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tv   Senate Banking Hearing on Facebook Digital Currency  CSPAN  July 31, 2019 3:19pm-5:42pm EDT

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tonight, american history tv focuses on the civil war. our programs include a look at civil war artifacts and a
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discussion on slave refugee camps during the war. watch american history tv tonight at 8:00 p.m. eastern on c-span 3. this past june, facebook announced plans for its own crypto currency called libra. the cocreator of libra david marcus answered lawmakers concerned over the digital currency before the senate banking committee. this is about 2 1/2 hours.
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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 facebook's access to and use of information on individuals or groups of individuals in credit, insure, employment or housing. i appreciate facebook's response last week. shortly after the letter was sent, facebook formally announce ds its intention to launch the payment system libra and issued
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a white paper providing some information about the project. since then, u.s. and global regulators have taken notice, including the federal reserve, uk's financial conduct authority, financial stability board, g-7 and others. last week during the federal reserve semi annual monetary policy report to congress, chairman powell raised concerns about the cryptocurrency's potential for inciting 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 misused by money launderers and terrorist financiers. 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 prudential regulation and consumer protection. it must address money laundering, data protection and operational resilience. concerns including but are in no way limited to how the payment system will work, how it will be
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managed and how libra, the libra association, ca libra and facebook all interact. what consumer protections will apply and potential implications for consumers with respect to financial loss from fraud or the project's failure. how individuals' data will be protected and how individuals' privacy will be preserved. how the libra ecosystem interacted with the bank and other existing money laundering protections. and the steps that could be taken preemptively to mitigate 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, facebook's
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efforts to leverage existing and evolving technology and make innovative improvements to traditional and non-traditional payment systems could deliver material 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 it's not entirely clear how existing laws and regulations apply. i'm particularly interested in its implications for the protection and privacy of individuals' data. facebook has massive reach and influence within society with over 2 billion active monthly users and access to vast amounts of personal information, including that which is received directly from users and information that can be derived from their behavior, both on and off of facebook.
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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 data. 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.
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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 it's 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.
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in this way, the libra announcement has heightened the need for policy makers and regulators to establish clear rules of the road. during this hearing i look forward to hearing more about facebook's 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 don't 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.
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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 industry's 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. this kind of creative disruption that doesn't create anything is just disruption. a look at the impact facebook's 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 already are. but that's not true. to be profitable facebook has juiced its algorithm to hold up
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a magnifying glass to society rather than a mirror, kind of like the way i learned in boy scouts to use a magnifying glass to burn a hole in a piece of wood. concentrating on divisive issues pushing controversial opinions to the top of the news feeds usually those are posts that play on people's fear and worst impulses but they may not be based on any sort of fact. facebook does all it can to manipulate its billions of users so it direct our ads, our eyes towards their ads and turn an even big are profit. i don't have to tell you what amp llifying our divisions has
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done to discourse in our country not just between political parties. i bet half of the people in this room had to block an old high school classmate or even a family member on facebook. a look around the world, more troubling. a u.n. report detailed how facebook was used to spread propaganda in myanmar that led to genocide. in the first month of violence, more than 600,000 people of the rohingya were killkilled, more 700,000 people had to flee the country. they created an algorithm that intensified it. it's hard to remember a world without facebook. it's hard to remember a time we told our kids to be careful what you do on the internet because its won't go away. what happens online has consequences offline.
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it's just common sense. that's why it's so hard for us to understand why facebookcompr its actions have real world consequences. they don't seem to understand that the topic of today's hearings has been met with such fierce opposition. mark zuckerberg has said that facebook might be more like a government than it is a company, but no one elected mark zuckerberg. in what kind of dystopian government wants to turn families and friends against each other rather than bring people together. mr. zuckerberg and his executives have proven over and over that they don't understand governing or accountability.
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they're not running a government. they're running a for profit laboratory. no facebook executives to my knowledge have been harmed by facebook's experiments. look what has happened everywhere that facebook has run its social experiments on us. their motto has been move fast and break things. they certainly have. they moved fast and broke our political discourse. they moved fast and broke journalism. they moved fast and incited a genocide. they moved fast and are undermining our democracy. now they're asking people to trust them with their hard earned paychecks. it takes a breathtaking amount of arrogance to look at that track record and think, you know what we really ought to do next, let's run our own bank and our own for profit version of the federal reserve and let's do it for the whole world. i understand that given the financial crisis and given the massive inequality and unfairness to workers in our
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country and given the fact that so many in this body have forgotten what happened ten years ago. it's tempting to think anyone can do a better job than the wall street mega banks but the last thing we need is to concentrate even more power in constitutions. we'd be crazy to give facebook a chance to experiment with people's bank accounts to use powerful tools they don't understand like monetary policy to jeopardize hard working americans ability to provide for their family. this is a recipe for more corporate power over markets and consumers and fewer and fewer protections for my constituents. >> we will now proceed with your testimony. mr. marcus, you may proceed. >> thank you, chairman. chairman, ranking member and members of the committee, thank you for the opportunity to appear before you today. my name is david marcus. i'm the head of ka libra at facebook.
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for most of my life i've been an entrepreneur building products aimed at improving people's lives. for many years my focus has been financial services. i became paypal's president and moved to facebook. in my written testimony i described the medicare anychani libra. i'm optimistic about what libra can offer the world. i want to make clear that we recognize we're only at the beginning of the journey. chairman powell has said publicly that the process for launching libra needs to be patient and thorough rather than a sprint to implement take. secretary mnuchin reinforced those views yesterday. we strongly agree with both of them. we will take the time to get this right. we expect the review of libra to be among the most extensive ever. we are fully committed to
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working with leg latregulators d around the world. facebook will not offer the libra digital currency until we have fully addressed regulators' concerns and received appropriate approvals. libra is intended to address an important problem. imagine a daughter who wants to send money home to her mom in another country. of the $200 she sends $4s on $1 be lost because of fees. it can take a week to send the money, a delay which can be disastrous in an emergency. but it doesn't have to be that way. wouldn't it be easier and safer if people could securely and inexpensively receive money transfers through their smart phones just like they do for so many other things today. that's what libra is about, developing a safe, secure and low cost way for people to
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officially move money around the world. facebook and 27 other organizations have founded the independent libra association. these include companies and the payments, technology, telecommunications, blockchain and venture capital industries along with staff from the libra association. the libra association will govern the libra blockchain network and administer the libra reserve. it will prioritize privacy and consumer protection and implement safeguards that require service providers in the libra network to fight money laundering, terrorism financing and other financial crime. we expect these safeguards will at least meet, if not exceed existing standards and improve the integrity of the global financial system. when fully formed, we expect the libra association to include 100 diverse members. facebook will only have one vote and will not be in a position to control the association, nor
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will facebook or the libra association position themselves to compete with sovereign currencies or interfere with monetary policy. in fact, the libra association will work with the federal reserve and other central banks to minimize the risk of any competition with their currency or monetary policies. finally, i would like to turn to facebook's role in establishing and realizing the potential of libra. to facilitate libra's use, facebook has established a s subsidiary known as ka libra. using the wallet, consumers will be able to save, spend and send libra right from their smart phone. if this is successful, facebook will benefit from more commerce across the family of apps. ka libra will be affordable and accessible and will also be safe and secure with strong safeguards to protect users'
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accounts and information. we expect the ka libra wallet will be governed by rules. it will also be regulated by state financial regulators. ka libra is committed to protecting the privacy of its customers. the ka libra wallet will not share individual customer data with the libra association or facebook except for limited circumstances. i'm proud to have initiated this effort here in the united states. i believe that if america doesn't lead innovation in digital currency and payments area, others will. if our country fails to act, we could soon see a digital currency by others whose values are dramatically different than ours. libra can provide an opportunity for leadership consistent with
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our shared values. i look forward to answering your questions, mr. chairman. >> thank you very much, mr. marcus. i'm going to start out with the question. you anticipated my question, actually, at the beginning of your statement. with regard to jurisdiction, frankly, and the regulatory rules of the road, it seems to me that digital technology innovations like this may be inevitable and could be beneficial. i also believe that the united states should lead in developing what the rules of the road should be. you've already indicated your awareness of secretary mnuchin's remarks yesterday, statement that chairman powell gave in responses to this committee when he was before us just a week or so ago 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
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be focused more on the swiss financial market supervisory authority. you've stated in your testimony that facebook will not offer libra digital currency until we have fully addressed the 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 and the legal oversight of libra and similar digital currency initiatives? >> thank you for your question. yes, absolutely, i agree that the u.s. should lead. and i want to reaffirm that we chose switzerland not to evade any responsibilities of oversight but rather because it is a well-established international place with headquarters for w.h.o., wto, even the b.i.s., the bank of international settlements. despite the fact that it willhe
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quartered in switzerland, it will have oversight from u.s. regulators. i completely agree with you that the u.s. should lead. >> i appreciate that. you've already indicated that you see that in the united states that you'll need to deal with regulators. the united states approaches regulation of data and data privacy in a sectoral way. we have multiple different regulators over pieces of economic activity and social activity. europe does this differently for example through its gdpr where it's a broad based rule across sectors. if you look at f sock in the financial world we've got the treasury, the occ, the fdic, the
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cfpb, the cftc, the fhfa. i guess my question to you is, have you analyzed and determined in our sectoral approach to regulation which of all of these regulators would have a piece of creating the rules of the road if the united states stays on this sectoral approach. >> chairman, this is not for me to say, but all i can say today is that we're committed to working until we satisfy all the concerns and and meet the regulatory bar before we proceed. in the u.s. there are a number of regulators that we're engaged with and we're also edge gauge -- engaged with the g-7 working group and the finance ministries and central banks working with libra and we're working with
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them clabtiollaboratively as we >> i understand you can't tell us which agencies are going to take a claim to what's happening with the establishment of libra, but you have committed that you will comply with the regulatory requirements of all u.s. regulators. >> yes, chairman. >> let me go quickly to one more question. i've got a lot of them. i'll have to submit some of those to you after the hearing. you recently told the banking committee that facebook collects data from transactions that occur on platform and use it for advertising and personalization. would you please describe the personal data collection from on platform transactions? what i'm talking about is, will this type of information be collected for on platform transactions that use the ka libra wallet? for example, when a user buys a product on facebook through ka libra, will facebook allow other digital wallets to be used within its family of products? if you could, just explain how
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that will work. >> chairman, one thing is really important and i want to state this very clearly. we will have within the ka libra wallet to compete with a number of other wallets that will operate on top of the libra network. the libra network will be intra-operable which means one wallet can send money to another wallet. to earn the people's trust, we will have to have the highest standards when it comes to privacy. the way we've built ka libra is that no financial cdata or account data which is collected in ka libra to offer the service will actually be shared with facebook. the way we've built this is to separate social and financial data because we've heard houd and cle loud and clear from people they
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don't want those two data streams connected. this is the way the system is designed. for transactions that would happen on any of our family of apps, the same way that any merchants completing a transaction, we will offer many options including the option for people to pay with credit, debit cards and other wallets, as well as with their ka libra wallet. >> thank you. senator brown. >> i'd point out in response to the questions, you're the only one with the reach of 2 billion people, so that's important to remember. facebook has a long track record of abusing users' trust. until recently you headed facebook's messaging team as they were allowing other companies like netflix and spotify and the royal bank of canada access to read facebook users' private messages. facebook told us they were
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keeping our data safe when they were really allowing other companies to sift through private messages. you had to shut down those programs after huge backlash. over and over, facebook has said "just trust us." and every time americans trust you, they seem to get burned. facebook told the fec in 2012 they would stop abusing our data. and last week got 5 billion dollar fine for violating that agreement. you've even run psychological experiments on users. sitting here today, mr. marcus, after all the times facebook has abused the public's trust -- and you know that -- do you really think people should trust facebook with their hard earned money, yes or no? >> senator, you heard it directly from mark and i will reiterate this. >> i didn't hear it directly from mark.
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>> trust is primordial. we've invested in a number of programs but i want to answer your question directly for libra. the reason we designed libra in such a way that facebook will only be one among 100 different members of the libra association and will have no special privilege means that you will not have to trust facebook -- >> mr. marcus, you know better than that. you know that only facebook has access to 2 billion people. to say that you are just one of many is simply not true. after people's data and private messages have been stolen and sold after you've let russian bots try to throw the 2016 election with no contrition, after you've abetted genocide in foreign countries, you really think people should trust you with our bank accounts and our economy.
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i just think that's delusional. let me ask a related question. if you think hard working families should trust facebook's monopoly money, i'd like to see how much you and your company trust it. you get a paycheck in dollars i assume. i assume you get some pretty good compensation in facebook stock. will you pledge today in this committee that you and your team who are working on this project will accept 100% of your salary and other compensation in this facebook currency? >> senator, libra is not designed to compete with bank accounts. >> that's not the question. the question is will you accept all of your compensation in this new currency that you want us to trust you so much? >> senator, libra is not meant to compete the bank accounts. we will, for instance, not pay interest. it's like cash, like digital cash. >> that's really avoiding the question. do you trust your currency so much that you and your team are
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willing to see 100% of your compensation be paid to you in that currency, which it could be if you decided it could? >> senator, if your question is whether i would trust all of my assets in libra, the answer is yes, i would. >> my question was -- >> and my pay. >> do you trust this enough to make your compensation paid fully in your currency? >> senator, i would, because it is backed one for one with a reserve. >> you could have said yes at the beginning of the question. >> senator, with respect, i wanted to clarify that we're not trying to compete with bank deposits. >> let me finish with the last question. you said you're open to facebook about your company creating -- you've said you were open to feedback about your company creating a new currency. i've told you i think this is a bad idea. the republican chairman of this committee has raised concerns, the democratic chair maxine waters in the house has demanded you give up on this project. the chairman of the federal
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reserve sat in front of this committee last week and voiced numerous and serious concerns. even the president of the united states has told facebook to back down. that's not to mention the many international who have raised serious, serious, alarm. is there -- my question is this, is there anything, mr. marcus, that elected leaders and economic experts can say that will convince you and facebook that it should not launch this currency? >> senator, we agree with all of the concerns, very legitimate concerns, that were raised by chairman powell, secretary mnuchin, and many others, and this is why we released our white paper so much ahead of any public launch because we wanted to ensure we take the time to get this right and getting this right means addressing these concerns in full and ensuring that there's proper regulatory oversight for this project, and we're fully committed to doing what it takes to get there. >> but if all, mr. marcus, with
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all due respect, if all of us we have been -- who have seen the collective amnesia of this congress in terms of what happened ten years ago, in my zip code in cleveland, 44105, where there were more foreclosures than any zip code in the united states a decade ago, if -- if -- if all of us find this to be a bad idea, think you shouldn't do this launch, are you still going to do it? >> senator, what i heard from chairman powell, from secretary mnuchin, and many others, is that there were serious legitimate concerns that have arose from libra, and i will commit, again, to do what it takes to address these concerns, and if those concerns are not addressed, and if the regulatory oversight is not appropriate, then, you know, we will not launch until it is. >> thank you. >> that speaks a lot, mr. chairman, to their accountability and their trustworthiness.
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>> senator toomey. >> thank you, mr. chairman. thank you, mr. marcus, for joining us. let me just say, it strikes me as wildly premature for us to come to the conclusion that we have to act now to prevent what could be a very constructive inno investigation in financial services. i think there are tremendous potential benefits in block chain technology and cryptocurrencies. i can imagine, i think it's clear they could help us lower payment transaction costs, fi facilitate access to capital, provide other forms of currency that other forms have not. limited pickup as medium of exchange might be explained partly by the volatility of these cryptocurrencies and here we have, it strikes me as an interesting iteration maybe, including a mechanism to provide a diminished volatility, which is backing it with a basket of
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currencies. so -- so i just think we should be exploring this and considering the benefits as well as the risk and take a prudent approach, but to announce in advance that we have to strangle this baby in the crib i think is wildly premature. let me ask a question, mr. marcus, about the ultimate motive of this. it seems to many of us that if this were to unfold as you described, and colibra and libra were adopted widly, there would be very, very valuable data about payments. in your testimony, my understanding is you have said that it is your intention never to share -- this is for colibra, never to share that data without consent. is it the business model, the plan, sometime in the foreseeable future to seek the consent of the participants so you would be able to commercialize that data somehow?
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>> senator, no, this is not the intention at all. the plan as far as facebook is concerned to monetize colibra and this initiative is actually to enable the 90 million small businesses that are currently on the facebook platform and the many users that are on the platform as well to engage it more commerce together. and if they engage in more commerce, there will be more advertising spend from those small businesses. that would be a first, indirect effect of having colibra and the libra network be successful then over time what we hope is that through the colibra wallet, we can offer more services and partnerships with existing banks and financial services companies to drive new revenue streams for the company. >> so the intent is never to even seek the consent of the consumer with regard to that payment data. takes consent to commercialize it. >> senator, i can't think of any
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reason right now for us to do this. >> my understanding is that tthe basket of currencies invested in very liquid high-quality assets that is used as they -- to provide the intrinsic value of this currency, there would be presumably income from that. we've got a lot of negative interest rates around the world, but let's asthusume we got more positive interest rates than negative. that generates a revenue stream. i think from your testimony, the intent is to use that to cover some various costs. but at some point, that could become very, very substantial, and i saw a reference to paying out dividends to the founders, the original investors, but this is also described as a not-for-profit. so it strikes me as odd for a not-for-profit to generate what could be huge income and then distribute it to the investor. that sounds like a for-profit.
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and so one possibility is you could pay dividends in libra to reflect the value of the income from the underlying assets, but could you explain how paying potentially unlimited dividends to the investor is not a for-profit operation? >> yes, senator. thank you for your question. first, i want to address the fact that libra doesn't pay interest because libra is like cash and is mainly going to be used as a payment instrument. and as far as the interest and the non for-profit question goes, the way that this is structured is it will have some income that is actually targeted toward 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, but the plan is not for this income to be, you know,
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unlimited and to be, you know, all of the income going back to investors. obviously, we will need to find a way over time to create new pools of incentive that go back to people and businesses using the libra network, and this is part of the conversation we're notably having on how to manage the reserve and the returns and how to have appropriate oversight on the reserve with this working group that the g7 organized with central banks, finance ministries, and the fsb. i believe that the reserve will require very specific oversight and regulatory framework in order to ensure proper management. >> thank you, mr. chairman. >> senator tester. >> thank you, mr. chairman, ranking member brown, thank you
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for being here today. david, i appreciate you being front of the committee. i have some concerns, a number of concerns, one of them being consumer security in cryptocurrencies like bitcoin, transactions are final. that means if somebody gets hacked, if somebody steals bitcoin, there's not much i can do about it. on the other hand, if somebody steals funds from a bank account or makes fraudulent charges on a credit card, the consumer for the most part, almost always, is held whole by the institution. how will libra handle theft? >> senator, i can speak for the colibra wallet and will offer a consumer protection against fraud and account recovery the same way that the leading wallets today out there in financial services company provide customer protection. >> okay. so in a situation where a
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fraudulent charge has been made with my -- with my account, you're saying that colibra will make the consumer whole, correct? >> that is correct, senator. >> is that immediate? >> it -- >> will that be immediate? so, okay, and will it be without question? so what i'm asking is is i pull out my driver's license, my credit card falls on the ground, that's really my fault. when they take that credit card to cleveland, ohio, and buy hoverboards with it, the bank always makes it fine, okay? the question is, and it's immediate, will it be immediate in your case? >> senator, we will do our best to resolve those types of issues and claims as fast as possible and we're investing heavily in 24/7 live customer support when it comes to the colibra wallet to ensure we can resolve those issues for our customers. >> i think it's critical that that is resolved before it goes
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live. so when i deposit money into a bank, i am very confident that i can withdraw it from that bank. okay? my grandfather was not, by the way. and that's why even on these homesteads that are around, every once in a while you'll find a glass jar full of money because they didn't trust the banks. it was only when we got deposit insurance that the banks had had the kind of faith. what -- what kind of faith do we have in libra? >> thank you for your question, senator. libra is actually going to be backed by a reserve -- one for one. so it's not ever going to be a fractional reserve. >> okay. >> and as a result, it is designed to be stable and retain its value. >> i got that. so in 2008, as the ranking member pointed out, there was a run on the banks. there was some big companies that went belly-up including 157 banks. lehman brothers, wamu, bear stearns, and others. nobody anticipated there would
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be a run like there was. nobody. how can eyou assure us -- and b the way, i still felt confident my money was safe in my bank. how can you make those assurances? how can you do it when we're talking about for-profit entity, whether it's called non-profit or not, it's a for-profit e entity. you're not doing this just for the fun of it. how can we be assured that our money is going to be there? >> senator, when it comes to libra, because the reserve is actually one for one and not fractional, the issue we've had in the events that you highlighted were because some of these institutions didn't have the appropriate reserves. >> didn't have, okay. >> and we also wants the appropriate regulatory oversights to ensure that anyone will have the ability to understand how big the reserve is and how many libra coins, if you will, are in circulation at any given point in time to rest
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assured that the value they hold is backed at any given point in time with the same amount in the reserve. >> so when we met last week, and thanks for coming in, by the way, the reserve question has to be answered. and it has to be something, by the way, that's not up to you guys to determine what that reserve is because when times get tough, stuff happens. okay? and so there has to be -- there has to be that kind of reliability there for that. otherwise, we're in no different situation than we were as we went in in the 1930s because you are a big outfit. just let me -- there's been a lot of comments about facebook today, brought up about some of the stuff that's happened on facebook that hasn't been meritorious, and i'm being generous. and it's true. and it has to do with bad actors because, quite frankly, there's people on facebook that are doing stuff all the time that
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have a different agenda than right and good and mom and dad and apple pie and chevrolet, okay? how are you going to prevent bad actors from using the application, and are you -- the past performance with facebook has been not that aggressive. let the money come in. we'll worry about it later. and it has had some pretty negative impacts on a lot of stuff worldwide. tell me how you're going to prevent bad actors from using this, and then i'll shut up. >> senator, when anyone will open a colibra account -- >> yes. >> -- because you will need to open a separate account, you cannot actually just use your facebook account to open a colibra wallet. you will have to authenticate and upload your government-issued i.d. as a result, we'll have real identity on tom p of the colibr wallet and have systems and a dedicated team to prevent fraudulent activity and, of course, to meet our requirements of anti-money laundering and
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counterterrorism funding monitoring. >> it's a huge issue. i think it would benefit this effort if facebook did a better job right now dong what aboexac you said. >> senator tillis. >> thank you, mr. chairman. mr. marcus, thank you for being here. first off, i'd like to associate my comments with senator timeoo. quite honestly, cryptocurrency is still a wild, wild west that's not very well regulated and there are a number of examples i'm aware of where consumers have lost everything. with their engagement with some of the better known cryptocurrencies out there. i'm trying to understand the distinction. you're going to have a transaction processing platform that several people have agreed to enter a consortium, with the sbept inte sbept
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intent of using the underlying program. at the expense of credit card companies or other wallet programs on the internet, is it a facilitator for those, take all commerce, assuming they're trusted payment platforms? >> yes, senator, and i want to stress that both visa and mastercard are taking this journey with us as well as paypal and coinbase and a number of other wallets. but i also want to stress that you don't have to become a member to accept libra as a form of payment or build services on top of the libra network. >> that's what i was trying to get at. there's a distinction between the currency which would be a libra and underlying infrastructure you're providing to facilitate payments. is that correct? >> that is correct, senator. >> now i want to get to something that i think you all have to get right. i'd love to, first off, what kind of capital investment are you projecting, if you want to launch it next year i'm sure you have an exhaustive implementation in place.
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what capital investment are you looking to put in the underlying infrastructure? >> senator, i thnk thatink that of the reasons why facebook is an appropriate sponsor as well, we have the resources to innovate. we're ready to put those resources to build valuable tools for people. that's what we're going to do here. we haven't determined exactly how much we are going to invest, and this is a process that -- >> so the consortium would be a part of the investment? >> yes, every member, senator, will have an opportunity to invest and participate in funding the network. >> i think something would be very helpful for this committee, maybe other members, is to get a a, really a briefing on the entire stack here. i think you said repeatedly you're not a bank. you're not going to hold deposits. you can't have a run in a traditional sense. i understand what you're doing with the reserve. i guess for transactions and process. i think it would be very helpful for the committee members and staff to understand that, so a
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believing f i briefing of that type, what i've been able to study on the internet is fairly limited in terms of understanding the stack and understanding what parts of the stack probably should be subject to some kind of regulatory oversight. i do want to express a concern. we were -- we had a committee hearing on judiciary, i think it was just last week, talking about how social media platforms have been hijacked by transnational criminal organizations, by pedophiles, by sexual predators. i don't think that you ever implemented, or no social media platform, i hope, was implemented for that purpose, but people are smart and devious and they hijack it. i hope that as a part of your implementati implementation, you're looking at all the ways that your payment platform like all the other ones could be potentially exploited for criminal activities. it's another reason why i think a briefing on the fuller architecture, the implementation timeline, maybe your own suggestion of where regulatory
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oversight would be pretty important to making sure you're going to create a trusted plat tomorrow. we need to get that kind of information to the committee. and to the members who are interested in digging in. i believe that if the united states can either follow some other jurisdiction on pursuing this, or we can lead it. i believe in the same we have a gold standard for banking in the united states, we ahave an opportunity to set an international standard that will ultimately provide protections for other upstart equivalent, not exactly equivalent architecturely to what you're doing. i think it's worth you doing this. i have concerns about privacy. about potential exploitation of the platform. i believe the united states, our regulatory environment and a n consortium that's well funded is more likely to produce a gold standard, something that does drive down the cost of
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transactions, actually providing better value for people who have the least amount of money to pay the transaction fees they're paying today. i look forward to seeing this developed. >> senator warner. >> thank you, mr. chairman. good to see you, mr. marcus. i'm all for better payment methods. i'm intrigued by blockchain and distributive ledger technology. i share a lot of concerns that my colleagues do up here particularly with an enterprise as large as yours, 23 billion u users. we look back during the antitrust investigation of microsoft during the 1990 the justice department found a key strategy that microsoft used that was called embrace, extend, extinguish. just the strategy was to go out and find a new technology then either copy it or buy it up. i call it catch and kill. buying up or copying other emerging technologies that might be disruptive to your dominance. now, we move into blockchain which, again, has the ability to
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be extraordinarily disruptive. why shouldn't we view facebook's efforts here with libra and calibra simply as another manifestation of the catch and kill approach? >> senator, i'm glad you asked that question because the way that we have developed the technology, the early technology, for libra, is that we've invested, we've put our best engineering talents and building the code base, the technology for the libra network, and then what we did is we open sourced it, and as a result, it doesn't belong to us anymore. it is now belonging to the community and they will help build the code and we will relinquish our control over both the code base and the network through the process. >> let me follow up, then, because will you commit that facebook will not develop preferential incentives that unfairly tie calibra, which is
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going to be your money-making venture, to other facebook products as a way of prohibiting libra users to use wallets other than calibra? >> senator, i'd even go further which is that not only have we started the technology and shared it in open source, but the network is actually -- >> no, that's not the question. the question is, incentives within your existing products. you didn't answer chairman crapo's question where he said with your dominance, how do you make sure that your already existing global platforms like what'sapp and messenger will actually support third-party wallets? will you at least clarify your answer to chairman crapo's question and say facebook will make sure that what'sapp and messenger will support third-party wallets? >> senator -- >> yes or no. >> senator, i want to clarify because there's a -- >> not clarification. you didn't answer chairman crapo.
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please answer my question. >> senator, the network is interoperable meaning that people who are using the libra network from within what'sapp will be able to send and receive from other wallets. not calibra wallets. >> so if a -- a user wishes to use -- a facebook user wishes to use a wallet other than calibra, will you make it easy to allow export of their keys, their financial data, and other calibra data? someone starts as a calibra wallet user, decides i don't want to use calibra anymore, will you make it easy to move their keys, their data, their financial information all over to that other third party? >> absolutely, senator. >> so that -- so right there, you've agreed on data portabili portability, potential interoperability in terms of the use of these wallets. my hope will be you'll have the same approach when i lay out my
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legislation for data portability and interoperability on existing platform use. so i hope your commitment on calibra will extend to your current applications as well. can i get a commitment there as well? >> i cannot commit for other parts of the company. >> i appreciate your team who has been willing to work with us. it would be really great if you make that same commitment on facebook basic products because if we want to bring in competition, you got to have that data portability, interoperability. at least on calibra, you are on the record as making sure that you will put no barriers in place to moving from one wallet to another. >> senator, we believe that this is actually primordial for the libra network that consumers have the ability to move from wallet to wallet to ensure that there are good competitive dynamics that work in favor of consumers. well really believe that. >> so, again, i'll come back again to chairman crapo's question about your globally dominant platform, products already in terms of what'sapp and messenger. they will support third-party
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wallets other than calibra? >> senator, i want to clarify, which is -- >> every time you start with "i want to clarify," gives me great level of pause. chairman crapo asked the question. i asked the question. what'sapp and messenger. globally dominant products. will they support third-party wallets or will they have incentives that will push people to simply using the facebook product, calibra? >> so this is why i want to clarify, senator, if i may, because it's a nuanced answer. if your question is whether we will embed other wallets inside what'sapp and messenger, the answer is no. if you're asking whether other wallets will have full interoperability means you don't have to use the calibra wallet inside messenger or what'sapp to send or receive money from people using the calibra wallet
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inside messenger and what'sapp, the answer is yes. >> embedding is different than putti intin inting preferential and areas. i didn't get to the questions around third-party developers having concerns about giving access. again, 34r67mr. chairman, some e questions you asked is one of the reasons we need to take a great deal of time to work this through. thank you, mr. marcus. >> senator rounds. >> thank you, mr. chairman. mr. marcus, thanks very much for appearing here before us today. before i begin my questions, i just wanted to take a moment to commend the south dakota division of banking for their forward thinking and willingness to allow for innovation in the digital currency space. another founding member of the libra association, anchorage, received permission from the division of banking to become a south dakota chartered trust company thanks to the business-friendly climate in my state, anchorage, which is a silicon valley cryptovault
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company decided to open its second headquarters in sioux falls. the significance of this extends far beyond the borders of south dakota. should serve as a model for how government can study and learn about digital currencies and while at the same time allowing pioneering companies like anchorage to innovate and try out new products and services. so once again, congratulations to anchorage and welcome to south dakota. i'm curious, i've had an opportunity on several different occasions to travel to africa and to watch what's going on within africa and the challenges they have there with very small amounts of value within their own currencies, yet on a day-to-day basis, there literally millions of people there that look to buy small incremental items on a day-to-day basis. they don't have any type of a product out there today really that works well that's internationally based. can you talk a little bit about what you see in other countries, the direction they're going, and what the opportunities are for this type of a platform to allow
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a very simple and inexpensive way to transact for values received or currencies or products, commodities, and exchange without a high cost of doing so, and just a thought in that regard. i haven't really heard that discussed yet today. >> i appreciate your question, senator. the way that anyone in the world will have the ability to use libra, using the wallets of their choice, will be to install a small app on a $40 android device with a basic data plan and from that point on, have the ability to move from the cash economy to the digital economy and benefit from having the ability to transact. not only domestically, but internationally. at very low, or no cost. and benefit from services that will be built on the libra network by other companies as well. and as a result, we really hope, and this is our ambition, that
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we can lower the barriers for access to modern financial services and massively lower costs for the people who need it the most. and in the process potentially also lower access to capital because if suddenly you have a global platform that enables free or low-cost money movements, then access to capital should be cheaper and the barriers would be lower as well. >> see, i think you're going to have a lot of competition. i think there's going to be a lot of different organizations that understand that this is the wave of the future. and i think the questions have been fair with regard to the different applications that are out there and how they would fit on your platform and be allowed and i think that's going to be an item of discussion for some time to come. but with it also comes the -- kind of the regulatory layout that you work within. you've chosen to set this up in switzerland. what did switzerland offer that the united states did not?
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and what is it about our regulatory framework that puts us, perhaps, at a disadvantage? >> senator, the choice of switzerland was not to evade regulatory oversight. it's really because we believe a global digitally native currency that will be used by people all over t around the world would benefit from being headquartered in an international place that is also the home of many respected international organizations. and that's where we came from. the reality, though, is if you look at the current composition of the libra association members, those are mostly american companies. calibra is an american subsidiary of a large american company. will be licensed and operate in the u.s. i think that the beneficiaries in terms of companies of the libra network will likely be
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american companies under the american jurisdiction and with proper regulatory oversight in the u.s. >> i think the proposal that you have has huge potential, and i think the challenges for the transaction of the exchange for services and so forth today still has lots of obstacles to be overcome including that of security and privacy. but nonetheless, we're going to look forward to observing and participating in this because i really do think it's the wave of the future and as senator tillis said, we are either going to be responding to it or we can be actively involved in learning from it. >> thank you. >> thank you. thank you. >> senator cortez-masto. >> mr. marcus, thank you very much. we appreciate you being here, and answering the questions. this is obviously very, very innovative for all of us and
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answering the questions. this is obviously very, very innovative for all of us and it's exciting. vy a couple questions to see if you thought through some of the concerns many of us also have. one of them for me, in particular, it's something i dealt with as attorney general of the state of nevada is the issue of money laundering. i know there's clear regulatory oversight we have right now to address the issue of money laundering. that comes in so many forms. one of them is terrorist financing. that support -- the money laundering supports of terrorist financing. my question to you is how will the libra association, itself, be ensuring that it is guarding against any type of money laundering activity? have you thought about that? >> yes, senator, this is something i care about deeply personally. the way we're thinking about protecting the integrity of the network from terrorism funding is by not only moving a lot of
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cash transaction in the digital world where cash transactions is where most crimes currently happen. we believe if a lot of transactions move to digital, it will be better. the way that we are applying programs is that as far as the calibra wallet is concerned, we will have strong identity because for every new calibra account opened, you will have to upload a government-issued i.d. and authenticate. as a result, we'll have aml programs on the calibra wallet. as far as the libra network is concerned, we will have an aml program as well, and despite the fact that the libra association will be based in switzerland, it will register with fincen and as a result will have to comply with aml and kyc practice. >> i'm glad you brought up fincen. that was my next question. would the association, itself, fall under the bank secrecy act
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jurisdiction? >> senator, the -- the association will not actually touch consumers. it will process -- it will just organize. >> so who's going to be subject to the bank's secrecy act in fincen then? i guess that's my question. >> so the calibra wallet and all the wallets that are operating under the jurisdiction will, of course, comply with bsa, perform kyc and have aml programs. and we're engaged with treasury on this to make sure that the setup of the network is not only not going to take a step back in terms of the efficacy of the aml and cft programs, but improve the efficacy because of the way that we're implementing and configuring the network. >> so you're currently talking right now with fincen and folks at fincen to get signoff on how you address money laundering issues? >> we are, senator. >> okay. i appreciate you providing more transparency around that.
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and let me just say, this is a new day and age when it comes to cash and carrying around a briefcase full of case. transnational criminals and terrorist activities don't do that anymore. what you're doing right now is an opportunity for them to engage in continuing money laundering and criminal activity. so know that. that's one. to say that we're going to be complying with aml activities is one thing. i want to see the specifics of it. so i appreciate your willingness to talk to fincen and talk with us about how we address this issue. another one that's come up as i sit on banking committee here and we've talked about it several times is sanctions laws. the head of policy and communication for libra was recently on a podcast and was asked how libra would react if a government like the united states required that the libra association blacklists certain addresses in order to comply
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with sanctions laws as is typical in what we do here. the response was, i quote, the association won't interact with any jurisdiction. it will, instead, leave that to the entities that provide an on and off ramp to libra, the c currency. can you clarify that? how are we supposed to address this issue when if cot comes to blacklisting and sanctions laws? >> senator, this is a question that we're also engaged with the treasury department on, and the one thing that we have committed is that we will respect the travel rule and as a result perform the right checks and including ofac checks. this is definitely true for the calibra wallet. i can't -- i don't know in what context those comments were made, but i believe that it may be because the association, itself, is not running anything. it's just coordinating governance, but the actual service providers that are going to be regulated service providers will enforce travel rule, perform ofac checks and ensure that those who -- who are
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subject will, of course, perform those functions. >> thank you. i noticed my time is up. i have further questions. i'll submit those for the record. well. thank you. >> thank you, senator. >> senator kennedy. >> mr. marcus, i'm going to move kind of fast here today. i apologize in advance if i interrupt you. we only have five minutes. i want to first agree with one of the comments that senator toomey made. we need to encourage innovation. but i want to explore today the underpinnings of libra. can we agree that a banker should be trustworthy? >> yes, senator. >> can we agree that a banker should be honest? >> yes, senator. >> can we agree that a banker should respect a customer's privacy? >> senator, yes, of course, but we are not going to engage in banking services. >> can we agree -- >> if that's what you're asking.
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>> can we agree that facebook knew in the spring of 2016 that russia was attempting through facebook to disrupt the u.s. presidential election? >> senator, with regards to those events, we definitely moved too slow and we've -- >> isn't it true that your general counsel and your chief security officer knew in the spring of 2016, isn't it true that mr. zuckerberg and your cfo, ms. sandberg, i believe, knew in december of 2016? isn't it also true that you didn't tell your board of directors, they didn't tell the board of directors until 2017? until september 2017? suspect th isn't that accurate? >> senator, we definitely moved too slow to recognize the activities that were happening on the platform.
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>> well, excuse me for interrupting but i only got five minutes. in september 2017 when senior management told your board of directors, you also issued -- facebook also issued a statement. it said, yeah, the russians have tried to disrupt the election through facebook, but they only spent $100,000 and they only ran 3,000 ads. that was a lie, wasn't it? >> i'm sorry, senator? >> that was a lie, wasn't it? >> i don't believe it was. >> later facebook admitted that, actually, the russian ads had reached 127 million people, didn't they? >> senator, i believe that the people who answered that question at the time answered to the best of their knowledge at the time. >> right. when mr. zuckerberg was conducting his listening tour across the whole country, first half, i think, of 2017, when he
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was feeding cows in wisconsin and having dinner with refugees in minneapolis, he knew about the russian involvement, didn't he? >> i don't know, senator. >> okay. he didn't say anything, did he? >> i don't remember the timeline, senator. >> okay. in the spring of 2017, spring and summer, our intelligence 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, wasn't it? >> senator, i can't -- i don't remember the timeline, and i believe that people have always answered truthfully with the information they had at the time. >> okay. in june of 2018, let me fast forward a little bit, we found out that facebook was sharing user data with device makers.
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a whole bunch of them. 40 of them. amazon, microsoft, samsung. facebook didn't disclose that to the use ers, 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, i'm immediately shown videos on more extreme versions of that topic. we call that stickiness. is that correct? >> this is not the way the facebook platform operate today, senator. >> but it did for a long time, right? >> senator, mark really led through -- >> can we agree on this, facebook has now become the major news source for many, many
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people, probably the major news source. is that true? >> i don't believe it is, senator. i believe that more and more people are interacting with other people -- >> 60% of your users say they get their news off facebook as their primary source. isn't 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 bullshit? >> i don't have an answer to that question, sir. >> okay. here's my last question. and i agree, again, with senator toomey. i have great respect for facebook. but facebook now wants to control the money supply. >> we will -- >> what could possibly go wrong? >> senator, we will not control either libra, the currency, or the association, and we agree
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that no company should control such a network or digital currency. >> i'd like a sound rouecond ro we could, mr. chairman. >> if we have time, i will be glad to do that for senators who do wish. senator smith. >> thank you very much. welcome. so, i got a lot of questions about this. you'll understand the level of skepticism that you see here, and i appreciate you being here to answer our questions. i want to try to understand a little bit better this association. so, the libra association expects to have you think about 100 founding members who together you say will be making decisions about investment strategy and regulatory compliance and social impact goals. who's in charge? >> senator, the way that the governance of the association works is that you'll have this
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counsel of 100 or more members that will make decisions and will elect a board that will be between 5 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. >> you know, in the united states senate, we also have 100 members but it's clear who's in charge. mitch mcconnell is in charge. and so i'm trying to understand in this sort of -- >> i thought it was shared. >> chair crapo is in charge of this committee. >> it's shared. >> i'm trying to understand, like, in this -- you described sort of almost a consensus -- is it -- will decisions be made on a consensus basis? i understand that there's some sort of a two-thirds majority,
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but 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 next is supposed to operate. the spirit in which the reserve is supposed to operate. and i believe that when it comes to the reserve, by the way, we will need appropriate regulatory oversight. >> would there be like a -- like a constitution or a body of rules that would be agreed to ahead of time that would guide the decisionmaking? >> yes, senator. and it will be made public. >> and how do you parse out kind of minority rights versus majority rites srights on this? >> as it stands, the way that it's starting, every member if we have 100 member will have an equal voice. >> what about -- what if there's
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a disagreement and there's, you know, do the minority -- is the my tinority just automatically overwhelmed by the majority on this board? >> it will depend on the type of decision. not all decisions will need supermajority to reach a consensus, senator. >> so it seems to me possible, any board, any group of humans, people develop coalitions and it just seems to be there's a big question about how every voice is going to be heard in this incredibly powerful association headquartered in switzerland. is this board like a corporate board in the sense, like, what if there were conflict of interests that developed? >> we hope that we'll avoid conflicts of interests, 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 white paper early on to get all of the feedback and the input and ensure that we can address all the concerns, get proper regulatory oversight, and part
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of that is also going to be governance of the association. >> i think these are really, really important questions because we're imagining this association headquartered in switzerland. it would have amazing power over the financial health of this country, over my constituents and over, you know, it's -- so i think these questions of acco t accountability are extremely important. let me ask, switch topics a little bit, what's the long-term 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 an ton the platform to trat with one another. so, as a result, more commerce on the facebook platform and our family of apps, and if there's more commerce, there will be more advertising revenue for facebook. so that one indirect effect of enabling -- >> more commercial activity on
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facebook equals more money for facebook, more -- more money? >> yes, senator. >> yeah. >> and the other part of it is if we earn people's trust with the calibra wallet and they decide 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, you know, getting a bigger market share of wallets, but it seems to me, mr. -- i know i'm out of time, mr. chair, but it seems to me that there's -- seems to me that what facebook is really good at is figuring out how to monetize people's personal data, not only the data that facebook gets directly but the ambient data that facebook collects through all of the many, many millions of activities that we take every year that facebook's -- what facebook is really good at is capitalizing,
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literally, on that data and so i have to say i'm not reassured by your statement that you can't see any reason right now why there wouldn't be data sharing 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 don't trust facebook, and it's because of the repeated violations of 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 that's where it started there with investigative bodies, but it hasn't ended. even after that, facebook is under investigation again and fcc approved a fine for about $5 billion. just recently because of your repeated violations of your users' information.
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for example, you know, without users' permission, sharing personal profile information with outside software developers. selling that off, again. data breaches. allegations that you repeatedly changed users' privacy settings without notice. the s.e.c., of course, is also investigating events surrounding the sale of personal information from facebook. the new york state's office of attorney general has an investigation into unauthorized collection of 1.5 million facebook users' email contact databases. on and on and on. there's allegations of bugs that oh, sorry, we didn't mean to allow them to download photos. it's one after another after another after another. so i don't trust you guys. so instead of cleaning up your house, now you're launching into another business model with calibra here, and you've got documents that talk about your
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privacy commitment for calibra. so in that, you know, in that privacy commitment, you say that you won't be sharing account information or financial data with facebook or any third party without customer consent. so how do we know that this isn't going to change, and how do we know you're actually going to do that based on your track record of failing and violating and deceiving in the past? >> it's a totally fair question, senator, and i want to answer it in two parts. the first is that as you know, we've been working really, really hard on addressing the issues, some of them you've raised. we have invested incredible resources in election integrity and privacy. 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
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way that facebook doesn't and won't 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, there's interoperability. so regardless of the wallet you choose, you'll be able to pay across wallets which is currently -- >> i don't want to get into the technical stuff. i'm talking about the trust issue. so you violated privacy in the past as a company. you continue to have issues. you continue to change the privacy, even rules, without informing users, yet you're launching a new product and you're claiming that their privacy is going to be protected. so how are users to know that that's also not going to be changed and they're not going to be violated? that's what i'm 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 that we will have to earn
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people's trust for a very long period of time. >> yeah. >> in order to get the benefit of them wanting to use the calibra wallet instead of any of the other wallets they'll have the choice of using. >> so let me follow up also, i know senator toomey asked a question, your privacy document says calibra will be transparent offering customer choices and controls using clear, simple language, and easy to find privacy controls that detail what data is collected, used, shared, and for what purposes. you're telling me, and i think you said this already, but can you clarify, the user will not be able to have consent as to their data being collected? >> i'm sorry, i don't understand the question, senator. >> okay. for calibra, you specifically say in your privacy document that there will be easy to understand controls on what data is being collected? so will the user have consent for their data being collected when they're using calibra? >> yes, senator. >> so do they have to consent in
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order to use calibra? >> yes, senator. >> okay. so there's really -- that's really no choice, right? so you -- in order to use it, your data has to be collected. there's no option to opt out. >> senator, if you want to use the calibra wallet, you will have to, for instance, authenticate and upload a government-issued i.d., and if consumers don't want us to collect that government-issued i.d., for instance, at the very first step, oskf course, they won't be able to use the service because we will be compliant to kyc regulation. >> so what's the business model of calibra, then? you mentioned the interface with facebook just recently, that the more people are using it, the more, you know, 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 of calibra or how are they going to make money? >> with respect, senator, that's not what i said, but what i said is -- >> but that's actually what happens. >> i'll focus on the specific
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question you asked, senator, which is that we have 90 million businesses, many of them that grow thanks to the facebook advertising platform. they're able to reach new consumers. they're able to hire and we believe that if they now have the ability to sell to more constituents across the facebook platform and more people have access to the services and products of those 19 million businesses, then more commerce will happen on the facebook platform. >> wonderful public good that you guys are committed to. i know i'm way over time here and that was extremely sarcastic. thank you. >> senator cinesinema. >> thank you, chairman crapo and thank you for our witness for being here today. arizonans have heard a lot over the years about privacy. for example, facebook promised when it acquired what'sapp it would not scrape our message data to deliver targeted ads but two years later facebook broke its promise and monetized our personal message data.
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with real doubts about facebook's commitment to privacy, arizonans are rightly skeptical about the proposed digital currency, libra. the goal of libra is to reach the unbanked and underbanked which is a noble goal, but it's important to remember that those who haven't utilized a bank or credit card will be more susceptible to scammers and predatory practices. your head of product, kevin weil, told techcrunch on june 18th there are, quote, no plans for the libra association to take a role in actively vetting, end quote, developers of wallets, exchanges, or other related apps. but failing to vet developers would expose arizonans to scammers which is unacceptable. do you stand by kevin's statement? >> senator, first, i want to correct something which is that what'sapp is fully encrypted so even facebook doesn't have access to messages on what'sapp. to answer your question which is a very important one, i would say two things. one is that while the libra association will not get in the way of developers developing
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things, we will need as an association to find a right approach to ensure that publishing services on the libra network has controls and the one thing i want to say as well is that financial literacy is really important and that at the libra association, there will be grant and investment made into financial literacy. as far as the calibra wallet is concerned, not only will we have consumer protections that will protect your constituents if they ever have a fraud issue, but we will make sure that there's appropriate education in the product from the get-go. >> well, that was very helpful information, but that response doesn't actually address my concern because if libra's 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 scammed using libra, which can jeopardize their hard-earned
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savings and financial security. so while we're on the subject of scams, here's a hypothetical scenario for you. let's say an unsavory app developer that's based in pakistan utilizes an exchange that's based in thailand to rip off an arizonan who's using a wallet that was built in spain. so they steal all of their libra and that, of course, is minted by an association based in switzerland. so which law enforcement or governmental agency , in which country, does the arizonan call to seek his or her legal or financial recourse in this situation? >> that's an excellent question, senator, and the answer to that is your constituents will likely use an american u.s.-based wallet provider that will have consumer protections and that will make your consumer -- your constituents whole if something bad happens to them. >> so 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
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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. so, and i believe that it will be the role of the libra association to ensure that there's proper education so that consumers can make informed choices. >> i think the point here is despite having legal and technical background in this room, this is a difficult question to answer. you posited they likely would be using an american wallet, but if they were using a wallet from another country, that complicates the answer. this is a real challenge and arizonans deserve answers on what rights they would have as consumers and how they would use them. i also have some national security concerns. despite granting anonymity, traditional cryptocurrencies are not the first choice of drug cartels, terrorists, and human traffickers because cryptocurrencies aren't very
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easy to use, but libra is not a cryptocurrency, it's a digital currency that promises both anonymity and ease of use which raises concerns about its potential exploitation for elicit purposes. i'm concerned that drug cartels and human traffickers, major problems, of course, in arizona and border regions, may try and use libra to finance their operations along our southern border. your testimony says that you'll comply with the rules set by the office of foreign assets control with respect to financial sanctions. but if a drug cartel or one of its sanctioned persons attempts to complete a transaction using libra, would you comply with ofac policy or would you allow the drug cartel transaction to be added to the ledger? >> senator, first of all, libra is not anonymous, so we will have an aml program and as far as the calibra wallet is concerned, we will have full kyc and aml programs as a result. those types of activities will be very difficult to conduct on
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this network, and you have my commitment that we will take the time before launch to ensure that the network and the proper measures are taken to avoid tako avoid this network to be used for other purposes than it was designed for. >> thank you. mr. chairman my time expired thp this is a puzzle but folks in my my state are concerned and we need better answers. i look forward to working with you on the committee on this i yield back. >> thank you. senator cotton. >> mr. marcus, thank you for your appearance and testimony. your ceo in testimony before congress referred to silicon valley as extremely left-wing place map that's why so many census he right platforms have concerns about facebook and google and twitter and so forth. i worry about the possibility that a digital wallet and digital currency like libra could extend that into the payment system. there is reason to worry about that, because democratic members of this committee made it a
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habit of contacting major financial institutions and encouraging them not to do business with say gun manufacturers or with government contractors who serve i.c.e. or the customs and border patrol. what safeguards if any will libra will have to ensure that you treat on par people with views that may be disfavored in extremely left-wing place like silicon valley. >> i appreciate your question, senator. and you are right, that silicon valley tends to have a bias. but i want to reaffirm that facebook is a technology company where ideas across the political spectrum are welcome and treated equally. as far as calibra and the calibra wallet is concerned, we wanted to ensure that people, as long as nef a legitimate use of the product, can do what they want with their money.
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of course there are some restrictions and regulated products. but my commitment to you is we will be thoughtful in writing those policies. and will be happy to follow up with you when we get closer to finalizing those policies. >> so that doesn't sound like much safe guard other than a commitment before you into pressure from democrats. just wait until tomorrow. until you go before the house financial services committee if you think the democrats on this commit have found hounded banks wait until you see what you're in for over there. how do we not -- so a federally listened firearm dealer wants to sell firearms at a gun show or maybe a neighbor wants to sell a shotgun to his neighbor. or a christian bake are wants to practice his faith when he bakes his cake. or someone wants to pay a subscription to abrasht instead "the new york times" what confidence can people with center-right views have that
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libra is going to be available to them on an equal basis as those who want to shut down gun retailers or oil pipelines or government contractors who are working with immigration and customs enforcement? >> senator, firearms, for instance, are regulated product, already regulated and treated as such on the facebook platform. and i know it's a complicated issue and when it comes to writing the policy, again, we will -- i'm committing that we will be very thoughtful. i have to say that as far as i'm concerned, personally, i believe that we should -- we should only get in the way in exceptional cases and by being thoughtful of getting in the people doing what they want with their money as long as it's lawful but we need to thoughtful in writing policies. >> thank you for the commitment. i do hope we have transparency. i can assure you'll getlers from
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that side of dais to say nothing of the house committee enacts just like banks on wall street have been getting letters. and your workforce will bring that pressure on you as well pl left shift gears in time i have left. we've heard talk about money laundering this morning. it's a big problem. i share the concerns. money laundering is done by individualing engaged in criminal activities lining drug trafficking human trafficking and so forth. there is also the question of sanctions one of the advantage of having the world's reserve currency is we have the ability to impose extremely effective worldwide sanctions because most if almost all transactions are dealt with in dollars worldwide. can you talk a little bit about how libra would have the -- a impact on the united states dollar as the reserve currency and therefore on the united states government's ability to impose sanctions. different from money laundering about individuals. talking about sanctions on nation states like say inn
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developing its own cryptocurrency and cracking down on others specifically to try to avoid sanctions. >> senator i'm glad you brought this up, because i believe if we don't lead in the space others will. and the sameway way we end up having two the internets and -- and sue 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 preserving our national security. appear this is why i believe that libra is an alternative that consumers will have the ability to use with wallets that will in effect enforce sanctions that are led by our national security apparatus and treasure. i actually believe if we stay put we are going to be in a situation in 10, 15 years where
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we are really going to have a half of the world that is going to operate by the way of blockchain based technology that be will be out of reach from our national security apparatus. >> all right. thank you. >> senator schatz. thank you mr. chairman. mr. marcus thank you for being here. on sieb err security. foreign interference on privacy, extremism, fake news is it fair to say you are working on solving those problems as a company? >> yes, senator we have a number of issues that we are hard at work. >> so you are working on solving those problems. they are not fixed yet, correct. >> some of them are, and a lot deserve a lot more work. >> which are. >> i'd say some of the issues we had in the past. >> cyber security, foreign interference, privacy, extremism, fake news, which ones of those have you fixed? >> well, you know, for instance,
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snr, the issue that happened back in the day with cambridge analytic have not happened against. >> not which have you made significant progress have you fixed them. >> i will will say all of them always will require great deal of work. >> let's pretend it's the two of us having a conversation. my question is this. what do you say to someone who says, maybe before you do a new thing and an enormously important thing you should go ahead and make sure you have your own shop fixed? what do you say to that. >> senator, i believe that the -- the status quo is really a huge burden on so many people around the world when it comes to financial. >> hold on you're making an argument for cryptocurrency generally, making an argument for in proposition generally. the question i have is, facebook has a lot of problems. you guys have had a rough couple of years. and so the question is, why are you moving on to a new and
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challenging thing other than the grand yosty of silicon valley which causes you to get border with your own thing and tri to move into a new line of business? so the question is not would it be great to eliminate credit card fees? the question is not should the united states lead in this area. the question is, why facebook? and why before you fixed your other stuff. >> senator, i believe it's important that we continue to innovate on behalf of the people we serve. and the same way that we've been able to bring communication prices down with our messaging app because now anyone with a $40 smartphone can actually communicate for free about the world. we want to continue innovating on behalf of the very people we serve and we hope that we can do the same thing for them when it comes to access to modern financial services. >> do you have specialized expertise with anti-money laundering essentials was prudential regulations preventing discrimination and other violations of consumer financial laws? >> senator, i do and my team
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does as well. >> not you personally does facebook have that. >> senator, through the team that i have assembled yes now it does. >> within facebook? >> senator, within. >> or the consortium. >> senator, within calibra which is the subsidiary it created it has the proper know how to. >> you hired up for this. >> yes, senator. >> okay. does your consortium have by laws? >> senator, the -- the charter of the association is in the process of being ratified by its members and it will be made public is this. >> so that's a no. >> senator, when we launched the website and white paper in june '1 we have dwlienz guidelines. but the reason we didn't want all the other members to sign an existing by law or charter is we
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wanted them to be -- to take part in writing it, because, again, we don't want to control the network. and we think it's important the decisions are made collegially with the other cofounding members. >> what i'm hearing -- and they're terrified to talk about this publicly -- is that members of the consortium actually have lots of questions too, similar to the questions that are being offered on in dais. but -- and they have great reservations about moving forward but don't want to be left out because of facebook's market power. and so how do you address the bigger question -- not just the one i asked earlier about you not having fixed your own shop before you move to currency -- which seems on the face of it to be nuts -- how do you answer the question about size, and power and the idea that lots of people out there think facebook inspect already too big and too powerful and and now you get into currency. so how do you address that
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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 with other companies that already have a lot of existing financial accounts, that are already kyc, already operating, that have trusts. you have companies like paypal and others that will of course collaborate but compete with us. >> i guess you have -- and i appreciate this. but you really haven't answered the most basic question of all which is why in the world should facebook of all companies given the last couple of years, do this? >> senator because we have the ability and the means to innovate on behalf of the people we serve and we shouldn't -- we shouldn't stand back and wait to do it if we can help the very people that we want to serve, because we have the resources and the engineering talent i
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believe we should. >> because of your size. >> senator, because of our resources and our engineering talent. >> because you are so big that you should get bigger. >> that's not the point i was making, senator. >> thank you. >> senator menendez. >> excuse me, you are right. senator jones. >> thank you. mr. chairman. thank you mr. marcus, i want at a talk about quickly back to some of the money laundering issues that i've got real concerns about. and i understand that calibra is committed to verify users and those kind of things. but for money laundering purposes, if you have a worldwide issue and you have partners all over the world, how are you going to get your partners to verify the third party products and how are we preventing the money laundering? i think that's a major concern? ? how are you going to deal with your partners?
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>> senator, first, i want to commit that we will not launch until we have satisfied those concerns with treasury and other regulators around the world in how the network is configured a and it operates. but more practically, the way that the network is going to operate that all the on and off ramps will be regulated and will have proper kyc and amlp. and as a result money laundering, terrorism funding relief have an opportunity to be monitored and the -- the intention here is really not for the efficacy of the programs to stap a step back. quite the so the sopright we hope to improve the efficacy of the programsen a work hard to make that happen because i care deeply about this. >> i appreciate that. i do have concerns about that because as senator brown said earlier we have seen facebook run into problems and their platform time and time again on
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any number of issues. and i think senator brown's comment was it's just another learning experience. but at some point if things continue -- and especially with a currency like this -- if we -- if all of a sudden this operates and you continue to see all matter of criminal activity and money laundering, at some point an innovative prosecutor is looking across the table and say, you, sir are contributing to this. you are an aider and abetter. are you prepared for that down the road if you don't do your job and this currency is used as -- to facilitate human trafficking, drugs, fraud things like that? are you prepared for facebook and all of the calibra and libra users looked at a as criminal defendants. >> senator, we are prepared the amount of time that will be required to ensure that those things don't happen and that we improve on the efficacy of the programs. >> all right. >> we really don't want this creation to be a tool for these types of activities.
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and this is why this time before launching we are taking so much time and sharing our plans early on, and have started this long consultive phase. >> i didn't mean to imply by my question you intend that. i also know there is unintended consequences and if things don't go right at some point somebody has to step up. but thank you for that. the the other thing i want to talk about briefly is taxes and how some of this will be taxed. as you know, the current irs law treats digital currency as property. which means under current law every single transaction or purchase made with libra will be a taxable event. the transaction will be taxable. many businesses in the current cryptospace now help their customers comply with tax laws by submitting details lists of transactions to both the i say and the consumer. similar to how stock brokers might send both a customer and the irs a 1099 b. does factual basis plan on recording and reporting all
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libra transactions directly to the irs and consumers to ensure that they fulfill in re tax requirements? >> senator, this is an important issue. and the way that we're approaching this is twofold. one is libra, unlike other digital currencies out there will not be volatile to the dollar. as a result, the variations in prices between the dollar and libra will be very, very minimal. but as far as the calibra wallet is concerned we will of course provide all tools to consumers so they can report taxes without the hassle of having to record all transactions on their own. >> well, but that -- so do i understand you are saying that you will provide that to the customer. but that you would not propose providing that to the internal revenue service. and see how i understand that you are just putting the burden
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on the consumer and the customer to comply with internal revenue service regulation sns. >> senator, my understanding of this matter is that this is the -- the decision that is in the hands of the irs and that today the irs, it is my understanding, that they require consumers to report. but we would be happy to work with the irs to make it easier for consumers or to reach a deminimum sflgs to avoid the burden for consumers. >> i think the money laundering aspect, criminal activity and the irs are two big things you got to -- hurdles to overcome. it's going to take some time to i think get past all that. but thank you for your testimony and being here. thank you, mr. chairman. >> all right. now senator menendez. >> thank you, mr. chairman.
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facebook's ceo mark zuckerberg was his mot oh was move fast and break things. we have referred to process. i have not nearlily enough time to list all the things facebook has broken. i've highlighted some behind me. the underlying theme,s in a company not thinking through the consequences of its actions. and with nearly 2.4 billion active users, when facebook breaks something it has serious consequences. i've been listening in and out between the meetings in my office to some of your testimony. and basically the theme of your response to many colleagues particularly on data privacy is trust us. trust is something you earn. and facebook ernl hasn't earned it. so it's not enough to say that you are will keep the calibra data separate. i'd like to know how exactly will you keep libra data separate from your social media data? >> senator, thank you for -- for your question.
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i want to also say that in the case of libra we're most definitely not moving fast. and i want to reiterate my commitments that we will not move to launch or to offer libra as a currency or on facebook's platform. >> just answer my question right now how specifically you keep the data separate. >> the way we keep the calibra data separate from facebook is within the infrastructure we have separated the -- the data from the rest of fischer's infrastructure and data in order for the it not to get commingled with the rest of the data. >> even though in the user agreement you say that you are going to -- may very well share aggregate data with facebook. >> aggregate data that we may use on the calibra wallet side,
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non-identifiable data to understand how to sflev but that's the beginning of opening up the door. let me ask you this. if there is a commingling of data, purposeful or not, can you commit to this committee and the public that you will notify users and the proper authorities within 48 hours? >> senator, i commit that we will naturally notify users that have -- would have been affected by this. but first and foremost we want to make sure it never happens. >> i know. but if -- if it happens -- i'm saying whether purposeful or not. things seem to happen at facebook. will you commit to notify both the users and public within 48 hours of your finding of it. >> senator, i commit that we will inform users and the public if such thing happen within a reasonable time frame. >> so that could mean a whole bunch of things. let me ask you this. i have been the author and architect of many of the sanctions regimes we have leveled against rogue regimes,
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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 from money laundering laws. last year the treasury department for the first time identified and published digital currency addresses associated with two iranian-based individuals who help exchange bitcoin for iranian cyber criminals that use ran some ware to extort millions of u.s. dollars from over 200 victims. if libra was used for a similar transaction, would the libra association, the group that validates libra transactions freeze the assets of such sanctioned individuals? >> senator, first, i really want to stress the fact that if we don't lead others will. and as a result the transactions that you highlighted and listed will happen on a network where we will have no jurisdiction and no reach and no ability to have
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any -- exert any control for national security purposes. as far as libra is concerned, naturally, because libra, ziet the fact that it will be headquartered will be registered with finsen, will collaborate and have an aml program appear will ensure that and on off ramps are regulated and as a result those types of activities should be extremely hard to -- >> so would you -- but my core question is, being -- having that individual identified to you, the type i just described, would you freeze the assets of such a sanctioned individual under your system. >> senator, the way this would happen in the way that the system is currently contemplated, it would be the role of the big custodial wallets operating on top of the libra network like the calibra wallet and many others to block access for funds for those
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addresses, as well all of the on and off ramps that would prevent the addresses to convert to cash. >> let me ask you one other question. i have a whole bunch but i'll submit them for the record. this doesn't assauge my concerns as it relates to the very sanction that is we have worked in a bipartisan basis to pass. so would the libra association. -- what would they do 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 that's a really good question and one that we are in active discussions with a number of regulators, including treasury. and my -- my understanding of this -- and the way that we are currently thinking about this, is that actually the way to properly police and control the
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network is through one, the on and off ramps, and two, to all of the wallets that will be -- >> i'm going to take you at your word that you're not going to act before you have the questions resolved, because if not what libra could be is the wild west of cryptocurrency where, you know, money laundering, criminals and countries seeking to avoid u.s. sanctions could be their resolve. and we just can't have that. >> i agree, senator. >> senator van hollen. >> thank you, mr. chair. thank you, mr. marcus. one of the benefits going last is you get to hear your colleagues comments. i'm going to make a couple of comments i hadn't planned to make otherwise. number one, senator kennedy rightfully pointed out facebook's failings in the face of russian interference in the 2016 elections. i know you are working hard to remediy. i frankly wish the united states congress was working to remedy it as well.
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we have a big in this committee, bipartisan bill called the deter act that would say to putin or anybody else that wants to interfere in the 2020 elections that they will pay a certain and very high price. so i hope, mr. chairman, we will move on that. we have to get to the bottom of 2016 backup my goodness we should worken a bipartisan basis to protect 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 have what do you call the social media summit at the white house where he summoned some of the et most right-wing extreme social media voices and peddled this idea that the president's own twitter account was somehow being blocked and limited. and yet within the last 48 hours
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we have seen what a grow tevfik lie that was. this is a president spewing all sorts of racist comments over the last 48 hours. and it does highlight the challenge social media companies have in trying to make sure that they monitor community standards to prevent insendary comments that cause harm or danger and allow voices of freedom on the internet. i hope we get away from the non-sen we hear from the president and others about this kind of biased censership. and i hope we have more voices actually exercising the first amendment rights to speak out against the president's racist comments. third, realtime payments. i'm looking forward -- and enjoyed the discussion here. every time the federal -- the chairman of the federal reserve, chairman powell comes before the committee and others.
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i asked why the united states government is so far behind our european partners and many others in realtime payments? the fact we don't have a system in the country that can clear realtime payments is today costing millions of americans billions of dollars. and they should -- they should accelerate their efforts and get it done. and i personally do not think we should hand that over to the consortium of the biggest banks in the country. so let's talk about the conversation here today specifically. i understand your point, saying that whether you trust facebook orr don't trust facebook, that's not a big issue with respect to the libra association. i have questions and concerns. and you have heard some today about the libra association itself. because what's different from things like bitcoin -- bitcoin -- the uncertainty arndt bitcoin, the uncertain value. the wild fluctuations and in my
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view mean it's not put in widespread use. whereas the whole goal is to have billions of people around the world using this new coin, right? that is that is the goal is it not. >> it's really to help the very people without access to current financial services. >> the idea is billions of people. and because this is now going to be tied to other currencies and supposedly be more stable. it will be in widespread use. there are huge concerns because this in my view obviously has lots of questions that need to be vetted. and the organization itself, the libra association -- you can say you don't have to trust facebook, but you do have to trust the libra association. and they're doing something very different, 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 the structure. i mean, i think people will conjure up the james bond move and the organization specter.
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and unless you are really clear about how this is a transparent association and be accountable in the ways discussed today, then it's not a question of whether people trust facebook or not. it's a question of whether people trust this international -- this organization, private -- run by private companies, and my view is when you are talking about a world currency that's going to be potentially used by billions of people i'm not sure that -- that there is sufficient accountability that you could build into the system that would answer all of the concerns. but i look forward to the continuing conversation. >> thank you, senator. >> thank you, mr. chairman. >> thank you, senator kennedy asked for a second round and 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. with that, senator kennedy. >> mr. marcus, i want to follow
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up on senator cotton's concerns. and i think the -- the basis for his concern is we can agree on this, i think, that facebook is not really a company anymore. it's country a country. you got 2.2 billion people that use it. i don't see anything in the documents that i'm seeing that would prevent the members of calibra, once libra is prevalent throughout the world, saying, you know, we don't -- we don't believe in abortion rights. and we have the transaction data of all the people. so we're just going to say if -- if you believe in abortion rights you can't use libra. or vice versa. and you could make that assessment on the basis of any person's position on socioeconomic issues. i think you need to address
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that. let me ask you a question about a game -- there is a big issue on trust here. in may a couple years ago. i think it was 2016 there was an article appeared that woeted news curators at facebook. they were in charge of the trending news section. you know what i'm talking about. >> yes, senator. >> right, i don't think you have it anymore. but they -- they testified that they had been 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 surps news about mitt i don't mean rand wall. scott walker. chris kyle. ted cruz.
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articles from news max. articles from the washington examiner. and one of the curaators kept a log. is that true. >> senator, i wasn't part of that team. and i was -- i'm not aware how it functioned but that product doesn't exist anymore. >> the curators said they were instructed to include articles from certain publications, whether true or not. and two of the publications were cnn and "new york times." is that true? >> senator, again i wasn't involved and this was not my product team. and it might have happened even prior to my time. i do want to say, though, that facebook really is a technology platform that is. >> right. >> neutral within terms -- >> i'm familiar with facebook. let me ask one other question np the news curators said they were told by management not to put in
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an article in the trending news section about facebook. is that true? >> again, senator this was not my team. i'm not aware. >> okay. is there any data that facebook has on its customers, if you will, that on principal facebook would monetize? >> well, senator, the way that -- the data is used on facebook when it comes to monetization is enabling better ads. to serve better ads to people that are personalized >> i get that. i'm sorry to interrupt you. i get that. but is there any data that on principle facebook would say we're not going to make money on this? this crosses the line have you ever thought about that. >> well it's not about making money but as far as calibra is concerned. >> it's not making money?
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>> senator, we don't typically look at data in a way that is to make money. it's just to improve the service, including improving the quality of the ads that. >> i'm going to ask you now mr. marcus. because you're telling me that money is a secondary concern at facebook? don't you have shareholders? >> senator, we do. but i believe that it is important that we first and foremost serve our customers. and the way we've done it with messaging apps notably without monetizing them yet. >> right, right. >> is a testament to what we can do to lower costs for people when we have the ability. >> last question -- i got 19 seconds here. i got to ask this if this is true. do you know these people snp sheryl sandrock. ooelt sraj. armana bickert. >> i do.
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>> is it true mr. zuckerberg told them to meet and consider shutting down mr. trump's the facebook website because mr. zuckerberg disgrooed with his views on zbrimgs. >> you don't i don't. >> >> you don't know. >> it would surprise me but i'm not aware. >> last question. i promise. i've heard -- i've seen thisscription before. i want your thoughts on it. if you and i interface on facebook, there are really not just two participants. it's you, you. it's me. and it's facebook. is that an accurate description, that nothing is private. >> except on messaging platforms, notably on what's app that's fully increpted. in this case it's just the two of us senator. >> this really is my last one. if libra catches on, and let's
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say 200 million people are using it. somebody is going to have the data on all of the financial transactions that those 200 million people have -- have consummated. which is going to indicate what they're buying, what they're not boying, what their likes are. where they like to shop pb a treasure trove of information. you're telling me that nobody in -- in calibra is going to attempt to monetize that? >> senator, when it comes to the libra association they will not have any personal identifiable data as a result and no way to. >> somebody will have the data. they'll have the data. >> the wallet nas will provide the services will have data for their own wallets. >> you're telling me nobody is going to monetize that data. >> as far as the calibra wallet we don't intend to. >> isn't it the case that at some point those consumers are going to be sent an email
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saying, do you care if we share your data and the details are right here? click on this and it's going to refer to you 10-page single-place spaced disclaimer written by the lawyers in which you could hire a dead body nobody will ever find it. and they'll start doing it isn't that's that what's going to happen. >> no, senator. >> okay thank you. >> thank you mr. chairman and mr. madagascar thank you for sitting here through this. i normally don't respond to partisan compensates from enclosings. but i wanted -- i ask the republican committee staff to let senator cotton know that is every letter to facebook from this committee from any of us on the committee has come -- or at least from the committee have been jointly signed by senator crapo and me. and i think that's important to know. as you see mr. marcus it's clear from this hearing that distrust at facebook is a universal feeling here. you heard kennedy say it.
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senator mcsally. senator smith and van hollen and schatz and me and others. that's an issue you need to deal with. i want to read back what you said to me about trust. you said, senator you heard it directly from mark and i will reiterate this fruft is prim orderial and i responded i didn't hear it from marc mark and you said trust is prim orderial. we've made mistakes past and have been working on. i know what the word trust means. about and prim orderial apparently you said- i mean you said and apparently mark zurich rk said aflt we nound found know record said process. but we believe you believe he sapd it what does it mean. >> senator, it means we need to continually -- we need to continue to do better in serving the customers -- the users we are serving. and we will do what it takes to earn their trust and that's
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definitely the case for as well for libra and the calibra wallet. >> and this is the same mark zuckerberg once called people trusting him with their dafrt and the next word starting with an f i can't say. this is the same mark zuckerberg who said that. i can 4,000 i have 4,000 emails pictures addressed people submitted i doept know why they trust me. then he said dumb and a profanity. which? and then i hear you quoting him. and then you say it yourself that trust is prim orderial. and the definition of prim orderial is from the beginning of time. and your biggest problem is that people don't trust you. what am i to take from this. >> that we we need to continue working hard to ensure that we are deserving of trust. >> why would you lead with trust is prime orderial. >> it's in your dna that you
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could trust us. but lay out one after another times that you deceived, undermined, betrayed that trust? what -- why, again senator schatz said over and over why with all of the problems should we trust you on something as important as a worldwide currency and the damage that can come from it. >> senator this is why we have set up libra the way we have, which is that we will not control it. and we will be one among 100 different participants that will govern over the network and the currency. as a result we will have to earn people's trust if we want them to use our product and services on top of the libra network because they've have plenty of choice with established companies that have a lot of trust. >> you -- you trust us -- you trust us to plebelieve is that
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statement when you say one of a hundred but you have access to 2 billion people. the george orwell, 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 nobody is like you as the preeminent player? >> senator, i do want to address this. because i believe that there might be some misunderstanding on how the people on the facebook wallet, the calibra wallet will have to onboard. we will not have the ability to onboard all people using our products automatically naturally. we will not even use facebook log in. people will have to on brody, create a new account with calibra, upload the government-issued id. as a result there is going to be a lot of friction. and we will have to make very
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strong commitments so that people trust us. and we have to honor the commitments for a very long period of time to earn people's trust. because which will we do that you will have other wallets that already have a number of customers that they can enable libra for immediately. and we're not in that position. as a result we put ourselves in a position where we have to work very hard to earn people's trust to use our products and services. >> pretty hard to trust when there is so little contrition responding to senator kennedy about the 2016 election, or what you have done to the -- to the media in this country to journalism. and what you have done according to the united nations in myanmar pretty hard to trust you with a worldwide currency that you are setting up in switzerland. >> senator, i believe that the status quo is not working for so many people that it's time for new progress to happen in financial services for those baieriers for so many people
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left behind to be lower and for costs for so many people to be also lower. and that's why we are deciding to take the lead on this. and then reling wish the lead. >> mr. chairman, i wish we could trust facebook. it's clear there is almost nobody on the committee that does. thank you. >> thank you, senator brown. i'll ask my final round of questions right now. mr. marcus, i've 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 talked about that with you in my first round of questions. i'm personally convinced that we need to -- if we don't -- well we have a sectoral approach as i indicated appear i think we need a more broad based approach at least for basic rights. europe and the gdpr has the gdpr
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pch that guarantees individual was the right to information about the access to their personal data which i believe means they should have access -- they should be notified when the data is being collected, what data is collected and given rights right at the point to opt out or in. and there should be corresponding responsibilities. does libra and its associated third party developers like calibra -- do they anticipate being captured under gdpr at this point in time? >> chairman, it will really depend on the jurisdiction of different wallets. but as far as the calibra wallet is concerned we will definitely have the highest standards when it comes to privacy. and as soon as the privacy policies and commitments are written you have my commitment that we will share those with you. >> all right. thank you.
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and let me get into that a little bit in the last part of my questions here. as i understand it, using the blockchain technology results in a limited amount of personal privacy -- or personal private data actually being collected. you've indicated that a person would have to provide their government-issued id. and then i assume -- orb please help me understand this. from that point calibra would have in re id. they would know the basic set of facts that's on in re government id. and i assume that information is connected to some kind of a code data or something that's used in the blockchain. is that correct? >> no, senator. actually the blockchain will not include personally identifiable data. >> but would calibra have the ability to connect a blockchain to the user of that blockchain? >> senator, it will depend on whether the transaction has been
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initiated from a calibra customer or not. >> okay. and if if it was initiated by a calibra customer, would calibra then -- calibra would then know the identity of the person using -- or engaging in that transaction, in that blockchain? >> yes, senator, because they would be using our product. >> and what else would calibra know in terms --way other data would calibra be able to use if it wanted to? >> senator, the -- the mindset in which we are establishing the product and the privacy of the product is that it will only collect the information that is required to offer the service. but also to keep accounts safe, which is, of course, really important when it comes to money, and especially because we will have strong customer protection programs. so we will need to protect
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accounts and data -- relevant data is actually quite helpful in protecting consumer accounts. >> tell me what some of the relevant data is. let's say it was a retail purchase. does that mean that the item purchased is a part of that data? >> senator, that would really depend. and i don't believe that we need that information, for instance either for the purposes of securing accounts or other purposes. >> so i've been told that the blockchain technology actually allows an enhancement of privacy protection. do you believe that's the case, that the use of blockchain technology actually 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 be
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their own sovereign, if you will, of the data that is used. and then it's a question of choice dpor consumers. on one side they can have consumer protections. and on the other they can be self-sovereign. about but their opportunities with blockchain technology to enable people to own their own data. >> so in comparison -- leaving the libra proposal out of the question now. just looking at the technology issue of blockchain technology versus, say the current transactional technology we use for credit card transactions or bank account transactions, check transactions and what have you, if we were to see a move in -- globally into use of blockchain technology for currency transactions, would that be -- would that represent an opportunity to enhance personal
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privacy? >> senator, it can be if implemented the right way, yes. >> all right i'm going to want to learn a lot more about that. maybe you could give me some of your information on this. >> thanks. >> all right. before we gavel to close, i want to reiterate my belief that it's critically important that policy makers and regulators understand the rules of the road as this project continues to develop. to the extent that gaps within the existing u.s. authority become parent it's worth examining whether new or clarifying legislation is warranted to ensure that u.s. regulators are not unfairly being relevant gait today the sidelines in assessment and oversight of this project and others like it. that concludes the question heing for today's hearing. for senators wishes to submit questions for the record the questions are due to the committee by tuesday, july 23rd. mr. marcus we ask that you respond to those questions as promptly as you can. and, again, thank you for being
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here. >> thank you. >> this hearing is adjourned. >> thank you, chairman.
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