Produced | Odaily (ID: o-daily)
Produced | Odaily (ID: o-daily)
Facebook is once again under siege by the US Congress.
After the release of the Libra white paper, Bitcoin once rose by 10%; now it has plummeted by 14%, falling below $10,000, and leading thousands of coins to dive.
On July 16, in Washington, USA, dozens of members of Congress focused their attention on David Marcus, the protagonist of the hearing.
image description
(David Marcus at the hearing, pictured from TechCrunch)
This scene seems familiar.
In April 2018, the 33-year-old Facebook founder Zuckerberg walked into the congressional chamber for the first time. He conducted a 5-hour hearing on Facebook's "privacy door issue".
The following month, Facebook appointed Marcus, who was still in the Messenger business, as the head of the blockchain project. A year later, the Libra white paper was made public. People speculate that having sufficient payment experience is the main reason why Marcus was entrusted with the important task. Before joining Facebook, Marcus founded a mobile payment company and became the president of PayPal after being acquired by PayPal.
At that time, Marcus was responsible for Facebook's reversal of its negative image and its move to inclusive finance. In just one year, the protagonist of the Facebook hearings was replaced by him.
The scene of the hearing was described as "extremely tragic". Members of the US Senate Banking Committee bluntly said that "Facebook is very dangerous" and "no one wants to trust you anymore." Several congressmen took turns to criticize Marcus. The latter was repeatedly reprimanded and interrupted by members of parliament during his answer:
"Facebook is dangerous...they don't respect the power of technology."
"Facebook has failed and abused the trust placed in them time and time again."
"I don't trust Facebook, data leaks, unauthorized collection of user data...although I have received documents about Libra's privacy commitment, how can we trust you to do it?"
Obviously, congressmen and the American people behind them have lost confidence in the company Facebook. The crisis of trust that Facebook was involved in a year ago meant that the first hurdle before Libra’s launch—regulation—was not easy.
secondary title
Libra's Regulatory Storm
Sherrod Brown, vice chairman of the Senate Banking Committee, squinted his eyes and was clearly the strongest questioner in the hearing. He first threw out the very dangerous conclusion of Facebook, and the style of interrupting or repeating questions with dissatisfaction was impressive.
"Trust trust" is the word he mentioned the most. He repeatedly questioned that Facebook has the DNA of violating user privacy and ignoring news professionalism, and even used "what the hell" at the end of the hearing. Ask Marcus how to make everyone trust you again?
The hearing in the House of Representatives has not yet started, but judging from the performance of the Senate, the members of the House of Representatives may be even less polite. According to previous media predictions, the situation in the Senate is acceptable, while the situation in the House of Representatives is more dangerous.
On June 17, 2019, Facebook released the Libra white paper. Facebook's payment ambitions are described in the white paper: "Libra's mission is to build a simple, borderless currency and financial infrastructure that serves billions of people. Libra's goal is to become a stable digital cryptocurrency that will All using real asset reserves as collateral.”
In most countries, cross-border reprinting or even domestic inter-bank transfers cost at least a few points, which is not as convenient as in China. Libra hopes to issue a digital currency anchored to multiple currencies, which can be transferred between people in various countries at low cost.
This yet-to-be-published digital currency is like a stone thrown into a calm lake, not only causing ripples around the world, but also getting itself involved in the eye of the storm of controversy all the time.
The carnival in the blockchain circle, the earthquake in the Internet circle, and the global regulatory siege.
On June 18, the same day that Facebook published the white paper, Maxin Waters, a member of Congress and chairman of the House Financial Services Committee, asked Facebook to suspend the development of Libra, and sent an open letter to Facebook with four other members of Congress in early July. The "Four Deadly Sins" of Facebook are listed:
1. Facebook has influence over a quarter of the world's population. If a crisis occurs, it will have a huge impact on the stability of the US and even the global financial system.
2. At present, there is a lack of clear supervision and protection, and investors and consumers may be threatened by various threats, including privacy, transactions and network security. The large volume of Facebook will also become a unified target for hackers.
3. Considering Facebook's past misdeeds, I don't know whether it can protect user information security.
4. It may become a regulated money laundering tool.
This open letter is not the first bomb that Facebook has received. Before the hearing, the Senate Banking, Housing and Urban Affairs Committee sent a letter to Facebook asking 7 major questions about the Libra project.
Even the Federal Reserve, which said shortly after Libra came out that it was not worried about Libra affecting its ability to implement monetary policy, changed its tone in July. In his latest speech, Federal Reserve Chairman Jerome Powell expressed doubts about the feasibility of Facebook launching Libra on its timetable. Libra raises many serious concerns, including privacy, money laundering, consumer protection, and financial stability, among others.
U.S. President Trump even pushed the negative attitude of U.S. regulators towards Libra to a climax, directly denying the status and reliability of Facebook's cryptocurrency Libra on Twitter.
In fact, except for the United States, regulators around the world have expressed a lot of negative remarks on Libra. Since July, European regulators such as France and Germany, the Bank of England, Japan’s Ministry of Finance, South Korea’s financial regulators, India’s Ministry of Economy, and the Bank of Thailand have all expressed their views on Libra with caution.
The gentle ones, such as the Japanese regulators, including the Japanese Ministry of Finance, the Japanese Financial Services Agency, and the Bank of Japan, held liaison meetings to discuss Libra’s impact on the world economy and money laundering countermeasures.
secondary title
The Libra team with a very low profile
The hearing was as scant as one might expect.
"National regulation is Libra's business boundary."
"We will not launch Libra until the regulatory issues are fully resolved."
"Facebook will not compete with any sovereign currency."
……
Before the hearing, the Libra team had already demonstrated its compromise with the regulation of various countries. The tone of Marcus's answer basically continued the hearing testimony exposed on the official website of the Senate before the hearing, as well as the personal letter of "Six Questions and Answers Responding to All Questions from Congress" published 6 days ago.
Summarizing the remarks of the U.S. regulators, they can be roughly classified into four categories: whether Facebook guarantees user privacy security, whether Libra will threaten the original financial system, whether the Libra system is sufficiently decentralized, and whether Libra will become a channel for financial crimes and money laundering.
Facebook's attitude has also gradually become clear in multiple responses.
As far as privacy protection and financial crime shortcuts are concerned, Marcus once answered in the "Letter to the U.S. Senate": the Libra Association itself will not participate in processing user transactions, nor will it store any personal data of Libra users; It is possible to operate their own public account addresses on the Libra blockchain, but these addresses can be independent of their real identities.
Digital wallet CaLibra does not share account information or financial data with Facebook or any third party without customer consent, except in exceptional circumstances, including legally with law enforcement or regulators regarding anti-money laundering or counter-terrorist financing , and sanctions laws, etc., but CaLibra customer account information and financial data will not be used to improve Facebook or its social media and instant messaging due to targeted advertising in the product.
Additionally, while Libra is regulated by the Swiss government, the Libra Association and Facebook's CaLibra wallet remain subject to U.S. tax, anti-money laundering, and anti-fraud regulations. Marcus reiterated at the hearing that Switzerland was not chosen to escape US regulation
In other words, Facebook will try to cooperate with global regulatory anti-money laundering actions.
As far as the threat theory is concerned, Marcus made it clear in the hearing that the Libra digital cryptocurrency will not be launched until Facebook has fully resolved regulatory concerns and obtained appropriate approvals.
Mracus also emphasized that the currencies in the Libra Reserve will be subject to the monetary policies of their respective governments, and that the Libra Association has no intention of competing with any sovereign currency or entering the field of monetary policy. And Facebook will not control the Libra network, nor will it control the Libra cryptocurrency and all reserves that support Libra.
Regarding the question of centralization, Marcus also stated in the hearing that the Libra Association will have about 100 such members. Facebook is just one of more than 100 members of the Libra Association and will not have any special rights or privileges. That is to say, he has only one vote and cannot control this completely independent organization, and everyone does not have to trust Facebook.
secondary title
Lost trust in Facebook, the road is doomed to be difficult
Despite Facebook's extremely low profile, it does not seem to be able to alleviate doubts about US regulation.
Just before the hearing, according to the blockchain media The Block, a discussion draft titled "Keep Big Tech Out Of Finance" (Keep Big Tech Out Of Finance) was proposed. The bill seeks to prevent internet and technology giants from becoming financial institutions. It also seeks to prohibit these companies from "establishing, maintaining, or operating digital assets intended to be widely used as a medium of exchange, unit of account, or store of value."
According to the draft, any technology company with a global annual revenue of more than US$25 billion that is engaged in providing online public markets, exchanges or third-party connectivity platforms to platforms will fall under the jurisdiction of the bill. Violators will be fined $1 million per day.
Obviously, this is a draft for Facebook. If the draft is passed, the Libra project will be unsustainable.
If you read Libra's white paper, it is not difficult to find that Facebook's response, whether it is the privacy protection of data or the denial of Facebook's centralization, is almost the same as the emphasized part of the white paper.
However, in the subsequent questioning and this hearing, the regulators still pointed their finger at the above problems.
At the hearing, Marcus also popularized the blockchain technology in Libra to the congressmen. Although members of Congress don't understand blockchain, it's not that they don't believe in technology, but they don't believe in Facebook.
In fact, in terms of technical mechanism implementation, there is no essential difference between Libra and other blockchain projects. In the United States, it is not illegal for commercial entities to issue stablecoins anchored to fiat currency. Previously, companies such as Paxos and Gemini have issued stablecoins approved by the New York Financial Bureau.
Clearly, Facebook is too big.
For a company with 2.7 billion users, its reach is hard to measure. The members of Facebook and the Libra Association that have been disclosed are unmatched. Compared with startups based on encrypted digital assets, the transaction scale is only a few hundred billion US dollars, including Visa, Mastercard, PayPal, Swipe, Uber and Lyft. The global payment companies in China are undoubtedly a huge driving force for Libra, and they have enough deterrent power to subvert the financial system.
With the growth of technology giants in the United States, repeated elections and data leaks have made the public aware of the "danger" of technology companies.
"Facebook getting into payments is all about making an already too powerful company stronger". A congressman believes that Libra is to collect important information such as users' funds and transactions. Facebook, which already has a huge amount of user information, if it also has financial data, what is there that Facebook doesn't know?
The deeper reason is that Facebook has lost trust.
Facebook has consumed too much trust in a series of privacy scandals. Whether it is the open letter written by the US Congress to Libra or this hearing, Facebook's dark history is still an inseparable topic.
Including the infamous Cambridge Analytica scandal, in which the political consulting firm obtained the data of 50 million Facebook users to influence elections. Facebook is already preparing to pay a $5 billion fine to the Federal Trade Commission for its involvement with Cambridge Analytica.
Additionally, the company has been sued by civil rights groups and the U.S. Department of Housing and Urban Development for violating fair housing laws on its ad platform and through its ad-serving algorithms.
Assuming that Facebook is not blessed by scandals, it may not be possible to assess how far this social giant can go in this cross-border currency, but what is certain is that it must not be as difficult as it is now.
It is foreseeable that Libra, which originally aimed to reverse Facebook's trust crisis and create Facebook's new business model, is being backlashed by Facebook's trust crisis.
Libra still has unlimited potential to solve cross-border payment problems. With the attention of regulators, whether Libra can be launched smoothly may still be unknown.
The future may be far from what was previously imagined.
As Marcus said, digital currency is the general trend, and the United States has fallen behind in the field of real-time payments. If the U.S. does not lead in digital innovation in money and payments, other countries will.
====================
There are two Libra hearings. If you are interested in related content, you can follow Odaily.
The first hearing was held at 10 am Washington time on July 16, organized by the Senate Banking, Housing and Urban Committee, entitled "Examining Facebook's Proposed Digital Currency and Data Privacy Considerations." ).
The second hearing will be held at 10 a.m. Washington time on July 17, organized by the House Financial Services Committee, titled "Examining Facebook's Proposed Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System." Cryptocurrencies and Implications for Consumers, Investors, and U.S. Financial Institutions).
The official link of the live broadcast of the first hearing:
https://www.banking.senate.gov/
The full transcript of the first hearing:
Full text of Libra Senate hearing:
