have committed that you will comply with regulatory requirements of all regulators . Yes. Let me go to one more question. Ive got a lot of them and will have to submit some after the hearing. You recently told the Banking Committee that facebook collects data from transactions that occur on platforms and use it for advertising and personalization. Will you describe the personal Data Collection on platform transactions . What im talking about is will this type of information we collect did for transactions that use the wallet . When a user buys a product through facebook through could calibra for example, will they allow other s to be used . If you could explain how that will work. One thing that is important, and i want to state this clearly, we will have to compete with a number of other wallets that will operate on top of the network. The network will be interoperable meaning that wallets can send money from one to another which is not possible with the current system. As a result, to earn the trust of people we will have to have the highest standards when it comes to privacy in the way that we built calibra. No Financial Data or account data is actually collected to offer the service will be shared with facebook. The way we built this is to separate social and Financial Data because weve heard from people that they do not want those types of data streams connected. This is the way the system is designed. For transactions that would happen on any of our family of applications, the same way that any merchants complete transactions, we will offer options for people to pay with credit debit cards and other wallets as well as with their calibra wallet. In response to the questions, the only one with, talk about competition, we are the only one with the reach of 2 billion people. Facebook has a long track record of abusing the trust of users. Until recently you added the messaging team as they were allowing other Companies Like netflix and spot if i and the royal bank of canada access to read private messages. To be clear about what went on, facebook told us they were keeping data safe when they were really allowing other companies to sift through private messages. You had to shut down programs after huge backlash. Over and over facebook has said Just Trust Us and every time Americans Trust you they seem to get burnt. Facebook told the sec that it would stop abusing data and then last week out of 5000 million five dollar fines for violating that agreement. Youve even run psychological experiments so sitting here today, after all of the times that facebook has abuse the trust of the public, do you really think people should trust facebook with their hard earned money . Yes or no . Senator, you heard directly from mark and i will reiterate, that its i didnt hear directly from mark. Weve made mistakes in the past and we have been working and are continuing to work very hard to get better. Weve invested in a number of programs on a number of other issues but one to answer your question directly. The reason we designed libra in such a way that facebook will be one of among 100 of the association and will have no special privilege means you will not have to trust facebook you know better than that. You know that only facebook has access to 2 billion people and to see that you are just one of many is simply not true after peoples data and private messages have been stolen and sold, after youve let russian bots try to throw the election with no contrition, i might add, and you have abutted genocide in foreign countries, you really think people should trust you with Bank Accounts . I think thats delusional. Let me ask a related question. If you think hardworking families should trust facebooks monopoly money i would like to see how much you and your Company Trust it. You get a paycheck in dollars i assume. I assume you get good compensation. Will you pledge today in this committee that you and your team working on this project will accept 100 of your salary and other compensation in this facebook currency . Libra is not designed to compete with Bank Accounts or the question is will you accept all of your compensation in this new currency that you want us to trust you so much . Libra is not meant to compete with Bank Accounts. We will for instance not pay interest. Its like digital cash. Thats really avoiding the question. Do you trust your currency so much that you and your team are willing to see 100 of your compensation be paid to you in that currency . Which it could be if you decided it could. If your question is whether i would trust all of my assets in libra the answer is yes i would. My question was you trust this enough to make your Company Compensation paid fully in your currency . I would because it is backed one for one with a reserve. You could have said yes at the beginning of the question. I wanted to clarify that we are not trying to compete with big deposits. Let me finish with the last question. You said you are open to facebook about your Company Creating it and you said you are open to feedback about your Company Creating a new currency. I told you that i think this is a bad idea. The republican chairman has raised concerns and the democratic chair has demanded you give up on this project. And to embrace numerous and serious concerns. Thats not to mention leaders who have raised serious alarm. Is there anything that elective leaders and experts can say will not convince you in facebook that it should not launch this currency. We agree with the concerns raised by chairman powell and many others. This is why we released so much ahead of any public launch, because we wanted to ensure we take the time to get this right. That means addressing concerns in full and ensuring theres proper regular oversight we are fully committed to doing what it takes. Those who have seen the collective amnesia in terms of what happened 10 years ago in my zip code in cleveland, 44105 where there were more foreclosures than any zip code a decade ago in the United States, if all of us find this to be a bad idea and think you should not do this lunch are you still going to do it . What i heard from chairman powell, there are serious legitimate concerns that rose from libra and will commit again to do what it takes to address concerns and if those are not addressed in the Regulatory Oversight is not appropriate, we will not launch until it is. That speaks to their accountability and their trustworthiness. Thank you mr. Chairman and marcus for joining us. We had to act now what could be a constructive innovation and Financial Services. I think there are tremendous benefits in Blockchain Tech knowledge he encryptor currencies. I think its clear that they could help us lower transaction costs, facilitate access to capital, provide pseudonymity and other forms of currency have not. Limited pickup as a medium of exchange may be explained by the volatility and here we have what strikes me as an interesting matter iteration as a mechanism to provide volatility. I think we should be exploring this and considering benefits as well as the risk and take a prudent approach to announce that we have to strangle this baby in the crib is widely premature. Let me ask a question about the ultimate motive. It seems that if this is to unfold, and calibra and libra were adopted widely they would be very while valuable data about payments. In your testimony my understanding is that it is your intention never to share, so this is for calibra, never to share that data without consent. Is at the Business Model or the plan to at some point in the foreseeable future seek the consent of the participants so that you would be able to commercialize that data somehow . This is not the intention at all. The plan as far as facebook is concerned to monetize calibra is actually to enable 90 million Small Businesses currently on the platform and many users on the platform as well to engage in more commerce together. If they do there will be more advertising from those Small Businesses which would be a first indirect effect of having a network be successful. Then over time what we hope is that through the calibra wallet we can offer more services and partnerships with existing banks and Services Companies to drive Revenue Streams for the company. The intent is never to seek the content consent of the consumer . I cant think of any reason right now for us to do that. My understanding is that basket of currencies invested in liquid high quality assets used to provide Intrinsic Value of this currency, it would be presumably income from that. Lets assume that we have more positive than negative which generates a regular stream. At some point that could substantial. I saw a reference to paying out dividends but this is also described as a notforprofit so it strikes me as odd for a notforprofit to generate what could be huge income and distribute it to investors. That sounds like a for profit. One possibility is that you could pay dividends in libra to reflect the value of the income from the underlying assets. Could you explain how paying potentially unlimited evidence to investors is not a for profit operation . Thank you for your question. I want to address the fact that libra does not pay interest because libra is like cash and mainly going to be used as a payment instrument. As far as the interest and the notforprofit goes, the way that this is structured is that it will have income that is targeted towards paying the operating costs of the association and potentially returning some return to all of the organizations that will invest in the ecosystem to make it happen. The plan is not for this income to be unlimited and to have all of the income going back to investors. We will need to find a way over time to create new pools of incentives that go back to people and businesses using the network. This is part of the conversation of how to manage those returns and how to have appropriate oversight with this working group that g7 organized with banks and financial ministries. I believe they will require specific oversight and Regulatory Framework in order to ensure proper management. Thank you mr. Chairman. Thank you for being here today and i appreciate you being in front of the committee. I have a number of concerns, one of them being consumer currency. And currency like that coin transactions are final. If somebody gets hacked or somebody steals in bit coin theres not much i can do about it. On the other hand if funds from a inc. Account is stolen or fraudulent purchases on a credit card the consumer is will always be held. I can speak for the calibra wallet it will offer Consumer Protection against fraud and account recovery the same way that the leading wallets today out there and Financial Services come provide for customer protection. In a situation where fraudulent charge has been made with my account, you are saying that calibra will make the consumer hall . Thats correct. Is that immediate . And will it be without questions . What im asking is is i if i pull out my credit card and it falls on the ground but when they take that credit card to cleveland, the bank always makes it fine. And its immediate. Will it be immediate . We will do our best to resolve those types of issues as fast as possible and we are investing in 24 seven live Customer Support to ensure that we can resolve those issues. Its critical that that is resolved. When i deposit money into a bank i am confident that i can withdraw. My grandfather was not, by the way. Even on these homesteads every once in a while you will find a glass jar full of money because they did not trust the bank. It was only when we got deposit insurance that they provided that kind of faith. What kind of faith to be have in libra. Libra is going to be back by a reserve one for one so its never going to be a fractional reserve. As a result it is to signed to be stable and retain its value. I got that. As a Ranking Member pointed out in 2018 2008 there was a run on banks and a number of companies that went belly up. Nobody anticipated there would be a run. Nobody. I still felt comfortable that the money was safe in my bank. How can you do that when we are talking about a forprofit entity. You are doing this just for the fun of it. How can we be assured that the money is going to be there . When it comes to libra, because the reserve is one for one and not fractional, the issue that weve had and the events that youve highlighted our because some of the institutions did not have appropriate reserves. They also want appropriate Regulatory Oversight to ensure that anyone will have the ability to understand how big the reserve is and how many coins in circulation at any point in time to rest assure that the value they hold is backed at any given point in time with the same amounts in the reserve. The reserve question has to be answered by a way thats not up to you guys to determine what the reserve is. When times get tough, stuff happens. There has to be that kind of reliability there, otherwise you are a big outfit. There has been a lot of comments brought up about some of the stuff that has happened that has not been meritorious, and ive been generous. It has to do with bad actors. There are people on facebook doing stuff all the time that heavy different agenda. How are you going to prevent actors from using the application . The past performance has been not that aggressive. Let the money come in and we will worry about it. It has had negative impacts worldwide. Tell me how you are going to prevent bad act is from using this. When anyone opens calibra accounts, you will need to open separate accounts. You cant just open calibra accounts. You have to authenticate and upload a government issued id. We will have real identity on top of the wallet and have systems and a dedicated team to prevent fraudulent tech tivoli and of course to meet requirements of antiMoney Laundering and funding monitoring. Its a huge issue and i think would and if it the effort if facebook did a better job doing exactly what you said. Thank you for being here. Thank you for being here. First off i would like to associate myself with some of the comments. Its a good idea for us to explore this because quite honestly cryptic currency is kind of a wild west that is not very well regulated. There are a number of examples that im aware of before consumers have lost everything with their engagement with some of the betterknown crypto currencies out there. Im trying to understand the distinction. You will have a Transaction Processing platform that i think several people have agreed to enter with the intent of using the underlying form. You are not creating something at the expense of Credit Card Companies or other wallet platforms. Is there a facilitator to assume they are trusted him at platforms . Yes sen. And i want to stress that both visa and mastercard are taking this journey with us as well as paypal and a number of other wallets. I want to also stress that you dont have to become a member to accept libra as a form of payment or to build services on top of the network. Theres a distinction between the currency which would be libra and the underlying infrastructure you are providing to facilitate payments. Is that correct . Thats correct. What kind of Capital Investment are you projecting if you are hoping to launch next year . I assume you have an exhaustive limitation plan. What investments are you looking to put on the underlying infrastructure . I think thats one of the reasons why facebook is an appropriate response. We have the resources to innovate and we are ready to put those to build valuable tools and thats what were going to do here. We have not determined exactly how much we are going to invest. This is a process it would be a part of the investment . Every member will have an opportunity to invest and participate in funding the network. I think something that would be helpful is to get a briefing on the entire stack. I think you said repeatedly you are not a bank. You cant have a run in the traditional sense to understand what you are doing. I think it would be helpful for Committee Members and staff to understand what a briefing of that type would be. But ive been able to study is fairly limited in terms of understanding what parts of the stack will be subject to some kind of oversight. I want to express the concern. We had a Committee Hearing on judiciary last week talking about how social media platforms have been hijacked by transnational criminal organizations, by pedophiles, sexual predators, i dont think you ever implemented implemented for the purpose. I hope that as a part of your implementation you are looking at the ways that your payment platform like all of the other ones could be potentially exploited. I believe that the United States can follow jurisdiction, we can leave that and i believe that in the same way we have the Gold Standard for banking, we have an opportunity to set a standard that will ultimately provide rater Consumer Protection for a lot of the other equivalents. Not exactly equivalent architecturally but i think its worth you all doing this. I have concerns about privacy and potential exploitation of the platform but i believe the United States and a consortium wellfunded is more likely to produce a Gold Standard that drives down the cost of transactions. Actually it provides better value for people who have the least amount of money so i look forward to seeing this develop. Sen. Warner . Im all for financial innovation and distributive ledger Tech Knowledge he but i share concerns that my colleagues do. We looked back during the antitrust investigation in the 1990s and they found that a key strategy that microsoft use which was called internally, embrace extend extinguish, either copy it or tie it up. It has been a technology that facebook has used extraordinarily. We move into blockchain and has the ability to be disrupt. Why should we not view these as another manifestation of catch and kill approach . The way that weve developed Early Technology is that we have invested and put best engineering talents building the code base for the network. As a result it does not belong to us. Is belonging to the community and they will help build the code. We will relinquish control over the code base. Will you commit that facebook will not develop preferential incentives that unfairly tie calibra, which will be your moneymaking venture, two other facebook products as a way from prohibiting libra users to use wallets other than calibra . I would even go further which is not only have we started technology and shared at an open source thats thats not quite the question. You didnt answer questions when you said how do you make sure existing Global Platforms like messenger will actually support thirdParty Wallets . Will you at least clarify and say facebook will make sure that they will support third Party Wallets . Yes or no . I want to clarify please answer my question. The network is interoperable meaning that people using the network will be able to send and receive from other wallets. If a user wishes to use a wallet other than calibra will you make it easy to allow export of keys, Financial Data and other data . If they say i dont want calibra, i want a new one, will you make it easy . Potential interoperability for use of these wallets, same approach when you lay out the legislation and interoperability on existing platform use . I hope that your commitment will extend to current applications as well. Can i get a commitment there as well . It would be really great if you could make the same commitment on facebook basic products. If we want to bring in competition we have to have interoperability but at least on calibra youre on the record can sure you put no barriers in place. We believe this is actually primordial, that consumers have the ability to move from wallet to wallet to ensure there are Competitive Dynamics working in favor of consumers. I will come back again to the question about your globally dominant platform products in terms of whats up in terms of messenger and supporting projects other than calibra. Every time you start with i want to clarify it gives me a great level of pause. He has asked the question, i have asked the question. It seems easy. Messenger, globally dominant products, will they support thirdParty Wallets or have incentives that will push people to simply use the facebook product calibra . This is why i want to clarify if i may. Its a nuanced answer. If your question is whether we will embed other wallets inside of whatsapp and messenger the answer is no. If youre asking whether others will have full interoperability meaning that you dont have to use the calibra wallet to be able to send or receive money to people using the wallets inside of messenger, the answer is yes. Embedding is different than putting preferential treatment. I do not get to questions around thirdparty developers having concerns but again, i think some of the questions youve asked is one of the reasons we are going to take a great deal of time to work through this. Mr. Marcus, thank you for appearing here before us today. I just wanted to take a moment to commend the south Dakota Division of ranking for forward thinking and willingness to allow for innovation in the Digital Currency space. Another founding member, anchorage, received permission to become a south dakota chartered Trust Company thanks to the business friendly climate in my state. Anchorage which is a crypto country has chosen to open in sioux falls south dakota. The significance extends far beyond the borders. Will serve as a model for how governments can study and learn about Digital Currencies and at the same time allowing Companies Like anchorage to innovate. Once again congratulations and welcome to south dakota. Ive had an opportunity to travel to africa and watch whats going on in the challenges they have with small amounts of value. Yet on a day today basis there are literally millions of people that look to buy small come incremental items on a dayto day basis. They dont have any type of a product really that works well and is internationally based. Can you talk about what you see in other countries . The direction they are going and what the opportunities are for this type of a platform to allow a simple and inexpensive way to transact values received or currencies or product commodities in Exchange Without a high cost of doing so. I havent really heard that discussed get today. I appreciate your question. The way that anyone in the world will have the ability to use libra using the wallet of their choice will be to install a small application on an Android Device with the basic data plan. From that point on, have the ability to move from the cash economy to the Digital Economy and benefit from the ability to transact not only domestically but internationally. And, benefit from services that will be built by other companies as well. We really hope, and this is the ambition, that we can lower barriers for those who Access Services and massively lower costs for people who need it. And in the process, lower access to capital because if suddenly you have a Global Platform enabling free or low cost money movement, then access to capital should be cheaper and the barriers below are. I think youre going to have a lot of competition and there will be a lot of organizations that understand that this is the wave of the future. I think the questions have been fair and have the platform be allowed. I think thats going to be an item of discussion but with that also comes the regulatory layout that you work with an. Youve chosen to set this up in switzerland. What does switzerland offer that the United States did not . And, what is it about our Regulatory Framework that puts us, perhaps, at a disadvantage . The choices switzerland is not to evade responsibility or Regulatory Oversight. Its really because we believe that a digitally native currency that will be used by people around the world would benefit from being headquartered in an International Place that is also the home of many respect to the international organizations. That was where we came from. The reality is if you look at the current of the members, these are mostly American Companies. This is an american subsidiary of the country and will operate in the us. The beneficiaries in terms of companies of the network will likely be American Companies under the american jurisdiction and with proper oversight. I think the proposal has huge potential and i think the challenges in the exchange per Services Still have lots of obstacles to overcome including that of security and privacy but we will look forward to observing and participating because i do think its the way of the future and as one senator said, we are going to be responding to that are actively involved in learning from it. Senator . Mr. Marcus thank you very much. We appreciate you being here and answering the questions. This is obviously very innovative and is exciting. I do have a couple of questions of if youve thought through some of the concerns that many of us have. One for me is something that i doubt with, the issue of Money Laundering. I know there are clear Regulatory Oversights that we have to address the issue of Money Laundering, but one of them is moneylaundering support and tariffs financing. How will the association itself be ensuring that it is guarding against any type of Money Laundering tivoli . Have you thought about that . Yes and this is something i care about deeply personally. The way that we are thinking about protecting the integrity of the network from Money Laundering, terrorism funding, is by not only moving a lot of cash transactions which is where most crimes currently happen. We believe that if a lot of transactions move to digital it will be better. The way that we are applying programs is as far as the calibra wallet is concerned we will have strong identity. For every new account opened you will have to upload a government issued id and authenticate. As a result we will have programs on the calibra wallet. As far as the Libra Network is concerned we will have a program there as well and despite the fact that the association will be based in switzerland, it will register with simpson and as a result will have to comply. Im glad you brought something up. With the association itself fallen to the Bank Secrecy Act jurisdiction . The association will not actually touch consumers. It will just organize so who will be subject to the secrecy act . The calibra wallet in the wallets that are operating under that jurisdiction will of course comply and perform qic and have aml programs. We will engage with the treasury to make sure the set up of the network is not only not going to take a step back in terms of the efficacy of the programs but improve the efficacy because of the way we are cementing and configuring the network. So you are currently talking to get signoff of how you will adjust moneylaundering issues . We are. I appreciate you providing transparency. And, this is a new day and age. When it comes to cash and carrying around a briefcase of cash, transnational terrorists dont do that you are creating is an opportunity for them to engage in continuing Money Laundering and criminal act tivoli, so know that. Thats one to say we will be complying with a tiffanys is one thing. I want to see the specifics so i appreciate your willingness to talk with us about how we address this issue. Another one that has come up as i sit on the Banking Committee here which we have talked about several times is sanctions laws. The head of policy and communications was recently on a podcast and asked how libra would react if government require that the association blacklist certain addresses in order to comply with sanctions laws as is typical in what we do here. The response was quote, the association will not interact with any jurisdiction and instead leave that to the entities that provide an on and off ramp to the currency. Can you clarify that . How are we supposed to address this issue when it comes to blacklisting and sanctions laws . This is a question they we are also engaged with the Treasury Department on. The one thing we have committed is that we will respect the travel rule and as a result perform the right checks including ofac checks. This is definitely true for the calibra wallet. I dont know in what context those comments were made but i believe that it may be because the association is not running anything. Its just coordinating governance. The actual Service Providers that will be regulated providers will enforce travel rules, and ensure that those who are subject will of course perform those functions. I noticed my time is up and i have for the questions. I will submit those for the record as well. Sen. Kennedy . Im going to move kind of fast so i apologize in advance if i interrupt you. I only have five minutes so im going to first agree with a lot of the comments that the senator made that we need to encourage innovation. But i want to explore the underpinnings of labor. Can we agree that a banker should be trustworthy . Yes sen. Should we agree that they should be honest . And should we agree that they should respect the customers privacy . Yes of course, we are not going to engage in banking. Then we agree that facebook knew that in the spring of 2016 that russia was attempting through facebook to disrupt the us president ial election . With regards to those events, we definitely moved to slow. Isnt it true that your general counsel and chief Security Officer knew that in the spring of 2016, that mr. Zuckerberg and your cfo knew that in december of knew that in december 2016 . Is it also true that you did not tell your word of directors and they did not until 2017 . Until september 2017 . Is that accurate . We moved to slow to recognize the activities happening on the platform. I dont mean to interrupt. In september 2017, when Senior Management told your board of direct theres, facebook also issued a statement saying the russians have tried to disrupt the election on facebook but only spent 100,000 and only ran 3000 advertisements. That was a lie, was to . Im sorry sen. That was a lie, wasnt it . Later facebook admitted that actually the russian advertisements had reached 126 billion people, didnt they . I believe that the people who answer that question at the time answer to the best of their knowledge at the time to when mr. Zuckerberg was conduct in his tour across the country, the first half of 2017 i think, when he was feeding cows in wisconsin and minneapolis. He knew about the russian involvement, didnt he . I dont know, senator. He didnt say anything, did he . I dont remember the timeline, senator. Okay. In the spring of 2017, spring and summer, our Intelligent Committee in the u. S. Senate started investigating the russian attempts to disrupt the election. Through facebook. Facebook issued a statement saying there were no such attempts. That was a lie, wasnt it . Senator, i dont remember the timeline, and i believe that people have always answered truthful lelee with the information they had at the time. Okay in. June of 2018, we found out that facebook was sharing user data with device makers, a whole bunch of them, 40 of them. Amazon, microsoft, samsung. Facebook didnt disclose that to the users, did it . Senator, my understanding, and again, it was not my responsibility or my team, is that this was designed to enable those phone manufacturers to build integration within the facebook product to serve those consumers using these devices. Okay. Your algorithms are such that if i watch a video on a topic, im immediately shown videos on more extreme versions of that topic. We call that stickiness, is that correct that . This is not the way that the facebook platform operates today, senator. But it did for a long time, right . Senator, mark really led through we agree on this, facebook has now become the major news source for many, many people. Probably the major news source. Is that true . I dont believe it is, senator. I believe that more and more people are interacting with other 60 of your users say they get their news off facebook as their primary source. Isnt it true i really want your opinion, that facebook has chosen to advance a set of values in which truthful reporting has been displaced by flagrant displays of i dont know how to answer that question, senator. Okay. Heres my last question. And i agree, senator, i have Great Respect for facebook. But facebook now wants to control the money supply. What could possibly go wrong . Senator, we will not control either libra, the currency, or the association. And we agree that no company should control such a network or Digital Currency. Id like a second round if we could, mr. Chairman. If we have time, i will be glad to do that. Thank you. Senator smith. Thank you very much, welcome. So i got a lot of questions about this. Youll understand the level of skepticism that you see here. And i appreciate you being here to answe questions. I want to try to understand a little bit better this association. So the Libra Association expects to have you think about a hundred founding members who together, you say, you will be making decisions about Investment Strategy and regulatory compliance. And social impact goals. Whos in charge . Senator, the way that the governance of the Association Works is that youll have this council of a hundred or more members that will make decisions and will elect a board that will be between five to 19 members. And that board will then of course elect a managing director. And the association will have a staff to perform the governance function that it is supposed to look after. In the United States senate, we also have a hundred members. But its clear whos in charge. Mr. Mcconnell is in charge. So im trying to understand in this sort of im trying to understand, like, you describe almost a consensusbuilding. Will decisions be made on a consensus basis . I understand theres some sort of a two thirds majority. Help me understand how decisions get made. Of course, senator. The decisions are basically the structure of the governance is one where there are certain things that should be really hard to change. And those are important things to the spirit of how the network is supposed to operate, the spirit in which the vfsh supposed to operate. And when it comes to the reserve, by the way, we will need Regulatory Oversight. Would there be, like, a constitution or body of rules that would be agreed to ahead of time that woulded by the decisionmaking . Yes, senator. And it will be made public. How do you parse out the minority rights versus majority rights in this board . As it stands, the way that its starting, every member, if we have a hundredmember, will have an equal voice at the council. What if theres a disagreement . Is the minority then just automatically overwhelmed by the majority in this board . It will depend on the type of decision. Not all decisions will need super majority to reach a consensus, senator. So it seems to be possible in any board, any group of humans, people develop coalitions. And it seems to meet question about how every voice is gonna be heard in this incredibly powerful association headquartered in switzerland, this is board, like, a Corporate Board in the sense what if theres a conflict of interest that develops . We hope that well avoid conflicts of interest, of course, senator. But again, we have a lot of work to do. Between now and the launch. And this is why we shared our wide paper early on, to get all the feedback and the input. And assure that we can address all the cashes, get proper Regulatory Oversight. And part of that is also going to be governance of the association. I think these are really, really important questions. Were imagining this association headquartered in switzerland who would have amazing power over the Financial Health of this country, over my constituents and over i think these questions of accountability are extremely important. Let me ask switch topics a little bit. Whats the longterm Business Opportunity for facebook here . Senator, two business opportunities. One is really the ability for the 90 million Small Businesses and the many users we have on the platform to transact with one another. So as a result, more commerce on the facebook platform and our family of apps. And if theres more commerce, there will be more advertising revenue for facebook. So thats one indirect effect of enabling more commercial activity on facebook equals more money for facebook. More money. Yes, senator. And the other part of it is if we earn Peoples Trust with the libra wallets, to use it over time, we can offer in partnerships with Financial Institutions and banks other services that will be new sources of revenue for the company. So competing on wallet, getting a bigger market share of wallets. But it seems to me, mr. I know im out of time, mr. Chair. But it seems to me that what facebook is really good at is figuring out how to monetize peoples personal data. Not only the data that they give directly. But the ambient data that facebook collects through many, many millions of activities that we take every year. What facebook is really good at is capitalizing, literally, on that data. And so i have to say im not reassured by your statements that you cant see any reason right now why there wouldnt be datasharing between these platforms. I have some additional questions for the record, mr. Chair. Thank you. Thank you. Senator mcsally. Thank you, mr. Chairman. Mr. Marcus, i dont trust facebook. And its because of the repeated violations ever your users privacy. Repeated deceit. And i am not alone. As you know. In 2011, there was a Consent Decree with the federal trade commission related to your privacy practices. So thats where it started there, with investigative bodies. But it hasnt ended. Even after that Consent Decree, facebook is under investigation again. And the fdc has approved a fine for about 5 billion, just recently. Because of your repeated violations of your users information. For example without users mermission, sharing personal Profile Information outside software developers. Selling that off again. Data breaches. Allegations that youve repeatedly changes users privacy settings wrought notice. The fcc is investigating the sale of personal information from facebook. The new York City Office of attorney general has an investigation. Collection of users email contact, databases, on and on and on. Theres allegations of bugs. Oh, sorry, we didnt mean to allow them to download photos. One after another after another. So i dont trust you guys. So instead of cleaning up your house, now youre launching into another Business Model with libra here. And youve got documents that talk about your privacy commitment for libra. In that privacy commitment, you say that you wont be sharing account information or Financial Data with facebook or any third Party Without customer consent. How do we know that this is gonna change . And how do we know that youre actually gonna do that based on your track record of failing and violating and deceiving in the past . Its a totally fair question, senator. And i want to answer it in two parts. The first is that, as you know, weve been working really, really hard on addressing the issues, some of them youve raised. We have visited incredible resources in election intelligent and price fee. Mark has made it his top priority. And we will continue to do that. Until those issues are fully resolved and addressed to satisfaction. On the libra side, we have designed this network in such a way that facebook doesnt and wont control it or the currency. And that there will be plenty of competition. And i want to take a moment to explain why there will be a lot of competition. First theres incorrupt iblt. So regardless of the wallet you choose, youll be able to pay across wallets. Yeah, i dont want to get into the technical stuff. Im talking built trust issues. You violated privacy in the past as a company. You continued to have issues, you continued to change the privacy, even rules, without informing users. Yet youre launching a new product. And youre claiming that the privacy is gonna be protected. How are users to know that thats also not gonna change . And theyre not gonna be violated . Thats what im getting at. The core issue here is trust. And senator, the point is really that people can get all of the benefit from this Network Without using our wallet. And i know you we will have to earn Peoples Trust for a very long period of time in order to get the benefits of them wanting to use the libra wallets instead of any of the other wallets they have a choice for. So let me follow up else. Your privacy documents say that libra will be transparent, offering customers choices and controls. Detail what is collected, used here, and for what purposes. You can clarify the user will not be able to have consent as to the data being collected . Im sorry, i dont understand the question. Okay. For libra you specifically say in your privacy document, that there will be easytounderstand controls on what data is being collected. So will the user have one cent for their data being collected . Yes, senator. Again, do they have to consent in order to use libra . Yes, senator. So its really no choice, right . So in order to use it, your data has to be collected. Theres no option to opt out. Senator, if you want to use a calibra wallet, youville to, frin, authenticate and upload a governmentissued i. D. Consumers dont want us to collect that governmentissued i. D. At the very first step, then of course they wont be able to use the service because we will be complying to kyc regulations. So whats the Business Model of libra then . You mentioned the interface with facebook. The more people are using it, the more people will stay on facebook. And then you can just continue to collect their personal information and target them with ads and sell off their information. Is that the Business Model . With respect senator, thats not what i said. But what i said is but thats actually what happens. Ill focus on the specific question you asked, which is that we have 90 million businesses. Many of them that grow thanks to Facebook Advertising platforms. Theyre able to reach consumers and hire. We believe we have the ability to sell to more constituents across the platform. And more people have access to the services and products of those 90 million businesses, then more commerce will happen. Thats wonderful public good that you guys are committed to. I know im way over time. And that was extremely sarcastic. Thank you. Senator sinema. Thank you, and thank you for being here today. Arizonans have heard a lot of promise from facebook over the years about privacy. Two years later facebook broke its promise and monetized our personal message data. To take a role in actively setting , end quote, developers of wallet, exchanges, or other related apps. But feeling that developers would expose arizonan scammers, which is unacceptable, do you stand by kevins statement . Senator, first i want to correct something. Which is that whats app is fully encrypted. So even facebook doesnt have access to messages on whats app. But to answer your question, which is very important. I would say two things. One is that while the Libra Association will not get in the way of Developers Developing things, we will meet as an association to ensure that Publishing Services on the network has controls. Our Financial Literacy is very important. And as the Libra Association, there will be to Financial Literacy. And as far as the calibra wallet concerns, we will have Consumer Protections which will protect your constituents if they ever have a fraud issue. But we will make sure that there is appropriate education in the product from the getgo. That was very helpful information. But that doesnt response doesnt address my concern. If libras goal is to reach a population that studies show are especially vulnerable to financial fraud and abuse without more vetting processes for these developers, arizonans will be more likely to be heres a hypothetical scenario for you. A developer from pakistan utilizes an exchange thats based in thailand to rip off an arizonan whos using a wallet that was built in spain so much they steal their daily bread. And that of course is an administration based in switzerland. Which Law Enforcement or government or agency in the country would the arizonan call to seek his or her financial recourse in this situation . Thats an excellent question, senator. And the answer to that is that your constituents will likely use an american, usbased wallet provider that will have Consumer Protections and that will make your constituents whole if something bad happens to them. In my scenario, this arizonan was using a wallet that was built in spain. Would they still have access to American Recourse for legal and financial problems . Senator, it will depend on the wallet Consumer Protection the same way that today you have different Consumer Protections and Services Offered by different Financial Institutions and others. And i believe that it will be the role of the Libra Association to ensure that there is proper education so that consumers can make informed choices. I think the point here is that despite having legal and technical background in this room, this is a difficult question to answer. This is a real challenge. And arizonans deserve answers. I also have some National Security concerns. Despite granting anony cryptocurrencies are the first choice of traffickers. But libra is not a cryptocurrency. Its a Digital Currency that promises anonymity, which raises concerns about its potential use for illicit purposes. Im concerned that drug cartels and human traffickers, major problems in arizona, may try to beef up their operations along the southern border. Your testimony says youll comply with the rules applied by the office of foreign assets control with respect to financial sanctions. If a drug carteler want or one of its sanctioned persons attempts to complete a transaction using lib remarks would you comply with opack alacy, or allow the drug cartel to be added to the lecture . Senator, first of up libra is not anonymous. We will have an email program. And as far as the libra wallet is concerned, you will have full ky programs. Those types of activities will be very difficult to conduct on this network. And you have my commitment that we will take the time before launch to ensure that the network and proper measures are taken to avoid this network to be used for other purpose purposes. I look forward to working with you. Thank you, senator. Mr. Marcus, thank you for your candor and your testimony. So many voices have concerns about censorship on platforms like facebook, twitter, google and so forth. I worry about the possibility that the wallet and Digital Currency like rib rawould xechd that into the Payment System. There is reason to worry about that. Not to do business with, say, gun manufacturers. Or with government contracts who serve i. C. E. Or customs and border patrol. What safeguards, if any, will libra have on par, people would use that maybe favors an extremely left wing place, like Silicon Valley . I appreciate your question, senator. And youre right that Silicon Valley tends to have a bias. I want to reaffirm that facebook is a Technology Company where ideas across the political spectrum are welcome and treated equally. And as far as the libra walset concerned, we wanted to ensure that people, as long as they have a legitimate use of the product, can do what they want with their money. Of course there are some restrictions and regulated products. But my commitment to you is we will be thoughtful in writing those policies. And well be happy to follow up with you when we get closer to finalizing those policies. It doesnt sound like much safeguard to me other than commitment before you come into pressure from democrats. And just wait till tomorrow. The house Financial Services committee. If you think the democrats on this committee have hounded bank, wait till you see what youre in for over there. A federally licensed firearm dealer wants to sell firearms at a gun show. Or maybe a neighbor wants to sell shotguns to his neighbor. Or a Christian Baker wants to practice his faith when he bakes his cake. Or someone wants to pay a subscription to bright bart instead of the new york times. What confidence can people who have center right views have that libra is gonna be available to them on an equal basis as those who want to shut down gun retailers or shut down Oil Pipelines or Government Contractors or working with immigration and Customs Enforcement . Senator, firearms, for instance are a regulated product. Theyre already regulated and treated as such on the facebook platform. And i know its a complicated issue. When it comes to writing this policy, again, we will im committing that we will be very thoughtful. I have to say that as far as im concerned personally, i believe that we should only get in the way in very exceptional cases. And by being thoughtful of getting in the way of people doing what they want with their money as long as its lawful. But we also need to be thoughtful in how we write those policies. Well, thanks for the commitment. And i do hope we have transparency. I assure you, youll be getting letters from that side of the aisle. That say nothing about Financial Services committee democrats. Just like all the major banks on wall street have been getting those letters. And for that matter, your own workforce is going to bring that kind of pressure in their argument as well. Lets shift gears in the time i have left. We heard a lot of talk about Money Laundering this morning. Its a big problem. I share the concerns weve heard this morning. Money laundering is typically done by individuals engaged in criminal activities like drug trafficking, Human Trafficking and so forth. Theres also the question of sanction sanctions. Noeft almost all transactions are dealt with in dollars worldwide. Could you talk a little bit about how libra would have an impact on the United States dollar as reserve currency . And therefore on the United States government in order to impose sanctions . Is it different for Money Laundering individuals . Were talking about sanctions on nation states like akers ran that is developing thei cryptocurrency and cracking down on others. Im glad you brought this upism believe that if we dont lead in this space, others will. The same way that we will end up having two internets and two different infrastructures, we will have two different Financial Systems and two different financial networks. And one will be out of reach. Of sanctions that are so effective in enforcing our Foreign Policy and continuing our National Security. And this is why i believe that libra is an alternative that consumers will have the ability to use with wallets that will effectively enforce the sanctions that are led by our National Security treasury. I believe that if we stay put, were going to be in a situation in 10, 15 years, where were really going to have half of the world that is going to operate on digitally based technology that will be out of reach from our National Security apparatus. All right. Thank you. Thank you, mr. Chairman. Mr. Marcus. So on cyber security, on foreign interference, on privacy, on extremism, on safety, is it fair to say youre still working those problems as a company . Yes, senator. We have a number of issues that were hard at work on. So youre working on solving those problems. They are not fixed yet . Some of them are. And a lot more work. Id say that some of the areas that we had in the past right. But interference, privacy, extremism, fake news. Which ones of those have you fixed . Well, for instance, senator, the issue that happened back in the day hold on. Not which ones have you made significant progress. Have you fixed any of those . I say that all of them will always require a great deal of work. Lets just pretend that the two of us are having a conversation. My question this is. What do you say to someone who says maybe before you do a new thing, and an enormously important thing, under go ahead and make sure that youve got your own shop fixed . What do you say to that . Senator, i believe that the status quo is really a huge burden on so many people around the world. Hold of youre making an argument for cryptocurrency generally. Youre making an argument for this appropriational generally. The question viis facebook. Has a lot of problems. You guys have had a rough couple of years. The question is why are you moving onto a new and challenging thing other than the grandiosity of Silicon Valley which causes you to get born with your own thing and try to move into a new line of business . So the question is not would it be great to eliminate credit cards for you. The question is not should the United States lead in this area. The question is why facebook . And before youve fixed your other stuff. Senator, i believe its important that we continue to innovate on behalf of the people we serve. And the same way that weve been able to bring communication prices down with our messaging app. Now anyone with a 40 smart phone can communicate for free with the world. We want to continue innovating on behalf of the very people that we serve. And we hope we can do the same thing for them when it comes to the financial side. Do you have specialized expertise with antiMoney Laundering sanctions, protecting Financial Information, preventing discrimination, and other violations of Consumer Financial laws . Senator, i do. Not you personally. Does facebook have that . Senator, through the teams that ive assembled, yes. Now it does. Senator within calibra, that is the subsidy iary that is created. It has the Software Knowhow yes senator. Okay. Does your concertium have bylaws . Senator, the Charter Association is in the process of being ratified by its members. And it will be made public. So thats a no. Senator when we launched, the website and white paper in june 18, we had guidelines. But the reason we didnt want all the other members to sign an existing bylaw or charter is we wanted them to take part in writing it. And so how do you i guess the bigger question, not just the one i asked earlier about you not having fixed your own shop before you move into currency. It seems on the face of it answer, and power, and the idea that lot of people out there think facebook is already too big and too powerful. And now youre gonna get into currency. How do you address that question . Senator, we answer that question with the very setup that we have at the Libra Association and the way that this network is not only governed but the way that we will have to face tremendous competition on top of this network. Can help the very people that we want to serve because we have the resources and the engineering talent, i believe we should. Because of your size. Senator, because of our resources and our engineering talent. Because youre so big that you should get bigger. Thats not the point i was making senator. Thank you. I understand that the libra institution verifies useers and those kind of things. But for Money Laundering purposes, youve got a worldwide issue and partners all over the world, how are you going to get your partners to verify the Third Party Products . And how are we gonna prevent this money lawned snerg i think thats a major concern. How are you gonna deal with your partners . Senator, first i want to commit that we will not launch until we 6 satisfied those concerns with the treasuriy and other regulators around, treasury, and other regulators around the world. But practical tiically, activities such as Money Laundering, terrorism funding will have an opportunity to be monitored. And the intention here is really not per the efficacy of these programs to take a setback. Quite the opposite. We believe we can improve the efficacy of these programs and well work hard to make that happen. I appreciate that. I do concerns about that. As senator brown said earlier, weve seen facebook running into problems time and time again. At some point, if things continue, and especially with currenty like this, if all of a sudden this operates and you continue to see all manner of criminal activity and Money Laundering, at some point an innovative prosecutor is gonna look across the table and say, you, sir, are contributing to this. Are you prepare forward that down the road if you dont do your job . And this currency is used to facilitate Human Trafficking, drugs . Fraud . Things like that . Are you prepared for facebook and all your users to be looked at as criminal defendants . Senator, were prepared to take the amount of time that will be required to ensure that those things dont happen. And that we improve on the efficacy of these programs. All right. We really dont want this creation to be a tool for these types of activities. And this why at this time before launching, were taking so much time and sharing our plans early on and have started this long conversation. And i dont mean thats my question that you intend to do that. I also know theres unintended consequences. And if things dont go right, at some point, somebody is gonna have to step up, but thank you for that. The other thing i want to talk about briefly is taxes. And how some of this will be taxed. The current rif law treats Digital Currency as property. Every single transaction or purchase made with libra will be a taxable event. The transaction will be taxable. So many businesses in the Current Space likely with tax laws by contributing to the irs and the consumer. Does facebook plan on sxroerg reporting all libra transactions directly to the irs . Senator, this is an important issue. And the way that were approaching this is twofold. One is libra, unlike other Digital Currencies out there, will not be volatile through the dollar. So as a result, the variation in price between the dollar and libra will be very, very minimal. But as far as the calibra walset concerned, we will, of course, wallet is concerned, we will, of course, provide all reports to consumers so they can report their taxes without the hassle of having to record all transactions. But thats i understand youre saying that you will provide that. To the customer. But that you would not propose providing that to the Internal Revenue service, is that how i understand that youre just putting the burden on the consumer and the customerer to comply with internal, customer to comply with Internal Revenue regulations . My understanding of this matter is that this is a decision that is in the hands of the irs. And that today, the irs it is my understanding, that they require a consumer to report. But we would be happy to work with the irs to omit continuous errors or to that determination for libra and other Digital Currencies in order to avoid the burden for consumers. All right. Well, i think from the Money Laundering aspect, criminal activity, and the Internal Revenue service, i cant see anything that you got a hurdle to overcome. Thats gonna take some time to, i think, get past all that. Thank you for your testimony. And thank you mr. Chair. All right. Now senator mennen dez. Thank you player, chairman. Mark zuckerberg once said that his model. I only have five minute, which is not nearly enough time to talk about all the promises facebook has broken. The underlying theme here, this is a company that is secondary device not think through the skwns of its actions wonderful nearly 2. 4 billion active users. When facebook breaks something, it has serious consequences. Basically the theme of your response to many of my colleagues on data privacy is trust us. Struft some trust is something you earn. And facebook certainly hasnt earned it. Id like to know how exactly will you keep libra data separate from your social media data . Senator, thank you for your question. I want to also say that in the case of libra, were most definitely not moving fast. And i want to reiterate my commitment that we will not move to launch or to offer libra as a currency or on facebooks platform before just answer my question right now. How specifically are you gonna keep the data separate . The way that we keep the calibra data separate from the rest of facebook is that, actually, within our infrastructure we have separated the data from the rest of facebooks infrastructure and data, in order for it not to get comingled with the rest of the data. Even though in your user agreement, you say that y going to may very well share aggregate data with facebook. Aggregate data that we may use on the calibra wallet side is nonidentifiable data to understand. But thats the beginning of opening up the door. Can you commit that you will notify users within the proper 48 snow showers ascertain, i commit that we will naturally notify users that have would have been affected by this. First and foremost, we want to make sure that it happens. But if it happen, whether purposeful or not, things seem to happen at facebook, will you commit to notifying both the users and the public within 48 hours of your finding of it . Senator, i commit that we will inform users and the public if such a thing happens within a reasonable timeframe. That could mean a whole bunch of things. I have been the author and architect of many of the sanctions regimes we have levelled against world regimes. Iran, venezuela, cuba to mention some. Many of us are concerned about how those countries and how criminals can use libra to evade u. S. Sanctions and Money Laundering laws. Last year, the Treasure Department for the first time identified and published Digital Currency addresses associated with two iranianbased individuals who helped exchange bit coin for iranian cyber criminals that use ransomware to extort millions of u. S. Dollars from ove victims. If libra was use forward a similar transaction, would the Libra Association choose the access of such sanctioned individuals . Senator, i really want to stress the fact that if we dont lead, others will. And as a result of the transaction that you highlighted and listed, will happen on the network where we will have no jurisdiction and no reach and no ability to exert any control for National Security purposes. As far as libra is concerned, naturally because lib remarks despite the fact that it will be headquartered, will be registered in switzerland, will collaborate. Will have an a l program, and make sure things are properly regulated. And as a result, those types of activities should be extremely hard. My core question is having that individual identified, the type i just described, would you freeze the assets of such a sanked individual in your system . Senator the way that this happens and the way that the currency is compensated, it would be the role of the big custodial wallety operating on top of the network line libra wallet and many others to block access for funds for those addresses. As well as all of the on and offramps that would prevent those addresses to one other question. I have a whole bunch of them. But ill submit them for the record. This doesnt assuage my concerns as it relates to sanctions that we have worked on a bipartisan basis in the past. With the Libra Association, what would they do if u. S. Regulators wanted to enforce sanctions on certain individuals but other Global Regulators did not . How would the association determine which set of rules to comply with . Senator, thats a really good question. And one that were in active discussions with a number of regulators, including the treasure. My understanding of this, and the way that were currently thinking about this is that actually the way to properly police and control the network is through one, the on and offramps. And two, to all the wallets that will im gonna take your word then. Youre not gonna act before. Before you have all these questions resolved. If not, libra would be the wild west of cryptocurrency where Money Laundering, criminals and countries seeking to avoid u. S. Sanctions could be their resolved. And we just cant have that. I agree, senator. Thank you, welcome, mr. Manshingus. One of bests of going last is you get to hear your colleagues comments. Im making a couple comments i hadnt planned to make otherwise. No. 1, senator kennedy rightfully pointed out facebooks failings in the face of russian interference in the 20 establish elections. I know youre working hard to remedy of. I frankly, wish the United States congress was working to remedy it as well. We have a bipartisan bill called the deter act that would say to putin or anybody else that wants to interfere in our 2020 election that they will pay a certain and very high price. So i hope, mr. Chairman, that we will move on that. We have to get to the bottom of 2016. But my goodness, we should be working on a bipartisan basis to protect our elections in 2020. And we have a means to do that. Secondly, i heard a hint of this whole idea that facebook and other social Media Companies are conspiring against right wing voices. In fact, four days ago we had the president of the United States, the social media summit at the white house where he summoned some of the most right wing extreme social media voices. Impaled this idea that the president s own twitter account was somehow being blocked and limited. And yet within the last 48 hours, weve seen what a grotesque lie that was. This is a president who just spews forth all sorts of racist comments over the last 48 hours. And it does light the challenge social Media Companies have in trying to make sure that they monitor Community Standards to prevent incendiary comments that can cause harm or danger. And at the same time allow freedom of voices on the internet. I hope were getting away from this nonsense that we often hear from the president and others about this kind of bias and senorship. And i hope well have more voices that exercise their First Amendment rights to speak out against the president s racist comments. Third, realtime payments. Im looking forward and enjoyed this discussion here. Every time the federal chairman, the chairman of the Federal Reserve, chairman powells come before this committee and others ive asked them why it is the United States government is so far behind our European Partners and many others in realtime payments. The fact that we dont have a system in this country that can clear realtime payments today costs millions of americans billions of dollars. And they should accelerate their efforts and get it done. And i personally do not think we should hand that over to a consortium of banks. In the country. So lets talk about the conversation here today, specifically. I understand your point saying that whether you trust facebook or dont trust facebook, thats not a big issue with respect to Libra Association. I have questions and concerns, and youve heard them today, about the Libra Association itself. The uncertainty around bitcoin, to me, means its not gonna be put into widespread use. Whereas here we have billions of people around the world using this new point, right . That is the goal. It is to help the people who dont have access to currency. The idea is billions of people, and because this is now gonna be tied to other currencies and supposedly be more stable, it would be in very widespread use. So there are huge concerns can the organization itself, the Libra Association but you do have to trust the Libra Association. And theyre doing something very different. Theyre creating a new currency that is intended to be used by billions of people. And i think there are lots of questions that you still need to answer regarding that structure. I think people will conjure up the james bond move and he that organization, specter. And unless youre really clear about how this is gonna be a transparent association and be accountable in all the ways that have been discussed today, then its not eye question of whether people trust facebook or not its a question of whether people trust this international this organization. Run by private companies. And my view is when youre talking about a world currency thats gonna be potentially be used pie billions of people, im in the sure thats sufficient accountability that you could build into that system that will answer all the concerns. And i look forward to the continuing conversation. Thank you. Senator brown and i will both go with another round of questioning. And i think that will be it. We may have another senator or two show up. So with that, senator kennedy. I want to follow up on the senators concerns. And i think the basis for his concern is we can agree on this, i think, that facebook not really a company anymore. Its a country. You got 2. 2 billion people. I dont see anything in the documents that ive seen that prevent the members of calibra, once libra is prevalent throughout the world, saying we dont believe in abortion rights. And we have the transaction data of all these people so much were gonna say if you believe in abortion rights, you cant use lib r. A. Or vice versa. And you could make that assessment on the basis of any persons position on socioeconomic issues. I think you need to address that. Let me ask you a question about a game. Theres a big issue in trust here. In may a couple years ago, i think it was 2016, there was an article appeared that quoted news curators at facebook. They were in charge of the trending news section. You know what im talking about . Yes, senator. Right. I dont think they have it anymore. But testified that theyd get instructed by the management of facebook to suppress news stories of interest to conservative readers. Even if they met the qualifications of trending. And they stated that they were told to suppress news stories about cpac, mitt romney, rand paul, ted cruz, articles from the washington examiner. And one of the curators even kept a log. Is that true . Senator, i juan part of that team. And im not aware of how it functioned. But that product doesnt exist anymore. Okay. The news curators also tell that they were instructed to include in the trending news section articles from certain public eggs whether they were true or not. And of two those were seen in the new york times. Is that true . Senator, i wasnt involved and it was not my product team. It might have happened even prior to my time. I do want to say though that facebook really is a Technology Platform is neutral. Im familiar with facebook. Let me ask one other question. They were told by management not to ever put an article in the trending news section about facebook. Is that true . Again senator, this was not my team and im not aware. Okay. Is there any data that facebook has on its customers, if you will . That on principle facebook wouldnt monetize . Senator, the way that the data is used on facebook, when it comes to monetization is enabling better ads, to show better ads to people. Im sorry to interrupt you, i get that. But is there any data that on principle facebook would say were not gonna make money on in . This crosses the line. Have you ever thought about that . Well, senator its not about making money. But as far as calibra is concerned its not about making money . Senator, we dont typically look at data in a way that is to make money. Its just to improve the service, including improving the quality of the ads. Let me stop you now. Youre telling me that money is a secondary concern at facebook . Dont you have shareholders . Senator, we we do. But i believe that it is important that we first and foremost serve our customers. And the way weve done it with messaging apps, without notifying them yet is a testament to what we can do to lower cost for people when we have these. I got 19 seconds here. I gotta ask this. Do you know hes people . Indonesiaing senator. Is it true that mr. Zuckerberg told them to meet several times and consider shutting down then candidate trumps facebook website in 2016 . Is that true . Senator im not aware. You just dont know. I do not know, senator. Im not aware. Last question, i promise. Ive heard if you and i interface, on facebook, youre really not just two participants. Its you, you, its me, and its facebook. Is that an crat description . Nothings private . Except on messaging platforms and whats app which are encrypted. In this case it would be just the two of us, senator. Okay. And this really is my last one. If libra catches on, and lets say, 200 Million People are using it, somebody is going to have the data on a the Financial Transactions that those 200 Million People have consummated. Which is gonna indicate what theyre buying, what theyre not buying, what their likes are, whether they like to shop. Just a treasure trove of information. In calibra is going to attempt to montiedz that . Senator, when it comes to those as far as the calibra wallets isnt it the case that at some point, those consumers are gonna be sent an email saying we share your data and the details are right here, click on this. And its gonna refer you to a tenpage, singlespaced disclaimer written by the lawyers in which you could hide a dead body and nobody would ever find it. And theyre gonna start doing it. Isnt that whats gonna happen . No, senator. Thank you. Thank you, senator brown. Thank you for sitting here through this. I normally dont respond to partisan comments from colleagues. But i just wanted to ask the Republican Committee staff to let senator cotton know that every letter to facebook from this committee, from any of us on this committee has come at least have been jointly signed by senator crapo. Did you see, mr. Marcus, its clear from this hearing that mistrust of facebook is a pretty universal feeling here. You heard senator mcsally, on the democratic side, and many others. That is an issue you need to deal with. I want to just read back what you said to me about trust. You said, senator, you heard it directly from mark, and i will reiterate this, trust is primoredial. And i respond and you said weve made mistakes in the past and have been working on them. I know what the word trust means. What and that mean, that trust is primoredial . We found no record that Mark Zuckerberg said it. What does it mean . Ascertain, it means that we need to continue to do better in serving the customers and the users were serving. And well do what it takes to earn their trust, especially in the case as well for libra and the calibra world. This is the same Mark Zuckerberg that once this is the same Mark Zuckerberg the one that trusted him with their data and dumb and the word i can say in this committee. That i can read what he said. People just submit it i dont know why they trust me and he said and a profanity. And then i hear you quoting him and you say yourself that trust is primordial and the definition from the beginning of time and your biggest problem is that people dont trust you so what am i to take from this . That we need to work very hard to ensure that we are deserving of trust. Why would you lead with trust is primordial it is in your dna that you can always trust and just lay out one after another times that you deceived and betrayed that trust. Senator said over and over with all of your problems should we trust you on something as important as a worldwide currency and the damage that can come from it. This is why we set up libre the way we have and we will be one of among 100 different participants that will govern over the currency and as a result we will have to earn Peoples Trust if we want them to use our product and services on top of the Labor Network because they will have on the of choice with established companies that have a lot of trust. You trust us to believe that statement you say one of the hundred your the only one that has access to 2 billion people and the George Orwell people some people are created more equal than others, why should we trust you when you keep talking about all the competition there are 100 players, but no one is like you as the preeminent player. I do want to address this because i believe that there might be some misunderstanding of how the people on the facebook wallet the libre wallet will have to on board. We will not have the ability to on board all people using our product automatically, naturally. We will not even use facebook login, people will have to create a new account and upload their government issue id and as a result there will be a lot of friction and we will have to make very strong commitments so that people trust us and we will have to honor those commitments for a long period of time because while we do that you will have other wallets that already have a number of customers that they can enable libre for immediately and we are not in that position and as a result we put ourselves in a position where we will have to work very hard to earn their trust to use our products and services. So hard to trust when there is so little contrition responding about the 2016 election or what you have done to the media in this country to journalism and what you have done according to the United Nations it is hard for us to trust you with a worldwide currency that you are setting up in switzerland. I believe the status quo is not working for so many people that it is time for you progress to happen in Financial Services for those barriers for so many people to be left behind and cost for so many people to be lower and that is why we are deciding to take the lead on this and then relinquish this lead. I wish we could trust facebook. There is no one on this committee that does. Thank you senator brown. I will ask my final round of questions right now. I have stated in a number of our previous hearings that ensuring that individuals have real control over their data is critical and the United States does not have, in my opinion, adequate assurances in its law. I am personally convinced that if we dont, we have an approach that i indicated and we need to have a more comprehensive broadbased approach and europe has such a law and that guarantees individual with the right to information about the access to their personal data that they would have access and notified and what data is being collected to opt out or in and there should be corresponding responsibilities. Does libre and its associated thirdparty developers, do they anticipate being captured under it at this point in time . It will really depend on jurisdiction and we will have the highest standards and as soon as the Privacy Policy and commitment is written you have my commitment we will share in those with you. Let me get into that. As i understand it using the ball Chain Technology results in limited amount of personal privacy private data actually being collected. And you indicate a person would issue there id and help me understand from this point they would have their id. I assume that is connected to a code data in the block chain. Would libre have the ability to add that to the user. And it is being initiated from the customer or not. They would be using our product. And what else what other data would calibra use if it wanted to . Senator, the mindset in which we are establishing the product and the odyssey of the duct is that it will only collect the information that is required to offer the service and also to keep accounts safe which is, of course, really urgent when it comes to money and because we will have Strong Customer protection programs so we will need to protect accounts and data, relevant data is helpful in protecting consumer accounts. Tell me what some of that is. Lets say it is a retail purchase does that mean the item purchased as a part of that data . That would depend and i dont believe that we need that information either for the purposes of securing accounts or other purposes. I have been told that the block Chain Technology allows an enhancement of privacy protection. Do you believe that is the case that the use of block Chain Technology reduces the potential for the abuse of collecting data on individuals . Senator, yes typically it enables people to use software that they can run on their own and as a result they can create their own sovereign if you will of the data that is used and then it is a question of choice for consumers on one side they can have Consumer Protections and on the other they can be self sovereign. There are opportunities with technology to enable people to own their own data. In comparison leaving the libra proposal and just looking at the Technology Issue of block Chain Technology and the current Transactional Technology we use for credit Card Transactions or Bank Account Transactions and what have you, if we were to see a move globally into use of block Chain Technology for currency transaction, would that be would that represent an opportunity to enhance personal privacy . It can be. I want to learn a lot more about that. Maybe you can give me some information on that. Bucket before we gobble i want to reiterate my belief that it is critically important that policymakers and regulators understand the rules of the road as this project continues to develop. To the extent that gaps within the u. S. Authority become apparent it is worth looking at whether legislation is warranted to ensure regulators are not really being relegated to the sidelines in assessment and oversight of this and others like it. That concludes the questioning for todays hearing. For senators that wish to submit hearings those are do i tuesday, july 23. We ask that you respond to those questions as promptly as you can and, again, thank you for being here. This hearing is adjourned