Transcripts For CSPAN Facebooks David Marcus Testifies Befor

CSPAN Facebooks David Marcus Testifies Before House Financial Services Hearing... July 14, 2024

We have a Good Opportunity if we enable more people to participate to offer services that can generate revenue. This is supposed to be a Nonprofit Organization, is in the . Im talking about the calibra wallop which will directly impact facebook. Is it going to be a nonprofit . No, calibra is a forprofit entity and the entity that will dold the wallet that will be offered to facebook consumers. Is Digital Currency illegal in some parts of the world quick skinny touch on that . Gets congressman there are an number of countries that prohibit buying selling or using Digital Currencies. I also want to mention privacy violation concerns things that americans have been concerned with. The american consumer, do they trust facebook and do they feel comfortable with your company . Congressman i believe we have a lot of work to do to earn Peoples Trust and we have two definitely make though strong commitments when it comes to privacy and make good on those commitments for long periods of time. I guess one a mic concerns by sharon i think its bipartisan we are a little concerned. I dont object to innovation in this sounds very exciting potentially but theres a level of mistrust of facebook just because of some of the things that have taken place over the last year. Would you be able to tell us that the ceo plans to come and testify before us as this thing goes down the road . Congressman i cant speak to that but im leading this project and im here today and i plan to continue to engage appropriately. Thank you. I yield back. The gentlewoman from california is recognized for five minutes. Hello mr. Marcus. Thank you for your patience during long testimony today but i want to look back at the history and try to understand what might become our future with libra. Are you familiar with the term wildcat tanker the free banking era . I am congresswoman. I want to open the ice concept that wildcat banks was chartered under state law before banks were federally regulated from 1836 to the mid1860s and they were called wildcat banks according to them. Because they were in locations they were so remote you may see wildcats. The wildcat banks world and reliable. They became known for distributing worthless currency and putting customers at risk and as a result of that in 1853 we enacted in congress the banking act. How is the basic concept of the single currency is a stable coin such as lieber will take dollars and vice versa fundamentally different from wildcat banks where they took u. S. Back to dollar coins in exchange for their own paper money which could and often did become worthless . It. Congressman i believe a very important distinction here is that the reserve will be a oneforone reserve. I understand the banks and the issues that arose from the wildcat banks are actually that they wanted to fractional reserves and as a result had inappropriate reserves to back the value of the currency they were shooting. A good point mr. Marcus. Which regulated will be responsible for ensuring that the association maintains that onetoone reserve . Will be the fdic . Congressman this is a conservative as well and will they believe the association will need to have the right oversight and meet the bar for oversight and guarantee that it cannot deviate from a full onetoone reserve. Sam will it be selfregulation . Thats what the wildcat banks were doing that so victor tune into factual reserve. People put their money in the wildcat banks because they believe perhaps wrongly that their money was saved but without the fdic guarantee isnt this exposing arent you creating a problem tomorrow again . We are not congresswoman but i do share your concerns and thats what i believe having the proper oversight and selfregulation of the Association Level notably under the reserve is important and i want to go further. What i would like is for any consumer at any given point in time when they hold a libra to have full transparency of the value of the reserve backing the libra at any given point in time. Essentially thats always what we believe about banks. Thats where we go to get her money and it will be there but thats precisely why we have banking regulations on fact the expectation is true. I wonder if i could ask you, i know that libra is going to be pegged to 50 dollar i believe i heard my colleague say and 50 currency from a few different of the country so it sounded like whats in my daughters bank which is kind of a mix of u. S. Dollars in money shes been giving friends from. To come back from other countries. Whats the association so to say 100 is that the state Exchange Rate and i would have the effect of the libra currency . Congressman that is why we believe we need the right oversight for the reserve. What is the right oversight . Proper regulation. Lycoming . To be determined by the g7 working group. Fdic . Congresswoman we will not engage in banking it to these. You are going to take peoples u. S. Dollars, give them something that youre going to call currency and you dont call that banking activity . He bucolic money changing to the because we have laws. Congresswoman you have my commitment that we will have the proper oversight and Regulatory Oversight of the association notably on the key issue of the reserve. Respectfully mr. Marcus this is not a personal thing at all but i have had a commitment to so many people who would do the right thing but i have to have better than now. I suggest you check out u. S. Code 46 which makes it a crime to create private money that is a metallic point. I dont see why that statute doesnt relate to digital coin. Mr. Clay whose the chair of the subcommittee on Housing Development and insurance is recognized for five minutes. Sad yankee manager. Mr. Marcus could you discuss what you believe libras ranks is akin to facebook come email or so nearly a new way to move money similar to paypal or square . Congressman at this point its an idea and a concept. I hope its very successful because if it is many people benefit from it and i hope its going to be a big success for the very people that we hope to serve. Think you. Will libra holders be subject to counterparty risk if the reserves are mismanaged . Congressman that reserve will be oneforone and we need to find a proper oversight so that it remains oneforone. Under what circumstances could a holder of libra lose their money . Congressman for instance if they use a wallet that does not have Consumer Protections we will offer full Consumer Protection in such a way that if you encounter fraud or have issues we will make you whole. So that would be some kind of an insurance for the customer . Correct. Its going to be something that is part of our Consumer Protection program when it comes to the calibra wallet. See that my colleagues have already discussed Systemic Risks but i would like to dig a little further. What are your thoughts about having a separate regulator to would only regulate Digital Currencies such as libra . Congressman its not for me to say who should regulate us but my commitment is that we will meet all regulations and worked with and consult with regulators and lawmakers to ensure we do this right. And of course the customer would pay a premium for the regulation. Is that how you envision that . Im not sure i understand your question congressman congressman. Well someone would have to stand up and fund the regulator. How would that be paid for . Do you have any ideas or thoughts on that . Congressman this is not my province. Okay lets go to another subject. What guardrails would be in place to prevent the a run on the libra currency . We have a oneforone reserve congressman. They run on the bank would be impossible provided the reserve and we hope to have the right oversight to make sure that it remains that way. With Portfolio Managers be incentivized to seek higher returns on their investments for Libra Association members . Are you talking about the libra currency itself because the libra currency is designed to be stable and as a result it will not have appreciation. Its designed to stay stable. Can and the Association Members are the investors. Corrects the Association Members invest in the ecosystem in order to kickstart the Libra Network. And so they would make a return on their money how . Congressman my apologies for not understanding your question the first time around. The way that investors make their money back is by having it portion of the income that is generated by the reserve after it is paid all of the costs for the Libra Association. I see. Thank you for your responses and i will yield back the balance of my time. Thank you. The committee will now take a fiveminute recess to set up for the second panel. I would like to thank, i am so sorry it should have thank you first mr. Marcus. I apologize. I would like to thank you so much for coming before this committee and again we will take a fiveminute recess to set up for the second panel. Our next witness is the honorable who is currently professor of the practice of Global School of. T. Sloan management senior advisor, m. I. T. Media lab and codirector of mit. Next witness will be robert weissmann, president , public citizen, and our final witness will be melton dumeers, chief Strategy Officer. Welcome to all of you. Without objection, your written statements will be made part of the record. Each of you will have five minutes to summarize your testimony with one minute remaining, a yellow light will appear. At that time, i would ask that you wrap up your testimony so that we can be respectful of both witnesses and the Committee Members time. You are recognized for five minutes to present your oral testimony. Thank you so much. Members of the committee, thank you for inviting me to testify at this hearing. My name is chris bremmer. Im a law professor at Georgetown University law center. Im here today solely in my academic capacity. It is an honor to be before this committee again. White papers like the one were struggling to understand today have emerged as a common tool through which Digital Asset companies communicate with potential consumers and investors about new projects and ventures. However, white papers have faced mounting criticism for their hyperbolic language, false promises, and omissions of Material Information consumers would need before purchasing a Digital Asset. Indeed the last time i was here to share my views before many members of the committee, we discussed precisely these challenges. But today we have a twist. Criticisms of white paper disclosures have focused on early stage cashstrapped startups. Rarely have they been directed at a Multinational Technology company with the resources to marshall top flight legal as well as technological talent. Yet this time it is different. The libra white paper is peppered with big promises and few details and the project involves risk to purchasers and at least potentially the Financial System that are not disclosed. Indeed, even for me, a staunch supporter of innovation and upgrades to our Financial System, this is at a minimum disappointing. The white paper is no mere public brainstorming exercise or technical exposition, but it is instead intended to condition the market for the adoption of a product that facebook wishes to sell to billions of people around the world. And the lapses are all the more problematic given the security like features of libra coins and possible implications of u. S. Security laws. Given the limited time available, i want to focus on some of the most problematic red flags. First, it fails to inform people in unambiguous terms that they can lose their money, and that runs on the coin are possible. Instead the white paper routinely suggests and doubles down on the idea that libra will virtually always provide stability in terms of the purchasing power of the new currency. But thats not necessarily the case. The libra is subject to foreign currency risk, something the white paper does not clearly acknowledge, and indeed the coin could cost their holders money in the form of lost purchasing power should there be a run on any one of the underlying currencies in the basket. Moreover, runs on the libra itself could be catalyzed for reasons that have nothing to do with the underlying basket, including a hack, or revelations that sensitive consumer data had been shared with facebook or other Libra Association members. Second, the white paper fails to clearly explain that libra holders will be exposed to counterparty risk, should the reserve Investment Strategy prove to be mismanaged or poorly executed. Although, quote, the goal will always be value preservation, end quote, any money raised from interest earnings ultimately go after operational and developmental expenses are going to Fund Dividends to early investors and the libra investment token for their initial contributions. As a result, the fund is structured in a way that creates incentives for the Portfolio Manager to accumulate over time higher yielding investments. Finally, the white paper fails to disclose its promise or how its promise of a secure scalable and reliable block chain could be compromised by whatever is the weakest link in its ecosystem including exchanges in wallets operating in jurisdictions without kyc rules. This is obviously just the tip of the iceberg. With a host of critical questions about the rights, duties, and selection criteria for authorized resellers and Libra Association members, not to mention how the folks are intending to manage potential conflicts of interest. In my written testimony, i show how these kinds of disclosure issues populate the document and are especially problematic since this offering has again securitieslike features including the fact among other things that it appears to operate nearly identically to etfs. Critically these kinds of omissions are more than just a matter of technicality. They indicate varying ways in which potential libra coin purchasers, every day people, are far from fully informed and are not on a level Playing Field visavis libra sponsors. There are 99 problems and this white paper is one. Thank you, mr. Brummer. You are recognized for five minutes. Thank you very much, chairman clay and Ranking Member mchenry. Thank you to the other members of the committee. Thank you for the opportunity to participate in this hearing and examine facebooks proposed global currency, the libra. Im a professor at a law school where i have taught for the past 18 years, mostly in the field of Corporate Law and finance, comparative law, and law and development. Im also the director of the law Schools Center on global legal transformation. Based on my own research, an analysis of the libra white paper and related documents that have been released so far and a close reading of other comments and analysis of libra, i have come to the following conclusion. Facebooks libra is designed to become a new global currency that will complement existing currencies. It is designed as a for profit currency of currencies. The libra white paper promises to create a global safe and inclusive Payment System based on modern digital technology. Libra is labelled a stable coin and as such aims at delivering low volatility and high liquidity to its customers, the holder of libra coins who shall be able to exchange their libra against local currencies without suffering major hair cuts. To this end, libra is backed by assets. The safe assets of choice are Bank Deposits and liquid debt of reputable sovereigns. These assets owe their safety to public backstopping mechanism in the form of deposit insurance and a full faith and credit of the issuing sovereign. In effect, the sponsors of libra and their profit earning beneficiaries will be free riding on a Public Safety net for which they are not paying and are extending the safety net to users around the globe. The main governance architecture of libra resembles currency boards employed by some countries that use currency baskets to back their currencies such as singapore and kuwait with the importance that libra shall deliver profits for its beneficiari beneficiaries. All interest and dividends will be allocated to the members of the Libra Association and are investors in the libra tokens which are distinct from libra coins, the holders of the libra and i would suspect in the event of an insolvency of the reserve, there will be no money transferred to the users of the libra. Essential note of what will become an ecology [inaudible] is the Libra Association based in switzerland. It will exercise control of admission of future members, manage the libra reserve, determine asset managebility for the reserve, decide the protocol for which libra runs and will determine how the architecture will evolve to a permission led system. This concentration of power is unmatched by any meaningful accountability to anyone. The choice of the legal structure means that the members of the Libra Association will be insulated from liability and accountable only to themselves. They will not be accountable to holders of the libra coins nor to the citizens of countries that create the safe assets used to backstop the libra. Facebook plays an essential role in the creation of libra, the first 28 prospect tor members o

© 2025 Vimarsana