The head of Facebook’s blockchain subsidiary Calibra David Marcus hasreleasedhis prepared testimony before congress for tomorrow and Wednesday, explaining that the Libra Association will be regulated by the Swiss government since that’s where it’s headquartered. Meanwhile, he says the Libra Association and Facebook’s Calibra wallet intend to comply will all US tax, anti-money laundering, and anti-fraud laws.
“The Libra Association expects that it will be licensed, regulated, and subject to supervisory oversight. Because the Association is headquartered in Geneva, it will be supervised by the Swiss Financial Markets Supervisory Authority (FINMA)” Marcus writes. “We have had preliminary discussions with FINMA and expect to engage with them on an appropriate regulatory framework for the Libra Association. The Association also intends to register with FinCEN [The U.S. Treasury Department’s Financial Crimes Enforcement Network] as a money services business.”
Marcus will be defending Libra before the Senate Banking Committee on July 16th and the House Financial Services Committees on July 17th. The House subcomittee’s Rep Maxine Waters has alreadyissued a letterto Facebook and the Libra Association requesting that it halt development and plans to launch Libra in early 2020 “until regulators and Congress have an opportunity to examine these issues and take action.”
Attempting to assuage a core concern that Libra is trying to replace the dollar or meddle in financial policy, Marcus writes that “The Libra Association, which will manage the Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena. It will work with the Federal Reserve and other central banks to make sure Libra does not compete with sovereign currencies or interfere with monetary policy. Monetary policy is properly the province of central banks
Marcus’ testimony comes days after President Donald TrumptweetedFriday to condemn Libra, claiming thaat “Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity. Similarly, Facebook Libra’s ‘virtual currency’ will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International.”
TechCrunch asked Facebook for a response Friday, which it declined to provide. However, a Facebook spokesperson noted that the Libra association won’t interact with consumers or operate as a bank, and that Libra is meant to be a complement to the existing financial system.
Regarding how Libra will comply with US anti-money laundering (AML) and know-your-customer (KYC) laws, Marcus explains that “The Libra Association is similarly committed to supporting efforts by regulators, central banks, and lawmakers to ensure that Libra contributes to the fight against money laundering, terrorism financing, and more” Marcus explains. “The Libra Association will also maintain policies and procedures with respect to AML and the Bank Secrecy Act, combating the financing of terrorism, and other national security-related laws, with which its members will be required to comply if they choose to provide financial services on the Libra network”
He argues that “Libra should improve detection and enforcement, not set them back” because cash transactions are frequently used by criminals to avoid law enforcement. “A network that helps move more paper cash transactions—where many illicit activities happen—to a digital network that features regulated on- and off-ramps with proper know-your-customer (KYC) practices, combined with the ability for law enforcement and regulators to conduct their own analysis of on-chain activity, will present an opportunity to increase the efficacy of financial crimes monitoring and enforcement.”
As for Facebook itself, Marcus writes that“The Calibra wallet will comply with FinCEN’s rules for its AML/CFT program and the rules set by the Office of Foreign Assets Control (OFAC) . . .Similarly, Calibra will comply with the Bank Secrecy Act and will incorporate KYC and AML/CFT methodologies used around the world.”
Below you can read the full testimony: