The head of Facebook’s cryptocurrency project, Calibra, plans to tell lawmakers the company is committed to working with policymakers and regulators to launch its Libra cryptocurrency.
“We know we need to take the time to get this right. And I want to be clear: Facebook (FB) will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals,” said Marcus.
Marcus will testify before the Senate Banking Committee on Tuesday morning and the House Financial Services Committee on Wednesday.
Treasury Secretary Steven Mnuchin told reporters on Monday that Facebook still has a long way to go before regulators are comfortable.
“They’ve got a lot of work to do to convince us,” said Mnuchin.
In his prepared remarks for the Senate hearing, Marcus said the Libra Association expects to be licensed, regulated and subject to supervisory oversight. He says because the Association is headquartered in Geneva, it will be supervised by the Swiss Financial Markets Supervisory Authority (FINMA).
“We have had preliminary discussions with FINMA and expect to engage with them on an appropriate regulatory framework for the Libra Association. The Association also intends to register with FinCEN as a money services business,” Marcus said.
This comes after lawmakers in both parties have raised concerns about the project. When Fed Chair Jerome Powell went before Congress in two separate hearings last week, much of the questioning centered around Libra.
Powell told lawmakers Facebook needed to address “serious concerns” before the initiative could move forward.
Mnuchin called this a national security issue, and told reporters Treasury has “very serious concerns” Libra or cryptocurrencies could be used by money launderers or terrorist financiers.
Mnuchin said regulators have met with Facebook representatives to express their concerns, and he has talked with Powell “extensively” about the issue.
The Treasury Secretary told reporters he also plans to discuss cryptocurrency when the G7 Finance ministers meet later this week.
“Given the international nature of cryptocurrencies, we are going to great lengths to ensure that effective regulation does not stop here at the U.S. border,” said Mnuchin.
‘Most careful pre-launch oversight’
In his testimony, Marcus referenced Powell’s comments about Libra during public hearings last week.
“Chairman Powell has made clear that the process for reviewing Libra needs to be patient and thorough, rather than a sprint to implementation. We strongly agree. That was the spirit with which we published the white paper introducing the Libra project. The time between now and launch is designed to be an open process and subject to regulatory oversight and review. In fact, I expect that this will be the broadest, most extensive, and most careful pre-launch oversight by regulators and central banks in FinTech’s history,” he said.
In his testimony, Marcus stresses that 27 other companies are involved in the project — and it hopes the Libra Association will eventually have about 100 members.
“Facebook teams have led the creation of the Libra Association and the Libra Blockchain and will maintain a leadership role through 2019. Once the Libra network launches, however, Facebook and its affiliates will have the same privileges, commitments, and financial obligations as any other founding member of the Association,” said Marcus.
Critics, like Rep. Maxine Waters (D-CA) and Sen. Sherrod Brown (D-OH) have raised privacy and consumer protection concerns, in light of Facebook’s track record with privacy scandals.
“We obviously have concerns with the privacy issues,” said Mnuchin on Monday.
Privacy, control, ad revenue
Marcus will likely face questions about Facebook’s trustworthiness in the hearings this week.
“As one member among many, Facebook’s role in governance of the Association will be equal to that of its peers. Facebook will have only one vote and will not be in a position to control the wholly independent organization,” said Marcus in his prepared remarks.
Marcus said he does not expect Calibra to make money at the outset and Calibra customers’ financial information won’t be shared with Facebook, so cannot be used for ad targeting.
“Our first goal is to create utility and adoption, enabling people around the world— especially the unbanked and underbanked—to take part in the financial ecosystem,” said Marcus.
But Marcus said Calibra will still lead to greater ad revenue for Facebook.
“We expect that the Calibra wallet will be immediately beneficial to Facebook more broadly because it will allow many of the 90 million small- and medium-sized businesses that use the Facebook platform to transact more directly with Facebook’s many users, which we hope will result in consumers and businesses using Facebook more,” said Marcus.
Marcus said if the United States doesn’t lead in digital current and payments — other countries will.
“If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different,” he said. “I believe that Libra can drive positive change for the many people who would benefit from it. I also believe that it can provide an opportunity for leadership consistent with our shared values.”
Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.