The Senate Banking Committee hearing that took place on July 16th to discuss Libra’s legitimacy and concern, raised some interesting questions about its future. The senators tone seemed to be more concerned with Facebook’s Libra as a company itself rather than the technology [i.e blockchain and cryptocurrency] it plans on leveraging.
Throughout the hearing David Marcus kept reiterating that blockchain is here to stay and if the United States don’t take advantage of it then somebody else will. Stating that the U.S should be a forerunner in establishing rules in the crypto world. He also stated that the only reason Libra headquarters is situated in Switzerland is because International groups like Bank for International Settlements are present there and not to evade any responsibilities or oversight.
The senators present then raised a question about how they didn’t doubt that cryptocurrencies should be spearheaded by the U.S, but rather why that somebody doing it should be Facebook. Given their history with data breaches and privacy concerns, Facebook now has an untrustworthy connotation attached to it, which is why the hearing is being held in the first place. In light of the general concern of privacy towards the company, David Marcus said that people didn’t have to trust Facebook with respect to Libra coin at all since it is only a part of the current 28 [projected to be around 100] companies that comprise it.
Now the question arises as to how they plan on implementing their Calibra wallet, since embedding their wallet into their messaging platforms will propel them way ahead of Coinbase, PayPal and any other potential wallet developer due to their massive user base. To this he replied,
“We open sourced it (Libra Network) 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 control over both the codebase and network through the process.”
Which essentially means that any developer team can potentially remove the KYC or AML [anti money laundering] requirements from a non-Calibra wallet and still be able to interact with the network. So Marcus saying that Calibra wallets enforcing the sanctions led by the national security apparatus and treasury is quite contradictory in itself.
Samson Mow, CSO of Blockstream tweeted saying,
“The only way for Libra to guarantee compliance in all areas is for it to be in complete control. You can’t have only Calibra wallets requiring authenticated government ID’s but not others. Only way it would work is with two pools of currency that are not allowed to intermingle.”
Which means that you would just end up with a non fungible currency which isn’t a “simple global currency” that is going to empower billions of people as Libra claims. Also the fact that they want to ensure that only people with a legitimate use case for their currency would be able to “do what they want with their money,” only means that it has to be very centralized in order to achieve that goal. Making it no different from other payment solutions than something like PayPal. Considering Marcus wants to be in compliance with every jurisdiction before launching the coin Samson Mow added,
It’s good though that Marcus said “we will take the time to get this right.” Once Libra is compliant with every jurisdiction, it will just be a more complex PayPal governed by an association.
Should’ve just used #Bitcoin.— Samson Mow (@Excellion) July 17, 2019
However, throughout the course of the hearing there was very little mention of Bitcoin and some senators seemed like they weren’t too concerned with Bitcoin being as widely used as Libra in the future. Senator Chris Van Hollen (D-Md.) said,
“The volatility of bitcoin means it won’t be put in widespread use. While [Libra] is supposed to be put into wide use”
Van Hollen also added that unlike Bitcoin where there is no central authority backing its assets by a particular currency, people have to trust in Libra’s association whether they like it or not. Bringing us back to the decentralized nature of Bitcoin and its trustless system which will always be at the forefront because it is not answerable to laws that govern other entities like Facebook and Libra.