[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                     EXAMINING FACEBOOK'S PROPOSED
                     CRYPTOCURRENCY AND ITS IMPACT
                      ON CONSUMERS, INVESTORS, AND.
                     THE AMERICAN FINANCIAL SYSTEM

=======================================================================

                                 HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 17, 2019

                               __________

       Printed for the use of the Committee on Financial Services    
      

                           Serial No. 116-40
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
39-740 PDF                  WASHINGTON : 2020                     
          
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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 17, 2019................................................     1
Appendix:
    July 17, 2019................................................   113

                               WITNESSES
                        Wednesday, July 17, 2019

Brummer, Chris, Professor of Law, Georgetown University Law 
  Center.........................................................    77
Demiros, Meltem, Chief Strategy Officer, CoinShares..............    84
Gensler, Hon. Gary, Professor of the Practice, MIT Sloan School 
  of Management; Senior Advisor to the Director, MIT Media Lab; 
  and Co-Director, MIT's Fintech@CSAIL...........................    80
Marcus, David, Head of Calibra, Facebook.........................     4
Pistor, Katharina, Edwin B. Parker Professor of Comparative Law, 
  Columbia Law School............................................    79
Weissman, Robert, President, Public Citizen......................    82

                                APPENDIX

Prepared statements:
    Brummer, Chris...............................................   114
    Demiros, Meltem..............................................   131
    Gensler, Hon. Gary...........................................   145
    Marcus, David................................................   164
    Pistor, Katharina............................................   171
     Weissman, Robert............................................   183

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of Chainalysis.............................   204
    Written statement of counteringcrime.org.....................   206
    Written statement of the ICBA................................   209
    Written statement of NAFCU...................................   213
Pressley, Ayanna:
    Press release dated June 18, 2019............................   215
Tlaib, Hon. Rashida:
    Written statement of Americans for Financial Reform Education 
      Fund.......................................................   218
    ``Diversity in Blockchain's Initial Review of Facebook's 
      Project Libra,'' dated June 24, 2019.......................   224
    Written statement of epic.org................................   261
Marcus, David:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   264
    Written responses to questions for the record submitted by 
      Representative Posey.......................................   280
    Written responses to questions for the record submitted by 
      Representative Wagner......................................   284
    Written responses to questions for the record submitted by 
      Representative Hill........................................   287
    Written responses to questions for the record submitted by 
      Representative Davidson....................................   289

 
                     EXAMINING FACEBOOK'S PROPOSED
                     CRYPTOCURRENCY AND ITS IMPACT
                      ON CONSUMERS, INVESTORS, AND
                     THE AMERICAN FINANCIAL SYSTEM

                              ----------                              


                        Wednesday, July 17, 2019

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:13 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Perlmutter, 
Himes, Foster, Beatty, Heck, Vargas, Gottheimer, Lawson, San 
Nicolas, Tlaib, Porter, Axne, Casten, Pressley, McAdams, 
Ocasio-Cortez, Wexton, Lynch, Adams, Dean, Garcia of Illinois, 
Garcia of Texas, Phillips; McHenry, Posey, Luetkemeyer, 
Huizenga, Duffy, Stivers, Wagner, Barr, Tipton, Williams, Hill, 
Emmer, Zeldin, Loudermilk, Davidson, Budd, Kustoff, 
Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden, and 
Riggleman.
    Chairwoman Waters. The Committee on Financial Services will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Examining Facebook's 
Proposed Cryptocurrency and Its Impact on Consumers, Investors, 
and the American Financial System.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Today, we are here for a hearing on Facebook's proposed 
digital currency, Libra, and digital wallet, Calibra, and their 
impacts on consumers, investors, and the financial system. Our 
first witness is David Marcus, Calibra's CEO. Following his 
testimony, a panel of experts will share their views on 
Facebook's plans.
    I have serious concerns with Facebook's plans to create a 
digital currency and digital wallet and its effort to enlist 
partners that expand its reach, like MasterCard, PayPal, Visa, 
Uber, Lyft, and Spotify. Facebook is apparently trying to 
create a new global financial system that is intended to rival 
the U.S. dollar.
    This venture is slated to be based in Switzerland, which 
has a history of being a monetary haven for criminals and shady 
corporations. Facebook's plans raise serious privacy, trading, 
national security and monetary policy concerns, not only for 
Facebook's over 2 billion users, who will have immediate access 
to these products, but also for consumers, investors, and the 
global economy.
    In addition, Facebook has proposed backing Libra tokens 
with government currencies and government-guaranteed 
securities, and holding them in a so-called Libra Reserve, to 
be governed by Facebook and its partners. Ownership of 
government assets on such a massive scale without proper 
oversight threatens to concentrate government influence in the 
hands of a few elites.
    Ultimately, if Facebook's plans come to fruition, the 
company and its partners will yield immense economic power that 
could destabilize currencies and governments. Facebook's 
proposed entry into financial services is all the more 
troubling because it has already harmed vast numbers of people 
on a scale similar to Wells Fargo, and demonstrated a pattern 
of failing to keep consumer data private, on a scale similar to 
Equifax.
    Facebook remains under a 2011 consent order from the 
Federal Trade Commission for deceiving consumers and failing to 
keep consumer data private. In the wake of the Cambridge 
Analytica scandal, in which Facebook provided 50 million users' 
private data to a political consulting firm, the company will 
reportedly pay a record $5 billion fine to the FTC for data 
privacy failures.
    In addition, Facebook has allegedly insecurely stored user 
passwords dating back to 2012, paid unsuspecting teenagers to 
download spyware, experienced a hack of nearly 50 million 
accounts, and experienced a software bug that granted third-
party access to 6.8 million users' photos. It has also been 
sued by HUD and civil rights groups for violations of the Fair 
Housing Act, in what amounts to modern-day redlining. Facebook 
also allowed malicious Russian state actors to purchase and 
target ads in a campaign to influence the 2016 election.
    I am also concerned about the lack of diversity in 
Facebook's upper ranks, and I fear that if these plans go 
forward, women and minorities, and women- and minority-owned 
businesses may be excluded from participating fully.
    In light of these and other concerns, my colleagues and I 
wrote to Facebook earlier this month to call on it to cease 
implementation of its plans until regulators and Congress can 
examine the issues associated with a large technology company 
developing a digital currency, and take action. The Independent 
Community Bankers of America and others support this common-
sense step. Facebook's plans also raise larger concerns about 
big tech's expansion into financial services, as it appears to 
inappropriately mix commerce and banking activities.
    So today, we will discuss a draft bill, the Keep Big Tech 
Out of Finance Act, which would prevent large platform 
utilities like Facebook from becoming financial institutions 
and block them from creating their own currencies. Today's 
hearing is only the first step in our oversight and legislative 
process. I look forward to hearing from our witnesses.
    The Chair now recognizes the ranking member of the 
committee, the gentleman from North Carolina, Mr. McHenry, for 
5 minutes for an opening statement.
    Mr. McHenry. We are here to go beyond the headlines. We are 
here to sift through the speculation and the hearsay. Here is 
just one of my favorite headlines which asks, ``Is Facebook 
forming a Crypto Mafia as Libra Foundation's Members Boost Each 
Other's Businesses?'' Washington must go beyond the hype and 
ensure that it is not the place where innovation goes to die.
    Just because we may not fully understand a new technology 
proposal does not mean we should immediately call for its 
prohibition, especially when that proposal is just that, a 
proposal. But let's face it. Let's be honest. It is Facebook. 
And I am skeptical, but we can either make you a political 
talking point or we can choose to conduct thoughtful 
governmental oversight. That is my hope for this day: 
thoughtful government oversight.
    The reality is whether Facebook is involved or not, change 
is here. Digital currencies exist. Blockchain technology is 
real and Facebook's entry in this new world is just 
confirmation, albeit at scale.
    The world that Satoshi Nakamoto, author of the Bitcoin 
White Paper, envisioned, and others are building, is an 
unstoppable force. We should not attempt to deter this 
innovation, and governments cannot stop this innovation, and 
those who have tried have already failed.
    So the question then becomes, what are American 
policymakers going to do to meet the challenges and the 
opportunities of this new world of innovation? Some politicians 
want us to live in a permission-based society, where you need 
to come to the government, and ask for its blessing before you 
can begin to even think about innovating. Those are the 
politicians who would rather kill it before it grows.
    But there are others who believe in the vibrancy of 
American ingenuity, American innovation, who recognize that our 
economy is built off of generations of entrepreneurs and 
innovators through competition, through testing, through 
tinkering, and through iterating, which got us here today.
    To be clear, it is not about advocating for a break-it-and-
figure-it-out-later approach, but when it comes to finances, we 
must ensure that consumers and investors are protected.
    So, Mr. Marcus, let's get to work. Let's have that 
conversation. Let's answer those questions. Instead of a knee-
jerk reaction of banning something before it begins, my 
Republican colleagues and I want to first try and understand 
it, and, in turn, based off what we learn, determine whether or 
not our current regulatory framework meets the demands of this 
new technology. That is why we are here today.
    Look, I don't have a crystal ball. I have no idea if Libra 
will lead to greater financial inclusion, and lower remittance 
costs, which would mean families could send money to each other 
more cheaply and easily than today, or if it is just a ploy to 
shoot Facebook's Twitter mentions through the roof. We will 
see.
    But what I do know is this: Republicans stand ready to work 
with innovators to successfully implement responsible 
technology here in the United States, here, domestically, 
before we lose out to other countries around the world. So I 
ask my colleagues on both sides of the aisle to join together 
in supporting innovation, ingenuity, and the entrepreneurial 
spirit that this nation was founded upon.
    I am grateful for this hearing. I called on Chairwoman 
Waters to have this hearing a month ago, and this is a 
bipartisan approach to oversight.
    And with that, I would like to yield the balance of my time 
to Mr. Hill.
    Mr. Hill. I thank the ranking member. This timely hearing 
touches on critical areas of jurisdiction within our committee: 
fintech innovation; oversight questions related to the use of 
and trading of cryptocurrencies; and the intersections of 
financial services and big data. We therefore must ensure that 
we are asking thoughtful questions, as we learn about and 
analyze these rapidly emerging trends.
    As a former community banker, I understand the importance, 
with appropriate regulation and balance, to benefit American 
consumers, and as lawmakers we all need to ensure that all the 
companies that operate here in America, with American 
consumers, are in full compliance of those laws. America is 
evolving into a digital era, and we need to make sure that we 
are asking the right questions. I urge my colleagues to do 
that, but always trust but verify.
    I yield back.
    Chairwoman Waters. Today, we have two panels. I want to 
welcome our first witness, Mr. David Marcus, chief executive 
officer of Calibra. David Marcus has been CEO of Calibra for 
the last 2 months and also identifies himself as working for 
Facebook. Prior to Calibra, Mr. Marcus explored blockchain and 
served as vice president for messaging products for Facebook. 
He has also served as president of PayPal and other tech 
companies.
    Mr. Marcus, without objection, your written statement will 
be made a part of the record. You will have 5 minutes to 
summarize your testimony. When you have one minute remaining, a 
yellow light will appear. At that time, I would ask you to wrap 
up your testimony so we can be respectful of both the committee 
members' time and others.
    Mr. Marcus, you are now recognized for 5 minutes to present 
your oral testimony.

      STATEMENT OF DAVID MARCUS, HEAD OF CALIBRA, FACEBOOK

    Mr. Marcus. Thank you, Madam Chairwoman. Chairwoman Waters, 
Ranking Member McHenry, and members of the committee, thank you 
for the opportunity to appear before you today.
    My name is David Marcus and I am the head of Calibra at 
Facebook. For most of my life I have 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 after it acquired my last startup, and I moved to 
Facebook about 5 years ago to run Messenger, and more recently 
to lead our blockchain efforts.
    In my written testimony, I describe the mechanics of Libra. 
Today, I want to explain why I am optimistic about what Libra 
can offer the world. But before I get there, I want to make 
clear that we recognize we are only at the beginning of this 
journey. Federal Reserve Chairman Powell has said publicly that 
the process for launching Libra needs to be patient and 
thorough, rather than a sprint to implementation. Treasury 
Secretary Mnuchin reinforced those views at his recent press 
conference.
    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 working with 
regulators, here and around the world. Chairwoman Waters, 
speaking on behalf of Facebook, I pledge to you that Facebook 
will not offer the Libra digital currency until we have fully 
addressed regulators' concerns and received appropriate 
approvals.
    I would like to start by sharing the vision for Libra. 
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, $14, on average, will be lost 
because of fees. It can also take several days or even a week 
for the mother to receive the money, a delay that can prove 
disastrous in an emergency. Not to mention lines may be long 
and collection points may be in high-crime areas.
    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 smartphones, just like they do 
for so many other things today? That is what Libra is about, 
developing a safe, secure, and low-cost way for people to 
efficiently move money around the world.
    To realize Libra's promise, Facebook and 27 other 
organizations have founded the independent Libra Association. 
These include companies in the payments technology, 
telecommunications, blockchain, and venture capital industries, 
and nonprofits like Women's World Banking, who is here today, 
along with staff from the Libra Association.
    The Libra Association will govern the Libra blockchain 
network and administer the Libra reserve. It will establish the 
rules of the road and will prioritize privacy and consumer 
protection, and it will implement safeguards that require 
service providers in the Libra network to fight money 
laundering, terrorism financing, and other financial crimes. 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 
will Facebook or the Libra Association position themselves to 
compete with sovereign currency or interfere with monetary 
policy. In fact, the Association will work with the Federal 
Reserve and other central banks to minimize the risk of any 
competition with their currencies or interference with their 
monetary policy. These areas are properly the province of 
central banks.
    Finally, I would like to turn to Facebook's role in 
realizing the potential of Libra. To facilitate Libra's use, 
Facebook has established a subsidiary, known as Calibra, that 
will offer one of many digital wallets on the Libra network. 
Using the Calibra Wallet, consumers will be able to save, 
spend, and send Libra right from their smartphones. If this is 
successful, Facebook will benefit from more commerce across the 
family of apps that it operates.
    Calibra will be affordable and accessible and also be safe 
and secure, with strong safeguards to protect users' accounts 
and information. We expect that the Calibra Wallet will be 
governed by rules administered or enforced by FinCEN, OFAC, and 
the FTC. It will also be regulated by State financial 
regulators.
    Calibra is committed to protecting the privacy of its 
customers. The Calibra Wallet will not share individual 
customer data with the Libra Association or even with Facebook 
except for limited circumstances such as preventing fraud or 
criminal activity in complying with the law.
    I am excited about the potential that Libra and Calibra 
hold, and I am proud that we have initiated this effort here in 
the United States. I believe that if America does not lead 
innovation in digital currency and payments, others will. If 
our country fails to act, we could soon see a digital currency 
controlled by others whose values are dramatically different 
from ours. I believe that Libra can drive positive change for 
many people and can provide an opportunity for leadership 
consistent with our shared values.
    I look forward to answering your questions.
    [The prepared statement of Mr. Marcus can be found on page 
164 of the appendix.]
    Chairman Waters. Thank you. I now recognize myself for 5 
minutes for questions.
    Mr. Marcus, Facebook's 2.7 billion users entrust you with 
their most intimate thoughts, pictures, feelings, ideas, and 
sensitive information. Yet at every opportunity to demonstrate 
growth, competence, and responsibility, Facebook has let us 
down.
    As I already noted, Facebook has a long list of scandals, 
including its repeated failures to safeguards its users' data. 
You said that we don't need to trust Facebook because it will 
only be one of 100 members in the Libra Association that will 
manage this project. But that is not entirely true, is it? The 
project was Facebook's idea. Facebook is spearheading it and 
recruiting partners. Facebook's subsidiary, Calibra, will 
provide consumers with a digital wallet to store Libra tokens. 
As I understand it, no member of the Association has paid 
anything towards the project.
    So my question is, why should we trust Facebook to do these 
activities?
    Mr. Marcus. Thank you, Madam Chairwoman. I think trust is 
really essential, and it is clear that we have made mistakes. I 
believe we are owning these mistakes and working hard in 
remedying them and working hard at improving on all fronts.
    But as far as the Libra Association is concerned and the 
way that this project has been developed, we have invested 
everything that has been invested so far in Libra--you are 
absolutely right--and we have built all of the code base, the 
technology, up to this point. But we have also given, donated, 
if you will, the technology, because it is now open source for 
the whole world to be able to use and leverage. As a result, we 
are not controlling the code base, and by the time we launch, 
we will be one of 100 members with no special privilege.
    As far as the wallet is concerned, I believe that the idea 
here is that one day we will launch and suddenly 2 billion 
people will arrive on the Calibra Wallet. This is not the 
approach we are taking. People will have to open specific 
Calibra accounts, so they are not going to be able to use their 
Facebook account. They have to open new accounts. And in order 
for them to do that they will have to upload a government-
issued ID to identify, so that we can meet our Know-Your-
Customer (KYC) requirements.
    Chairwoman Waters. Thank you. Mr. Marcus, I can appreciate 
that you understand that there is a trust problem here, given 
its disregard for U.S. law and its massive scale. I think 
foreign countries could find it difficult to effectively 
regulate Facebook, Libra, or Calibra. It is not clear the 
Federal Reserve or other U.S. regulators have the authority to 
regulate you, and yesterday the Swiss regulator, that you are 
saying would regulate you, actually said that it has never been 
contacted by Facebook about this project.
    So, Mr. Marcus, you responded to a request by members of 
this committee for a moratorium on your activities by stating 
that you would continue to work with regulators before going 
forward, but if the regulators lack the authority to adequately 
oversee you, how can you work with them to resolve concerns? 
Will you stop kind of dancing around this question and commit 
here, in this committee, before the duly elected 
Representatives of the American people, to a moratorium until 
Congress enacts an appropriate legal framework to ensure that 
Libra and Calibra do what you claim it is intended to do, which 
to serve the public good?
    Let me just say that we are all in support of innovation. 
It is not one side of the aisle versus the other side of the 
aisle. But if you talk to any member on this committee, they 
will know nothing about Libra. They will know nothing about 
Calibra. They will know nothing about how it is organized. They 
will know nothing about the role that Facebook is going to play 
in this big association that now has 28 companies and is 
looking to get 100 companies.
    And so despite the fact that we all support innovation, and 
we all understand what is important for our economy to grow, 
and for development and for the future of this country, we need 
to be on top of and understand something as massive as this 
project, and that does not mean we don't support innovation.
    With that, I will turn to the gentleman--well, yes, if he 
has time to answer. Please, go right ahead.
    Mr. Marcus. Chairwoman Waters, I agree with you that this 
needs to be analyzed, understood, and the proper oversight 
needs to be set up before Libra can launch, and it is in this 
spirit that we released a White Paper very early, before any 
launch, so that we could have the time to engage with all of 
the proper regulators and central banks and lawmakers to ensure 
that we will get this right. And this is my commitment to you, 
Madam Chairwoman. We will take the time to get this right.
    Chairwoman Waters. Thank you very much. The gentleman from 
North Carolina, Ranking Member McHenry, is recognized for 5 
minutes.
    Mr. McHenry. I want to keep this simple. Mr. Marcus, I have 
read your White Paper. I understand the nature of digital 
currency and digital technology. What is a Libra?
    Mr. Marcus. Congressman, Libra is a digital currency, a 
Reserve-backed digital currency.
    Mr. McHenry. Is it a security?
    Mr. Marcus. We don't believe it is, Congressman.
    Mr. McHenry. Is it a commodity?
    Mr. Marcus. Congressman, based on current U.S. law I 
believe it might be a commodity, but we see it as a payment 
tool.
    Mr. McHenry. Is it an exchange-traded fund?
    Mr. Marcus. It is not, Congressman.
    Mr. McHenry. Okay. So it is none of the above, in any pure 
form, like other digital currencies. Correct?
    Mr. Marcus. Congressman, it is designed to be a payment 
tool.
    Mr. McHenry. A payment tool. Okay. So if it is none of the 
above in our current structure, what I am really getting at is, 
how do you comply with regulations?
    Mr. Marcus. Congressman, the way that we comply with 
regulations is in a number of ways. First, as far as the 
Calibra Wallet is concerned, it is registered as a money 
services business with Treasury, and with FinCEN. It is 
applying, and has received a number of State licenses, and will 
operate the same way that other wallets operate, as far as--
    Mr. McHenry. That is Calibra. I am asking about Libra.
    Mr. Marcus. As far as the Libra Association is concerned, 
these are active conversations we are having, notably with the 
working group of the G-7, as well as FINMA, which is the Swiss 
financial regulator.
    Mr. McHenry. Okay. So there is tension between the notion 
of a decentralized currency, or something decentralized, and 
ultimately privacy, and ultimately anti-money- laundering and 
Know-Your-Customer elements. These things stand in conflict 
with one other and are very difficult things to resolve.
    In your White Paper, you say that after 5 years, there will 
be a transition point, and you will go from a permission-based 
to a permission-less system. Post-transition, how do you 
reconcile the need for controls which allow you to comply with 
anti-money-laundering and Know-Your-Customer (KYC) regulations, 
with that decentralized notion of a fully decentralized digital 
currency?
    Mr. Marcus. That is a very good question, Congressman, and 
the way that this will work is that the association will still 
have the ability to set the rules when it comes to anti-money-
laundering programs, and CFT and KYC requirements for the 
network. And what we expect, even when the network transitions 
to permission-less, without getting lost in the weeds, is that 
the vast majority of validators will likely be the ones 
providing services, so likely larger companies.
    Mr. McHenry. So you are saying in the nature of the wallet, 
that is how you get to anti-money-laundering, and Know Your 
Customer, not the nature of the digital currency. So going from 
a permissioned system, with these nodes, ultimately 100, to a 
permission-less system, you are saying it is not going to be 
the nature of that technology of a Libra. It will be in the 
nature of the wallets on either side of this?
    Mr. Marcus. That is correct, Congressman, but on top of 
that the Libra Association will continue to have an AML program 
and will still be under the supervision of FinCEN.
    Mr. McHenry. Okay. So getting into that question of anti-
money-laundering provisions, and complying with FinCEN, is your 
view that you are going to be like Western Union, or is it 
going to be your view that you are more like your former 
employer, PayPal?
    Mr. Marcus. Congressman, I believe that it depends on the 
entities that you are talking about, as far as the wallets are 
concerned. It will definitely be more like the PayPal types of 
businesses that operate in the payment space. And as far as the 
Libra Association is concerned, that is the conversation we are 
having, because--
    Mr. McHenry. So is it your view that the development 
internally at Facebook is for you to be a competitor to Alipay 
and to WePay?
    Mr. Marcus. Congressman, yes.
    Mr. McHenry. And to be a competitor to Venmo and PayPal?
    Mr. Marcus. Congressman, so yes, we have a number of 
wallets that are working with us on the network side but that 
will compete on the wallet side, on the network.
    Mr. McHenry. Will that consumer data be kept separate or a 
part of the Calibra data collected from consumers? Will that be 
a part of Facebook's overall knowledge of consumers or will it 
be separate and distinct?
    Mr. Marcus. No, Congressman, we will make a strong 
commitment to keep that data separated from social data.
    Mr. McHenry. Separate and distinct.
    Mr. Marcus. Yes.
    Mr. McHenry. Final question here: If you are seeking to be 
a competitor to Alipay and to WePay, why are you doing this in 
Switzerland and why are you using a basket of currencies? Why 
not the good old American dollar, and to bring down the 
transaction costs, which is seemingly the ultimate goal here?
    Mr. Marcus. Congressman, first I want to say that the 
choice of Switzerland has nothing to do with evading 
responsibilities or oversight. The goal with Switzerland is to 
home this Libra Association in an international place that is 
the home of--
    Mr. McHenry. Okay. Skip beyond that.
    Mr. Marcus. So that is really why. The second thing is for 
the same reason we would like for Libra to be a digital, global 
currency, and as a result to be one unit of digital currency 
for the whole world, and this is why we believe it was the 
right approach.
    Mr. McHenry. Thank you.
    Chairwoman Waters. The gentlewoman from New York, Mrs. 
Maloney, who is also the Chair of our Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets, is 
recognized for 5 minutes.
    Mrs. Maloney. Thank you. Mr. Marcus, as you can see there 
are a lot of questions about this project. It is big and very 
bold. Some would say it is too bold. The Chairman of the 
Federal Reserve, Jay Powell, was in here just last week saying 
that he thinks it could be a systemic risk. The former Chairman 
of the CFTC, Gary Gensler, is going to testify later that he 
believes it should be covered by the Investment Company Act. So 
we have a lot of concerns and a lot of questions.
    And I take it that it is a ``no'' to the chairwoman's 
question about requesting a moratorium on Libra until 
policymakers can figure out how to handle it. Was that a yes or 
a no to her question, when she called for a moratorium?
    Mr. Marcus. Congresswoman, the commitment is that we will 
not launch until we have addressed all concerns fully and have 
the proper approval.
    Mrs. Maloney. Okay. I take that as a ``no.'' So what I want 
to ask you is, will you commit, right here in this hearing 
room, to walk before you run? Will you commit to doing a small 
pilot program for Libra first, limited to no more than 1 
million users, and overseen by the Federal Reserve and the SEC? 
Will you commit to that?
    Mr. Marcus. Congresswoman, the steps we have taken--and 
this is the reason why we announced the White Paper in the 
plans, instead of launching and then figuring it out after, 
which is what happens sometimes with technology products, most 
often, actually. In this very care, we are deliberate about 
taking the time to get this right--
    Mrs. Maloney. With all due respect, that is not what I 
asked you, and given the lack of trust that people have in 
Facebook--you breached the trust of users over and over again. 
Just last week you were reportedly fined $5 billion for selling 
your users' private data without their knowledge or permission.
    So I would like to ask you again, will you commit to 
walking before you run? Because if you go ahead and launch 
Libra without doing a pilot program first, there are too many 
risks. The Libra reserve could be managing too much money, 
which could make it systemic, too much money could be pulled 
out of banks in order to buy Libra, which former FDIC Chair 
Sheila Bair has written about and warned about. So, the risks 
are very great.
    Now personally, and this is only my own personal belief, I 
don't think you should launch Libra at all, because the 
creation of a new currency is a core government function and 
should be left to democratically accountable institutions that 
are accountable to the American people. But at the very least 
you should agree to do this small pilot program first, fully 
overseen by you and the Federal Reserve and the SEC. I think 
that is a modest request.
    So will you commit right now to doing a small pilot program 
first? Yes or no?
    Mr. Marcus. Congresswoman, we will continue to engage with 
regulators and the working group at the G-7 that is notably 
looking after the issues that you raised to ensure that however 
we launch this it is responsibly and it is with the appropriate 
oversight, in a very responsible way. You have my commitment on 
that.
    Mrs. Maloney. If you will not commit to testing this out as 
a pilot program first--I think it is a reasonable request--then 
I think that Congress should seriously consider stopping this 
project from moving forward.
    There is a lot of concern about Facebook. A lot of people 
think that it has really become too powerful, that it has 
become a monopoly. And now you are telling us that Facebook's 
digital wallet for Libra, called Calibra, will be the only 
wallet that can be embedded into What's App and Facebook 
Messenger. Given how dominant these two apps are, I think that 
raises serious concerns about market concentration, and 
potentially, monopoly concerns.
    So will you commit to allowing third-party wallets on 
What's App and Facebook Messenger?
    Mr. Marcus. Congresswoman, may I answer the one point about 
what you said earlier? I just want to address it really quick, 
which is that the current system is really not working for 
people, and for way too many people, and others are leading and 
plowing ahead, and I believe that if we don't--
    Mrs. Maloney. Please, sir, would you answer my question? I 
get to ask the questions in this committee. Will you commit to 
allowing the third-party wallets on What's App and Facebook 
Messenger? Yes or no? It is a simple question. Yes or no?
    Mr. Marcus. Congresswoman, other wallets are going to 
actually be interoperable with the Calibra Wallets that will be 
integrated in What's App.
    Mrs. Maloney. So do you believe in competition and market 
access? If you believe in it, then you would allow them to be 
embedded also, third party. Will you allow it?
    Chairwoman Waters. The gentlelady's time has expired.
    Mrs. Maloney. Thank you.
    Chairwoman Waters. The gentlewoman from Missouri, Mrs. 
Wagner, is recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. I am concerned 
that a 2020 launch date demonstrates deep insensitivities 
around how Libra could impact U.S. national security, the 
global financial system, the privacy of people across the 
globe, criminal activity, and international human rights.
    Mr. Marcus, I have a number of questions so let's try and 
move as expeditiously as possible. Are you taking any steps to 
ensure that the dollar is not overtaken as the leading 
international currency that undergirds global economic 
stability?
    Mr. Marcus. Yes, Congresswoman, and the first of many steps 
is that the dollar is most likely going to be the predominant 
part of the reserve.
    Mrs. Wagner. It is 58 percent, generally speaking, euro 
about 19. I don't know what your numbers are, in terms of--
    Mr. Marcus. Congresswoman, first, the dollar will be one of 
the predominant currencies backing Libra, and then the other 
part is really the engagement that we currently have with the 
G-7 working group, with the Fed, and with the Financial 
Stability Board. We will continue to engage in those 
conversations.
    Mrs. Wagner. I serve also as the vice ranking member of the 
House Foreign Affairs Committee, and I am hoping to understand 
how the U.S. Government could effectively implement sanctions 
if Libra were to take off. As you likely know, North Korea uses 
cryptocurrencies to evade our sanctions all the time. If the 
Treasury Department demanded that the Libra Association 
blacklist certain Libra addresses in order to comply with U.S. 
sanctions, how would Libra respond?
    Mr. Marcus. Congresswoman, I want to make a strong point 
here because it is really important. Whether Libra launches or 
it doesn't launch, there will be other networks. There are 
other networks. There are other cryptocurrencies. And those are 
not coming here--
    Mrs. Wagner. You are not suggesting that if it is okay if 
others evade U.S. sanctions, then it is okay if Libra does?
    Mr. Marcus. I am absolutely not saying that, Congresswoman. 
That is why I am saying that we are here and we are engaging 
with FinCEN. The Libra Association will be also registered with 
FinCEN, and we will have strong AML and KYC programs, as well 
as from all of the wallets operating here in the United States, 
of course full enforcement of sanctions, and then some.
    Mrs. Wagner. Libra could have significant geopolitical 
implications, frankly, from a human rights perspective, for 
instance. Despotic leaders could ban Libra and penalize users. 
How are you approaching establishing appropriate human rights 
safeguards as you develop the Libra platform?
    Mr. Marcus. Congresswoman, I believe that one of the 
driving forces of the association being financial inclusion, we 
will have the right representatives around the table--
    Mrs. Wagner. Which specific organizations, because your 
folks sure couldn't answer that yesterday when I asked--which 
ones are you specifically working with to address potential 
human rights impacts?
    Mr. Marcus. We have Mercy Corps, Women's World Banking, and 
Kiva that are already founding members of the Libra 
Association, and there will be more organizations that have 
dedicated all of their lives and energy in addressing the very 
problems that you are raising.
    Mrs. Wagner. I am curious to understand how you think the 
Libra platform would interact with Section 230 of the 
Communications Decency Act, which prevents State and local law 
enforcement from protecting citizens from illicit activities, 
for instance, if Libra is explicitly being used to further a 
criminal act negotiated on Facebook Messenger.
    Mr. Marcus. Congresswoman, Section 230, as I understand it, 
is relating to the Facebook technology product and we have the 
protections of Section 230. I don't believe that this applies 
to payments.
    Mrs. Wagner. Terrorists and criminals use Facebook to 
fundraise, to recruit, and to connect with buyers. Facebook's 
moderation just does not seem up to the task and Libra could 
make it, I believe, even easier for these nefarious actors to 
move money. Before launching Libra and potentially compounding 
the situation, how will you be addressing the digital back-
markets that run rampant on the Facebook platform?
    Mr. Marcus. Congresswoman, the first way we will do that is 
ensuring that on the Calibra Wallet, everyone who opens a 
Calibra account has to identify with a government-issued ID, 
and as a result we will have strong identity and a fullly 
staffed team to address--
    Mrs. Wagner. My time has expired. I yield back to the 
Chair. I have other questions I will submit for the record. 
Thank you.
    Chairwoman Waters. Thank you. The gentlewoman from New 
York, Ms. Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman.
    Mr. Marcus, we do not want to stifle innovation, but we do 
have a healthy dose of skepticism. This is not Silicon Valley. 
You cannot work out problems as you go. So all of those 
problems need to be resolved and worked out before you launch 
Libra.
    So for the third time on this side, I pose the question to 
you: Will you commit yourself to not launch Libra before all 
the concerns from the Federal Reserve and all the regulators 
are addressed? Yes or no?
    Mr. Marcus. Absolutely, Congresswoman, and I want to 
reiterate this commitment that this was the spirit in which we 
announced early, and we will do what is right to address--
    Ms. Velazquez. Okay. I just want a yes-or-no answer. Thank 
you.
    Mr. Marcus, we gave the Federal Reserve increased oversight 
over non-banks. We don't know yet what you are. If the FSOC 
designated you a SIFI, would you submit to enhanced oversight?
    Mr. Marcus. Congresswoman, I don't believe that the--
    Ms. Velazquez. But you don't know what you are, so--
    Mr. Marcus. No, but Congresswoman, the Libra Association or 
Calibra have no plans to engage in banking activities, and as 
far as the Calibra Wallet is concerned, we will be active in 
the payment space, like many other non-banks are active in the 
payment space. But that said, we will, of course, comply with 
all regulations.
    Ms. Velazquez. We want to make sure that companies that do 
not fall into the normal bucket of regulatory authority could 
not threaten the U.S. financial system. So I would like to ask 
you, according to the Libra Association's White Paper, members 
of the Libra Association will consist of geographically 
distributed and diverse businesses, nonprofit and multilateral 
organizations, and academic institutions.
    Sir, by what criteria were the initial members of the 
association chosen?
    Mr. Marcus. Thank you for your question, Congresswoman. The 
way that the initial members joined was a result of a wide 
outreach, and it is a combination of companies that can 
accelerate the acceptance and utility of Libra, companies like 
Uber and Lyft and Spotify, that can accelerate the acceptance 
of Libra within current merchant networks, like Visa and 
MasterCard, that can inform how to drive financial inclusion, 
like Mercy Corps, Kiva, and Women's World Banking. And now, the 
Libra Association is starting that phase of welcoming more 
members that will be even--
    Ms. Velazquez. Okay. I hear you. You want to get to 100, 
right?
    Mr. Marcus. That is correct, Congresswoman.
    Ms. Velazquez. So if a member were to determine that they 
no longer wish to participate in the association, what is the 
process for withdrawal?
    Mr. Marcus. Congresswoman, at this stage we are in the 
process, all of us, the 28 organizations, of ratifying the 
charter, and as a result of this process--
    Ms. Velazquez. So you don't know yet.
    Mr. Marcus. No. As a result of this process, if members do 
not wish to participate they can drop, and there will be a 
process on an ongoing basis for members that do not wish to 
participate.
    Ms. Velazquez. So do you think a member's withdrawal could 
threaten the value of the Libra currency?
    Mr. Marcus. No, I don't believe that's the case, 
Congresswoman.
    Ms. Velazquez. Mr. Marcus, according to the Libra 
Association's White Paper, the Libra Association has a target 
launch of the first half of 2020. When do you expect the 
Association's charter to be finalized, and will the charter be 
available for review by regulators, lawmakers, and the public?
    Mr. Marcus. Absolutely, Congresswoman.
    Ms. Velazquez. This question was asked before, so I will 
yield back the balance of my time.
    Chairwoman Waters. Thank you. Point of clarification, Mr. 
Marcus, did you commit to the moratorium, or to Ms. Velazquez?
    Mr. Marcus. Madam Chairwoman, I committed to waiting--
    Chairwoman Waters. Excuse me. I just need a yes or no.
    Mr. Marcus. Madam Chairwoman, I just want to be precise. I 
committed to waiting for us to have all the appropriate 
regulatory approvals and to have addressed all concerns before 
we move forward.
    Chairwoman Waters. Thank you very much. That is not a 
commitment. I wanted to clarify that.
    The gentleman from Arkansas, Mr. Hill, is recognized for 5 
minutes.
    Mr. Hill. I thank the chairwoman. Mr. Marcus, again, thank 
you for being here. I wanted to talk a little bit about what 
appears to be a core business element for Calibra and that is 
the issue of remittances. The World Bank says that the single 
most important challenge in remittances around the world is 
lack of transparency and cost, and the average cost of global 
remittances is about 7 percent. So tell me what fees you will 
be charging for moving money inside the Calibra system?
    Mr. Marcus. Congressman, the goal for Calibra is to charge 
very little or nothing at all for transactions, for person-to-
person (P2P) transactions. We are hoping that we can offer that 
part of the service for free.
    Mr. Hill. And then, therefore, on B2B or B2P, you would be 
charging something in Libra currency, fractional Libra 
currency?
    Mr. Marcus. There will likely be small merchant fees that 
will be competitive, very competitive with the current fees 
that are paid by merchants.
    Mr. Hill. And inside the Calibra system, you will earn 
revenue from advertising as well?
    Mr. Marcus. No, Congressman. No advertising in Calibra. The 
Calibra revenue streams, when we start working on that, which 
we haven't at all and we don't plan to for a number of years, 
will likely be by offering a range of financial services in 
partnerships with existing financial institutions and banks.
    Mr. Hill. And so in those remittances, which are so 
important to countries all over the world--we know what 
percentage of GDP remittances represent--particularly in 
Central America, and in Mexico, where I think it is the third-
largest source of hard currency, for example, 20 percent in 
Honduras--both sides of that equation would be subject to KYC?
    Mr. Marcus. Yes, Congressman. On the Calibra Wallet, you 
will not be able to open an account without having proper KYC.
    Mr. Hill. And one of the issues in the Third World, 
obviously, is they don't have a stable currency and are subject 
to inflation, terrible inflation. I think I read a note that 94 
countries, representing 48 percent of the world's population 
and 16 percent of world GDP, experience, on a regular basis, 10 
percent or more inflation per year.
    So is it your view that the Calibra Wallet will have a more 
stable currency than their local currency, or more stable 
value, I should say, than their local currency?
    Mr. Marcus. Congressman, the way we've designed the 
reserve, and again, subject to proper oversight and review from 
the G-7 working group and others, is to have a very stable 
value-retentive digital currency. So, yes, it will be a very 
high-quality digital currency, in a number of countries that 
are currently receiving a lot of their income from abroad, they 
will now receive a lot of their income from abroad in a stable 
currency that will retain its value.
    Mr. Hill. What do you think, though, about--obviously many 
of those same Third-World countries, and some larger than Third 
World, have very strict controls on foreign currency. They have 
currency controls. They have currency boards. They don't allow 
their consumers to take action outside their home currency and 
they don't allow their home currency to be taken out of the 
country. How does Libra plan on dealing with that?
    Mr. Marcus. Congressman, this is going to be a country-by-
country answer. There are lots of countries that have the 
problems you highlighted and that don't have currency controls, 
that we think we can address right away. And then for other 
countries, it will definitely be a country-by-country approach.
    The one thing I want to highlight, though, is the fact that 
any wallet--not only Calibra--that is actually built on top of 
the Libra network will be interoperable with one another, 
meaning that to provide the value that we intend to provide for 
so many people, we don't need to be the only wallets, and in 
certain regions it will be other wallets, but they would still 
benefit from interoperability.
    Mr. Hill. I thought that was an interesting conversation 
with my friend from New York about the exclusivity of the 
wallet, Calibra Wallet, at What's App, for example. You do plan 
on having--and you have 100 members that are not interested in 
Facebook having any more monopoly than they do now, so would 
you have Visas, or debit or credit systems available as a 
wallet?
    Mr. Marcus. Congressman, we will have a number of other 
payment methods for commerce on the Facebook platform, and 
Instagram as well, including debit, credit cards, other 
wallets. And as far as P2P payments, there will be more--
    Mr. Hill. There will be competition on P2P payments, even 
on Facebook's application?
    Mr. Marcus. There will be on traditional currencies, the 
same way that in Messenger, you can currently use debit cards 
to do P2P.
    Mr. Hill. I yield back. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
who is also the Chair of our Subcommittee on Consumer 
Protection and Financial Institutions, is recognized for 5 
minutes.
    Mr. Meeks. Thank you, Madam Chairwoman, and Mr. Marcus, 
thank you for your testimony.
    I can say, with confidence, that Lehman Brothers, Bear 
Stearns, and the entire subprime mortgage ecosystem did not set 
out to bring the global financial system to its knees. I can 
say, with confidence, that the legitimately brilliant minds and 
Nobel prizewinners, in fact, behind LTCM, did not set out to 
trigger the Asian financial crisis, but they nearly broke the 
global markets. And I can also say, with confidence, that the 
deregulation of the early 1980s and bankers did not set out to 
trigger the savings-and-loan crisis, but they did.
    Not only that, they all typically founded their logic and 
innovation, expanding access to financial services, and 
arguments of inclusion, and yet they all broke the system, and 
the people at the bottom of the socioeconomic ladder 
systemically paid the heaviest price.
    So you may be speaking earnestly when you tell us your 
lofty goals, but I was here in Congress when Secretary Paulson 
came to us and told us we were within days of a complete 
shutdown of the global financial system. Now, I don't expect 
you to understand what that was like, but I assure you it was 
absolutely terrifying and one of my worst moments in Congress.
    I want America to remain a global leader in financial 
services innovation, and I believe that we have regulators, et 
cetera, that are the best in the world. But let's do this. 
Let's assume that Facebook manages to get even just 10 percent 
of its current user base to the Facebook Libra wallet. Do you 
understand that that would absolutely make you a systemically 
risky financial institution, and that we would expect FSOC to 
designate you as such, and the Fed to create a special 
regulatory oversight program for Facebook accordingly? Would 
you agree to this?
    Mr. Marcus. Congressman, first of all I want to recommit, 
we will actually--
    Mr. Meeks. Yes or no? Would you agree to this?
    Mr. Marcus. I do want to share that if we have 10 percent 
of the Facebook--
    Mr. Meeks. I only have a small amount of time.
    Mr. Marcus. I want to answer your question to the best of 
my ability, Congressman, and if we had 10 percent of our user 
base, which is 200 million people, using a Calibra Wallet, we 
would be the same size as many other non-bank payment wallets 
around the world, including here in the U.S., including another 
one that is part of the--
    Mr. Meeks. Let me reclaim my time. You are not answering my 
question, because even banks, anybody that is holding money 
would be considered a bank.
    Let me ask this. Do you agree that, defined simply, an 
organization that holds deposits and makes loans is a bank? 
Similarly, banks, in the past, did issue their own currency, or 
IOUs, and clear their payments. Finally, some banks are run as 
nonprofit organizations or cooperatives. Therefore, are both 
Facebook and Libra organizations planning to establish bank 
holding companies with full organization and capital structure 
we require to protect the global financial system from systemic 
risk and systemic collapse?
    Mr. Marcus. Congressman, we will not engage in banking 
services. We will focus on payments.
    Mr. Meeks. You are taking people's money, right, and you 
are holding their money, correct?
    Mr. Marcus. Congressman, the same way that you have Venmo 
and PayPal and Square Cash and a number of other payment 
companies.
    Mr. Meeks. So what you are telling me is you are not going 
to organize as a bank--you didn't answer my first question--
which would put you under the regulations of FSOC and others, 
so that we can make sure that there is no systemic risk here, 
because of what you are doing and your size that could bring 
down the entire Federal Government, the entire financial 
services industry, but let me ask you one more question. I have 
40 seconds.
    In the Dodd-Frank Act, we established the CFPB to serve as 
a financial regulator focused specifically on the best 
interests of consumers. Do you believe that the CFPB currently 
has authority over both the Libra organization and the Facebook 
Libra wallet? And why did you not conclude--well, do you think 
the CFPB has jurisdiction?
    Mr. Marcus. Congressman, we are engaged in conversation 
with all FSOC agencies, including CFPB, and it is not for me to 
decide who has appropriate oversight.
    Mr. Meeks. Why didn't you include compliance with CFPB in 
your prepared testimony?
    Mr. Marcus. Congressman, this is because we are currently 
engaged with all of these agencies, and I wanted to share where 
we were right now, at this point in time, with the knowledge 
that we have at this time. But we will have a more complete 
outreach by the time we are ready for launch, because we are 
going to take the time to get this right.
    Chairwoman Waters. Clarification. I understand that you are 
absolutely opposed to FSOC's oversight and that you don't think 
they should be allowed to designate you as a SIFI. Is that 
right?
    Mr. Marcus. Madam Chairwoman, I am not opposed to any 
regulation, and we have had conversations with FSOC.
    Chairwoman Waters. Thank you very much. Thank you. We will 
move on to the next person.
    The gentleman from Missouri, Mr. Luetkemeyer, is recognized 
for 5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. Over here, 
Mr. Marcus. Thank you.
    You made a statement a while ago where you said that the 
current system is not working, and that concerns me because I 
think the current system is working. It is not working as 
efficiently, maybe, as you would like to see it work, but I 
think the system right now works because it is kind of traffic 
control. And if you are on a country road, and you have 5 cars 
going through an intersection, you don't need traffic control 
and you can go, whatever you want to do, and it doesn't cost 
you any time to go through an intersection.
    If you have an intersection that has 30,000 cars a day 
going through it, you need some traffic control to go through 
there, to protect people, for safety purposes, to be able to 
transact their ability to go through that thing in an efficient 
way. And I think you're talking about the size and scope of 
money transactions, and, yes, it costs a little bit of money 
right now to be able to transfer money around the world, but 
that is because of safety and security concerns, as well as the 
mechanisms that are in place to be able to do that.
    I think what you are trying to do is take away some of 
those costs, but we are concerned about the safety and 
transactional transparency, what is going on here. So the 
system is working but you would like to improve it, is what I 
think you meant to say a while ago. Is that right?
    Mr. Marcus. Congressman, first, I really believe that the 
system is not working for way too many people right now, and I 
don't believe that the reason the people who earn less and who 
have less pay more is because of the regulation and having KYC 
and AML. I believe we can do that technology at a much lower 
cost.
    Mr. Luetkemeyer. What you just said, though, is you agree 
that the system is working. It is just not working as 
efficiently as you would like to see it, so I accept that.
    A while ago, you said that you want to offer more financial 
services as you go down the road, and just a minute ago, you 
said you wanted to offer no banking services. So, which one is 
it? Are you going to have deposits down the road that you pay 
interest on? Are you going to take deposits at all? Are you 
going to have lending that you are going to be doing, to some 
of the customers? What kind of financial services or banking 
services are you intending to grow into?
    Mr. Marcus. Congressman, it is too early, but if we are to 
engage in those services we will partner with existing banks 
and financial institutions the same way that other payment 
companies have done it. I am talking here exclusively about the 
Calibra Wallet, and I think I need to be precise here.
    Mr. Luetkemeyer. Okay. With regards to the specific assets 
that you are going to hold in reserve, who puts the money in? 
Who puts the assets in to begin with? Who owns those assets? 
What do you do with any dividends or interest or any returns on 
those investments that you make? Who shares in those profits?
    Mr. Marcus. Congressman, the way the reserve is built is if 
consumers buy into Libra, the fiat money they use to buy Libra 
ends up in the reserve and is actually custodied with large 
banks, or potentially a better form of custody, even, depending 
on the outcome of some of the conversations we're having with 
the G-7 working group and the recommendations that they will 
come with. And so the reserve is always proportional to the 
number of Libra coins in circulation.
    And if the reserve generates a return, it will be used for 
two things: number one, to pay for the Association and the 
operation of the whole Libra network; and number two, to return 
some of the investment back to original investors and backers 
of the system who will put in a lot of resources to get it off 
the ground.
    Mr. Luetkemeyer. One of the things as we look at this is, 
if I have a business and I am trying to sell a thousand widgets 
to some company in France, and I want to use the Libra system 
to facilitate this, when I get done with this transaction, I 
have an income off of that, and so I have to report that to the 
IRS. Is there a cost to change back from the Libra to the 
dollar so that I then can explain to the IRS the kind of 
transaction and the kind of money I earned off of this 
transaction? Is there a fee for doing that when you transfer it 
back from Libras to dollars?
    Mr. Marcus. Congressman, there will be probably small fees 
because there will be agents and exchanges that will be 
involved in the process of converting fiat into Libra and back 
to fiat. But from an IRS and tax standpoint, as far as the 
Calibra Wallet is concerned, we will have the proper tools 
built into the product so that people can report their taxes.
    Mr. Luetkemeyer. My time is up. Thank you.
    Chairwoman Waters. The gentleman from Georgia, Mr. Scott, 
is recognized for 5 minutes.
    Mr. Scott. Mr. Marcus, I have listened very attentively to 
your testimony and to the response to several of my colleagues' 
questions here--Ms. Waters, Mr. McHenry--and you keep 
mentioning your White Paper as a defense to the answer to the 
questions. But I want to call your attention to the fact that 
neither your White Paper nor your subsequent Facebook posts 
offered any concrete details as to how you plan to implement or 
enforce strong anti-money-laundering, how you plan to enforce 
Know-Your-Customer protections, and most importantly, to ensure 
what all of us are concerned about: the safety of our financial 
system.
    Right now, tell us what specifically--do not say the White 
Paper--what are you going to do--what do you see as the 
responsibilities of Libra to combat anti-money-laundering to 
protect our financial system? Could you tell us right now, just 
point at it?
    Mr. Marcus. Yes, Congressman. There are wo parts to that 
answer: first, the Libra Association itself. The Libra 
Association will be based in Switzerland but will still 
register with FinCEN, and as a result we will have an AML 
program, and we will have guidelines for all the members to 
enforce the right KYC standards, and the AML/CFT programs.
    As far as the Calibra Wallet is concerned, for every 
account opened we will ensure that everyone KYC's appropriately 
with government-issued ID, and we will have very strong AML 
programs.
    Mr. Scott. Okay, but what about this, Mr. Marcus? 
Currently, the full responsibility to file suspicious activity 
reports (SARs) is on our banks or other money services 
businesses, and law enforcement uses these SARs to investigate 
and prosecute criminal terrorists. And in your July post, you 
spoke only of the ability for these law enforcement and 
regulators to conduct their own analysis of off-the-chain 
activity. Do you feel that this represents a shift away from 
Libra's own responsibility to monitor and enforce anti-money-
laundering or customer protections?
    Mr. Marcus. No, Congressman. The reason I wrote this is 
that the approach that Libra is taking is using blockchain, and 
blockchain gives additional visibility to law enforcement and 
regulators compared to the current system to conduct their own 
investigations instead of solely depending on banks or 
regulated entities' self-reporting. But that does not mean that 
we on the Calibra Wallet side and all of the other members 
operating on top of this network will not have very strong AML 
programs and will not file suspicious activity reports.
    Mr. Scott. All right. So, now you are marketing this 
currency as a new entity to financial services, and with that 
will surely come new and innovative methods of committing 
financial crimes. What you bring is new; criminals out there 
are going to invent ways to deal with it.
    Let me ask you, what are you anticipating as some of the 
new ways that criminals may attempt to extort and exploit Libra 
for illicit use? And how do you plan to combat this? You are 
planning something new, but you also have to have the ability 
to be able to not just look down the road but to be able to 
look around corners to see what that criminal has in store for 
us. What say you?
    Mr. Marcus. I could not agree more with you, Congressman, 
and I believe that we can improve on the current system because 
we have a chance this time around to think through the way that 
the network is designed, the way that the on- and off-ramps are 
properly regulated with proper KYC controls, the proper way to 
monitor activity and report it with new technologies. And I 
think this system might be potentially better on these fronts.
    Mr. Scott. Thank you, Mr. Marcus.
    Chairwoman Waters. The gentleman from Michigan, Mr. 
Huizenga, is recognized for 5 minutes.
    Mr. Huizenga. Thank you, Madam Chairwoman. And there is so 
much to cover and so little time. I am going to try to go 
through and get to some new territory.
    I was not planning on doing this, but you used the term, 
``fiat currency'' a couple of times, and I thought I knew what 
that meant, but it seemed a little odd that you were using it 
in the way that you were. And so I went to Wikipedia. ``Fiat 
money'' is a currency without intrinsic value that has been 
established as money. Fiat money does not have use value and 
has value only because a government maintains its value or 
because parties engage in exchange to agree on its value. 
Wikipedia might need to update its definition a little bit 
because we see that people are using cryptocurrencies with no 
backing. And I am curious, why do you feel the need to have a 
reserve? Because it strikes me that you are using a fiat 
currency to create a fiat currency and to have a reserve of 
that.
    Mr. Marcus. Congressman, the reason we have a reserve is 
that we believe that to create a high-quality payment tool, we 
need that digital currency to be very stable. And as we have 
seen with a number of other currencies out there, digital 
currencies, they are very volatile, and as a result they are 
not a very good medium of exchange or payment tools.
    Mr. Huizenga. So it is a trust issue?
    Mr. Marcus. No, Congressman. It is a stability issue. It is 
an inherent quality that--
    Mr. Huizenga. I guess, stability and trust.
    Mr. Marcus. --good money has, which is, if it is stable, 
then it is good money; if it is not stable, then it is not.
    Mr. Huizenga. But couldn't your stability be influenced by 
people's trust levels of the currency?
    Mr. Marcus. Yes and no. In other words, the way that--
    Mr. Huizenga. You fit perfectly into Washington with both a 
yes and a no.
    [laughter]
    Mr. Huizenga. It does strike me, though, as a little bit, 
as many nonbanked and underbanked, as you have said, is one of 
the goals of trying to get in it, get them involved in the 
financial space, oftentimes they are not in that space because 
they have a distrust of financial institutions. And it does not 
take anyone much time to find some well-publicized issues of 
trust with a number of the companies that are involved in 
Calibra. And so I am not sure exactly how you are going to 
address this, but let me get back to the regulatory 
implications of this.
    I had the pleasure of being the Chair of the Monetary 
Policy and Trade Subcommittee at one point, as well as the 
Capital Markets Subcommittee, and I am the Ranking Member now 
on that. And as I have always said, as we have been looking at 
these crypto assets, cryptocurrencies, and as Ranking Member 
McHenry asked, is it a security? Is it an exchange-traded 
product? What exactly is this? Is it fish or fowl? And it seems 
that it is more of a platypus to me, that it kind of evolves in 
its different parts. And I am curious, are you able to actually 
maintain the core and essence of a cryptocurrency and asset if 
you are really under all this regulation?
    Mr. Marcus. We believe we can, Congressman, because we 
believe that in order for any form of digital currency and 
payments system to reach mass--
    Mr. Huizenga. Would you like to see all of the other crypto 
assets and cryptocurrencies under the exact same regulation 
that you are? Or are you trying to create and carve out this 
new product?
    Mr. Marcus. Congressman, I cannot speak for other crypto 
assets--
    Mr. Huizenga. Certainly, you must have some thoughts on 
that, because if you are looking at it, saying, well, that is 
not working for them, otherwise why would you be coming and 
asking for this regulatory burden?
    Mr. Marcus. Because we believe that this is a digital 
currency. If you compare it to other digital currencies or 
cryptocurrencies, it serves a different purpose. This one is to 
serve a purpose of payment. It is a payment tool. And as a 
result, when it reaches so many people, we believe that 
appropriate regulation and oversight is required.
    Mr. Huizenga. As we were having a little confab up here, my 
friend, French Hill, said you might be the equivalent of 
American Express traveler's checks of days of old.
    Mr. Marcus. I do not think of it that way, Congressman, 
but--
    Mr. Huizenga. Okay. For the benefit of the lower dais and 
the staff, those were things that were actually paper and you 
carried them with you.
    [laughter]
    Mr. Huizenga. You bought them at a bank. You actually put 
in a fiat currency towards it.
    All right. My time has dwindled. I'm sorry. We have a lot, 
and I have one last quick thing, which is the Chair had 
asserted that you had not been in contact with FINMA, with the 
Swiss. Is that true or not true? Because you had said earlier 
that you have been.
    Mr. Marcus. Congressman, we have been in touch with FINMA. 
The other agency was the privacy agency that we have not 
reached out to, but we have had continuous engagement with 
FINMA.
    Mr. Huizenga. I will be following up with some written 
questions, so thank you.
    Chairwoman Waters. The gentleman from Colorado, Mr. 
Perlmutter, is recognized for 5 minutes.
    Mr. Perlmutter. Thanks, Madam Chairwoman, and I am going to 
kind of take off where Mr. Huizenga just left off, just to help 
me understand the deal.
    So, I have $5, and I go and I buy one token of Libra for 5 
bucks. You take that 5 bucks, and what do you do with it?
    Mr. Marcus. Congressman, the $5 you would use to buy Libra 
would end up being in the reserve, and so in the current 
contemplated basket, it would mean that 2\1/2\ dollars will be 
in the reserve and another 2\1/2\ of your dollars will be in a 
basket of euro, pound, yen, et cetera, in the reserve. And as a 
result, because the reserve is one for one, your Libra unit of 
value will always be backed by the same value in the reserve at 
all times, guaranteeing stability and low volatility.
    Mr. Perlmutter. And that reserve is in the Cloud? That 
reserve is in a bank? That reserve is where?
    Mr. Marcus. That reserve is custodied with very large 
global banks that provide custodial services to a number of 
companies, but this is something that we are also in 
discussions on with the G-7 working group to ensure that there 
is proper regulatory oversight in how the reserve is managed 
and how it is custodied as well.
    Mr. Perlmutter. All right. We have this medium, this 
currency of some court, called ``Libra,'' and now it is half 
here, and half there. I want to use it. I want to buy something 
in Paraguay, which, if I were using dollars, was going to cost 
me 4 bucks. So how do I do that? I then go to Calibra, and 
Calibra is like my credit card, and it wires four-fifths of a 
token of a Libra to Paraguay?
    Mr. Marcus. Congressman, you would use any of the wallets, 
Calibra being one of them, to transfer the money that you 
wanted to transfer to that other country. And the way it would 
work is the same way that you would use any payment apps here 
in the U.S. like Venmo or PayPal.
    Mr. Perlmutter. It is a wiring system, more or less, except 
that I am using Libra. Calibra is a wiring system. Venmo, you 
know, I Venmo my daughter 20 bucks, okay? It is done, it is 
wired, it is over. I could have gone to the bank, and they 
could have wired it to her. But I use Venmo.
    Mr. Marcus. It is very similar to your experience on Venmo, 
Congressman.
    Mr. Perlmutter. I think what we are struggling with is, 
what are you? I mean, you are a medium. You are an 
intermediary. You are facilitating financial transactions. And 
it is not as if we have not had problems with that in the 
history of the world. You have a money changer in the process 
of turning my buck into a Libra into a euro. So, that is 
biblical. The transaction is something we have had from the 
beginning of time, but it is a faster kind of wiring and more 
immediate transaction. Am I mistaken in that?
    Mr. Marcus. No, Congressman. It is also much, much lower 
cost for the people who end up needing it the most.
    Mr. Perlmutter. And I appreciate that, but for us, we have 
seen banks fail. We had the old saying, ``What is good for GM 
is good for America.'' And they had to go through a Chapter 11 
back in the recession. I do not think that will happen to 
Facebook or whomever is backing this whole process. But it is 
possible, it is certainly possible. And so our responsibility 
is to your depositors or the people who buy these tokens or who 
use your credit card system.
    We are trying to figure out what kinds of regulations, and 
I think you are getting really good questions from both sides 
of the aisle because we all have this same question for you. 
And that is the resistance you are feeling, because we think 
you are a bank, but you are not quite like a bank. And if you 
are a bank, we regulate the heck out of you because we have 
seen a lot of people lose money where there has not been 
regulation. That is the resistance that I feel. I want to 
support your innovation. I want to support the efficiency that 
you people believe you are bringing to the table. But I also do 
not want anybody getting hurt here.
    Mr. Marcus. Congressman, we are completely aligned on that. 
We do not want anyone hurt, and we want the proper regulatory 
oversight, and this is why we have announced our plans very 
early, and we are here and engaging with all of the regulatory 
bodies here in the U.S. and around the world to ensure that we 
have the right regulatory framework and oversight and we 
address all the concerns that were raised today, yesterday, and 
that were raised by Chairman Powell and others.
    Mr. Perlmutter. Thank you for your testimony.
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Duffy, 
is recognized for 5 minutes.
    Mr. Duffy. Thank you, Madam Chairwoman. Mr. Marcus, how are 
you doing? I have to tell you, this is absolutely brilliant, 
innovative, creative, and to come from Facebook and to leverage 
your network is pretty amazing. I was shocked at how bright it 
was, not to hit a sore point. But, quickly, who gets to use 
Calibra and Libra?
    Mr. Marcus. Anyone can open a Calibra account, go through 
KYC, in countries where we can operate.
    Mr. Duffy. This is a $20 bill. Do you know who can use a 
$20 bill?
    Mr. Marcus. Yes, Congressman.
    Mr. Duffy. Who can use it? Or maybe a better question is, 
who cannot use a $20 bill?
    Mr. Marcus. I believe the answer to your question is 
everyone, anyone--
    Mr. Duffy. Everybody can use a $20 bill. This $20 bill does 
not discriminate on anything. You could be a murderer. You can 
say horrible things. You can say great things. This $20 bill 
can be used by every single person who possesses it.
    With regard to your network, can Milo Yiannopoulos or Louis 
Farrakhan use Libra? And I bring that up because both of those 
individuals have been banned from Facebook.
    Mr. Marcus. Congressman, first I want to say that--
    Mr. Duffy. No. A simple question. We only have 5 minutes. 
You have to answer a question so we can do the best job in 
vetting what you want to do.
    Mr. Marcus. I know, but we must be thoughtful about those 
issues, Congressman, so I am trying to respond appropriately.
    On one side, I just want to stress that a platform that 
enables you to communicate and share ideas, while Facebook we 
believe is a platform that accepts ideas across the political 
spectrum, it has to protect--
    Mr. Duffy. I somewhat disagree with that, but--
    Mr. Marcus. --from hate speech and others, and so that is 
one thing. When it comes to money--
    Mr. Duffy. Can Milo use that? Can Louis Farrakhan use this 
system? They have been banned from Facebook. Can they use it? 
Yes or no?
    Mr. Marcus. Congressman--
    Mr. Duffy. Yes or no?
    Mr. Marcus. I do not know yet, Congressman, because--
    Mr. Duffy. Okay. If I am a gun dealer, I can use a $20 
bill, because if it is a lawful gun, that happens all across 
America. On Facebook, you do not allow gun sales. So can a gun 
dealer who is abiding by American law, can they use your 
system?
    Mr. Marcus. This is a question that is really important to 
get right, Congressman, and we have not written a policy yet--
    Mr. Duffy. See, and that is what concerns me. I love what 
you are doing, but when you say, ``we at Facebook are going to 
set the social policies of who can use this cryptocurrency'', 
in a way, you are going to set the social policy of who is in 
and who is out. And what is great about this is everybody gets 
to use it. And what I fear is maybe in a roundabout way what is 
happening in China with their social scoring--if you get the 
right social score, you can get a loan. You can get an 
apartment. You can access the train. Maybe Facebook is doing 
the same thing here where, if you meet our social standards, 
which a lot of people here do not necessarily agree with your 
social standards though we use your platform, that is the way 
you access the network, so we have to conform our behavior to 
the standards of Facebook to be on the network, where I think 
the right answer would be, listen, everybody, if you are 
abiding by the law, has access to this system.
    Mr. Marcus. Congressman, personally, I believe that we 
should not be in the business of deciding what people can do 
with their money or not. But that being said, this is an 
important question, and we need to be thoughtful about the 
policy.
    Mr. Duffy. I think you are going to get some major pushback 
when we look at your network and you say who is on and who is 
off, and you are the judge and the jury. And for this system, I 
think you are going to see a lot of pushback from both sides. 
Go ahead, quickly.
    Mr. Marcus. This is why I believe we need to be very 
thoughtful about this, and my commitment to you is--
    Mr. Duffy. I think the thoughtful answer is, I am going to 
behave like the fiat currency. The thoughtful answer is, if you 
abide by the law, you have access to it. That is the thoughtful 
and the right answer. But you have not given me that, which 
gives me great pause and concern that the model of Libra is 
going to be the model of Facebook where you get to decide, and 
that concerns me.
    I am also concerned about the data privacy and how you are 
going to use the data. A lot of us have had concerns about the 
data use on Facebook. How will you use this data? Because what 
we post on Facebook and who we are friends with is one thing. 
How we spend our money is really powerful information, and you 
have access to that, too. And I would like to dig deeper with 
you on that point, but also, the freedom and liberty that comes 
from the $20, I think you should offer that same freedom and 
liberty on your network, and maybe we can talk more about that 
later. And I appreciate you coming here and testifying, and 
kudos on the innovation.
    I yield back.
    Mr. Marcus. Thank you, Congressman.
    Chairwoman Waters. Thank you.
    The gentleman from Connecticut, Mr. Himes, is recognized 
for 5 minutes.
    Mr. Himes. Thank you, Madam Chairwoman. Mr. Marcus, thank 
you for being here. This has been one of the more interesting 
hearings we have had in a little while.
    In the last Congress, I had the honor of chairing the new 
Democrat Coalition, 104 Democrats, and if we do one thing, we 
get excited about innovation. But this is not an app that 
measures your heartbeat. This is a complete overhaul of the 
circulatory system of the global economy. A lot of the concern 
you are hearing here I think is just around its sort of 
shocking ambition.
    I want to ask you a specific question and take you through 
a specific scenario that gets at a larger concern that I have, 
and just so that folks at home can kind of follow along, let us 
just imagine that I am an American user of Libra, and my rent 
is $1,000 a month, and just for simplicity's sake, let us say 
that this month it is 1,000 Libra a month.
    Now, because Libra is backed by a basket of currencies, let 
us just imagine that one of the currencies, sterling, devalues 
dramatically in 2 weeks. I think, if I recall my banking and 
economic days, that I will find that in the next month, my rent 
in Libra will be--let's just pick a number--1,100 Libra but 
still $1,000 a month. What I am getting at is that users will 
have the profoundly unfamiliar experience of assuming foreign 
currency risk. Am I correct in that?
    Mr. Marcus. Congressman, yes, there will be fluctuation, 
but the way that we are intending to design the reserve, again, 
in consultation with the G-7 working group of finance 
ministries and central banks, is going to be in such a way 
that--we have looked historically at the volatility that the 
dollar would have had in the last 20 years compared to the 
Libra with the proposed basket. And if you look at the fact 
that half of the basket is dollars, it should be fairly stable.
    That being said--
    Mr. Himes. But wait, wait. You acknowledge--I got it. You 
acknowledge that consumers everywhere, users of Libra, will for 
the first time, if they have previously been using their 
domestic currency to purchase domestic goods, experience 
foreign currency risk.
    Mr. Marcus. They will have some degree of volatility--
    Mr. Himes. Right. Okay. I think that is an important point 
for people to understand. And I am not saying that is good or 
bad, but traditionally, the regulatory apparatus here has said 
that if you are going to assume an unfamiliar risk, that risk 
will be disclosed to you with full transparency. And the 
mechanism we have traditionally used to disclose that kind of 
risk is through public filings and disclosure.
    Now, you said this is not an exchange-traded fund (ETF). I 
am a former banker. This looks to me exactly like an exchange-
traded fund backed by a series of short-term instruments in 
foreign currency. It looks exactly like an ETF to me. It even 
has a creation and remittance mechanism. Elaborate for me on 
why this is not an exchange-traded fund. And if there is any 
ambiguity, what I really am getting at here is you need to 
clear--if, in fact, the regulators determine that it is an ETF, 
you need to clear 1940 Act registration hurdles, which that may 
sound technical, but that is designed to protect that rent 
payer who discovers that their rent went up for reasons they do 
not understand.
    So, tell me why this is not an exchange-traded fund?
    Mr. Marcus. Congressman, there are three points of why we 
believe it is not. Despite the fact that you are right that it 
uses some operational mechanisms that are similar, we believe 
that it is not because Libra is a payment tool. And typically, 
if the question you are asking is whether we--
    Mr. Himes. But wait, I need to stop you there. The SEC does 
not say if you are a payment tool, you are not an exchange-
traded fund. The SEC says if you have a security that is backed 
by other securities, you are an exchange-traded fund. And you 
may quibble with me that you are not a security, but you are 
certainly backed by other securities. Is that not correct?
    Mr. Marcus. Congressman, it is mainly currencies, but I do 
want to answer your question. First, we believe that no one 
will buy Libra as an investment because it is designed for 
stability. That is number one.
    Number two is that when you look at the definition of the 
securities or the Howey Test that has been used by the SEC, it 
actually uses the idea that you invest for a profit that will 
result in the management of the product, and this product is 
not a product, it is a payment tool. It is not going to be 
actively managed. And you cannot use an ETF for payments. This 
is actually designed as a payment tool to enable people to 
retain value, not to--
    Mr. Himes. Since I am almost out of time, let us go back to 
my original question. How will you make transparent what you 
acknowledged is foreign currency risk that consumers will face? 
How do you envision doing that?
    Mr. Marcus. Congressman, as far as the Calibra Wallet is 
concerned, you will have transparency and education built into 
the product.
    Mr. Himes. Okay. Thank you. My time has expired. Thank you, 
Madam Chairwoman.
    Chairwoman Waters. The gentleman from Ohio, Mr. Stivers, is 
recognized for 5 minutes.
    Mr. Stivers. Thank you, Madam Chairwoman. And welcome, Mr. 
Marcus.
    We all say we want to encourage innovation, and I 
appreciate your innovation, and I really do want to encourage 
innovation. And I would just like to kind of walk through a 
timeline so we know where we are in the innovation process 
here. And correct me if I am wrong, or I will just ask a couple 
yes-or-no questions. It was about 60 days ago you announced the 
idea, correct?
    Mr. Marcus. Congressman, it was on June 18th, yes.
    Mr. Stivers. June 18th. The White Paper was on June 18th, 
but I thought in May, you put out--there was nothing in May?
    [Witness nods head no.]
    Mr. Stivers. Okay. We are 30 days from the White Paper. So, 
this is a really early congressional hearing. And with that, I 
understand that you will not have the answer to every question. 
I do appreciate your commitment to be willing to ensure that 
you meet all the regulatory hurdles and comply with the law. 
The value I see in this innovation is, of course, for cross-
border payments because that is so expensive today, and, 
second, for the unbanked, and you talked about both of those 
domestically. But can you just tell us what is in it for 
somebody domestically who already has a bank account and is not 
looking for cross-border payments? I do not see a big 
application for those folks.
    Mr. Marcus. Congressman, I am glad you asked, because I 
doubt that people will pay their rent with Libra any time soon, 
to just answer the question from earlier. The general use case 
that we believe will happen in the U.S. when you have a bank 
account and you are properly banked is that if you want to send 
money abroad, you will connect your debit card with one of the 
wallets. You will buy just the right amount of Libra you need 
to actually make that cross-border transaction. You will save a 
lot in the process, but then if money comes back, you will 
redeposit it back to your bank account.
    Mr. Stivers. And so you do not expect people to be holding 
Libra because the point is to have a stable currency, not a 
volatile currency. That is where the value comes in, in cross-
border payments, because about 60 percent of the world's 
population lives in a country that does not have a stable 
currency. I appreciate that, and I think there is some value in 
that.
    I do have some concerns about the potential of money 
laundering. As you know, cryptocurrencies and the Silk Road 
sort of started as a way to anonymously finance illicit 
activity or as one of the early things that it was used for. I 
am concerned about cross-border payments that then are going to 
people who have sort of bad intent, and I am curious, will you 
put a limit on the amount of any individual transaction? And I 
know, again, it is early. I recognize the timeline of where we 
are. But do you expect to put a limit on how much somebody can 
transfer in Libra to someone else?
    Mr. Marcus. Congressman, we are going to continue our 
engagement notably with Treasury on this topic, and my 
expectation is that there will be limits, depending on where 
the money is sent or where it is coming from. My hope is that 
between two consumers of American-regulated wallets like 
Calibra and others who will have proper KYC and AML, we can 
avoid having artificial limits. But we will probably need 
limits across the network to ensure that those activities can--
    Mr. Stivers. And I am not asking you to put artificial 
limits in. I was just curious, and obviously I want to make 
sure you comply with Know Your Customer and anti-money- 
laundering because that is complying with the law, which you 
said you would do, and I think that is really important.
    Mr. Marcus. We will, Congressman.
    Mr. Stivers. Do you expect to have the Libra Association 
vote to exclude companies like Chick-fil-A or anybody else that 
might have social views that you disagree with?
    Mr. Marcus. Congressman, this is actually not going to be 
my decision or Facebook's decision. It is going to have to be a 
decision that is going to be made by the council of members of 
the Libra Association and the Libra Association itself.
    Mr. Stivers. And I recognize that. I will just urge you to 
not use this for social engineering but to use it to meet the 
intent that we talked about of helping the unbanked and helping 
people with cross-border payments. I hope that is the purpose 
and not just social engineering.
    I appreciate your time today. There are a lot of unanswered 
questions. I may send some in writing. I do appreciate the 
innovation. I appreciate your time, and I look forward to 
working with you as you work to make sure that you follow every 
law and regulation. I know it will be a challenge because you 
will be dealing with 200 countries' regulations.
    Thank you so much.
    Mr. Marcus. Thank you, Congressman.
    Chairwoman Waters. The gentleman from California, Mr. 
Sherman, is recognized for 5 minutes.
    Mr. Sherman. Madam Chairwoman, we need to get Mark 
Zuckerberg here. This is the biggest thing or it tries to be 
the biggest thing this committee will deal with this decade. 
And while we have one of his employees here, this is 
Zuckerberg's program.
    Now, we are told by some that innovation is always good. 
The most innovative thing that happened this century is when 
Osama bin Laden came up with the innovative idea of flying two 
airplanes into towers. That is the most consequential 
innovation, although this may do more to endanger America than 
even that.
    People call this the ``Libra.'' It is not the Libra. If it 
finally happens, nobody is going to call it a ``Libra.'' They 
are going to call it a ``Zuck Buck.'' This is Zuckerberg's 
baby.
    Mr. Marcus gave me two promises in our conversation 
yesterday, both of which he knows they will not comply with.
    First, he promised that all the Know Your Customer and 
anti-money-laundering is going to be adhered to. But that 
applies only to the Calibra Wallet, and he hopes to have 
hundreds of other wallets created by others. Keep in mind as to 
Bitcoin, 46 percent of the transactions, according to one 
academic study, are for drug dealers and other nefarious 
operations. Hamas advertises they want Bitcoin contributions. 
Bitcoin, however, has a problem. There is no off-ramp. There is 
no way to just go buy something with a Bitcoin. You can 
eventually with a Zuck Buck.
    And, finally, the White Paper put out by Facebook says the 
Libra protocol does not link accounts to real-world identity. A 
user is free to create multiple accounts by generating multiple 
key pairs. So this is a godsend to drug dealers and sanctions 
evaders and tax evaders.
    Zuckerberg has billions, but he does not have the authority 
to print more until he gets this. We went from the U.S. dollar 
being linked to gold, and we only printed a number of dollars 
equal to the gold we had, to the dollar becoming valuable in 
and of itself, and now how many dollars we print has nothing to 
do with how much gold we have stored.
    Mr. Marcus promised me that they would never do that, but 
then he testifies here that the Libra Association will make all 
the decisions and Facebook will not be in control. So much for 
those promises.
    America's power comes from the power of the dollar more, I 
think, than the power of our military. It lowers the interest 
rates in the United States by at least $1,000 a family. The 
seigniorage has allowed the Fed to transfer $100 billion in 
some years, often less, to the Treasury. Our sanctions in Iran, 
which I have worked on for over 20 years, are effective only 
because of the power of the dollar, and we are able to go after 
human traffickers, drug dealers, and tax evaders because of the 
power of the dollar.
    We are told that they are going to solve two problems with 
this. They are not going to solve those problems. Cross-border 
transmission, let us do that in dollars, or let us send 
quetzals to Guatemala. You have a multi-billion-dollar company, 
a trillion-dollar-company. Help people make those transmissions 
at low fees, but use dollars or use the local currency.
    And then we are told they are going to deal with the 
unbanked. If they wanted to help the unbanked, they would not 
be using a cryptocurrency because cryptocurrencies are illegal 
in India, the place where they have more unbanked than anywhere 
else. They do not want to solve those problems.
    They want to solve two other problems: problem number one, 
Zuckerberg cannot print money-- yet; and problem number two, 
Zuckerberg is under attack because he invades the privacy of 
ordinary Americans and sells it to the highest bidder. He needs 
to be an advocate for privacy. And so, he is creating a device 
which will provide privacy to drug dealers, human traffickers, 
terrorists, tax evaders, and sanctions evaders.
    We need Zuckerberg here because we need to tell him that he 
probably has the power to push this through. He will throw 
around tens and hundreds of millions of dollars in Washington. 
His supporters will get huge Zuck Bucks in U.S. dollars. A 
hundred lawyers will tell him that what he is doing is legal 
and, therefore, he is safe. But someone with an understanding 
of the politics of this country needs to explain to Mr. 
Zuckerberg that if cryptocurrency is used to finance the next 
horrific terrorist attack against Americans, a hundred lawyers 
standing in a row, charging $2,000 an hour, are not going to 
protect his rear end from the wrath of the American people.
    This is an attempt to transfer enormous power from America 
to Facebook and a number of its allies. We need Zuckerberg 
here.
    Chairwoman Waters. The gentleman from Kentucky, Mr. Barr, 
is recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman.
    Given the commentary we have heard in this committee 
hearing today, and some of the very pointed questions directed 
your way, Mr. Marcus, I think we are discovering why a decision 
has been made to locate in Switzerland as opposed to the United 
States.
    Having said that, I do want to address some of the concerns 
that have been raised today and ask you about them. I think 
there are some legitimate questions that we can ask, but it 
does seem like in Washington, whenever the private sector 
produces some kind of innovation or new discovery or new 
advancement, politicians and bureaucrats rush to criticize and 
regulate, and there is always a presumption that the private 
sector innovating is a bad thing. I think the presumption 
should be totally reversed. I think we should presume that 
innovation is good; it presents enormous opportunity for 
financial inclusion, reducing friction in transactions. The 
opportunities that are created by this innovation is laudable. 
It is to be commended.
    That is not to say we should not ask questions, but the 
presumption in this hearing room today seems to be in the wrong 
place.
    Let me ask you about the possibilities, the opportunities 
that this presents, particularly with respect to financial 
inclusion. What percentage of users on Facebook are underbanked 
or unbanked in the United States, Mr. Marcus?
    Mr. Marcus. Congressman, I do not have the answer for 
Facebook specifically, but I know that over 8 million 
households in the U.S. are--
    Mr. Barr. Why don't you know how many Facebook--Facebook is 
often criticized for invading the privacy of Americans. Why 
doesn't Facebook know approximately how many of its 2.6 billion 
users are unbanked or underbanked?
    Mr. Marcus. Because there is no way for us to know that 
information.
    Mr. Barr. Okay. Do you have any idea how many users of 
Facebook live in rural America or so-called bank deserts?
    Mr. Marcus. I do not have the exact number, Congressman, 
but I can find out and follow up with your office.
    Mr. Barr. Well, if you know or do not know, we would like 
to know that. How will Libra and Project Libra promote greater 
financial inclusion in the United States?
    Mr. Marcus. Congressman, we believe that having the ability 
to access digital money where you can safeguard the value that 
you want to safeguard but, more importantly transact with the 
people that you want to transact with for free, simply with 
just a $40 smartphone and a basic data plan, is something that 
would enhance the ability for people even here in the U.S., 
despite the fact that we believe this is not going to be the 
main market for Libra, it will solve problems for lots of 
people here in the U.S., notably the very people who are 
unbanked today and send money abroad home, which makes for the 
bulk of the income of their families back at home.
    Mr. Barr. I will not ask a question, but I will just jump 
onto the point that Mr. Duffy was making earlier. I think that 
the opportunity for financial inclusion with Project Libra is 
enormous and very positive. I share Mr. Duffy's concern about 
what that inclusion actually means, and to the extent that 
Facebook and other social media enterprises have been 
criticized for political bias, I think that is important to 
earn the credibility of the American people that this platform, 
this financial platform be viewed and earn the confidence as a 
neutral player so that the adoption can serve all and really 
serve that ultimate purpose of financial inclusion.
    A final question, and this relates to the testimony that 
you have delivered that this project will not compete with 
central banks or interfere with monetary policy. We heard from 
the Chairman of the Fed, Jay Powell, recently that whereas 
Bitcoin or other digital currency endeavors really do not 
present a challenge for central banks, this could, because of 
Facebook's 2.7, 2.8 billion users and 1.6 billion daily users, 
that it does have the potential for widespread adoption big 
enough to potentially displace the U.S. dollar as the world's 
reserve currency and, therefore, interfere with central banking 
tools, interfere with monetary policy.
    Tell me how Libra will not undermine sovereign currencies 
and the power of central banks. Or is the very point to 
undermine central bankers and to provide greater freedom away 
from central banking?
    Mr. Marcus. Congressman, I want to be very clear. We do not 
want to compete with the dollar or with sovereign currencies. 
This is why they make the reserve. And even in our wildest 
dreams, never will we come anywhere close to the size of any of 
the currencies that you mentioned. But we will make sure to 
work with the Fed, with the Financial Stability Board, and with 
the G-7 working group internationally to ensure that the proper 
controls--
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Barr. Thank you.
    Chairwoman Waters. The gentleman from Illinois, Mr. Foster, 
is recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman, and Mr. Marcus, I 
would like to also thank you, as the co-Chair of the 
Congressional Blockchain Caucus, as well as perhaps the only 
blockchain programmer and AI programmer in the U.S. Congress, I 
want to thank you for having rather detailed individual 
briefings with me on this.
    There are a couple of things I was promised during those 
briefings that my staff tells me have not yet been delivered. 
One of them is when we got into a detailed discussion of how 
you would prevent this from being used for ransomware, I was 
promised that there would be an answer. Are you prepared to 
give that answer yet? If not, I would like to drill down into 
just how anonymous these transactions in Libra actually would 
be.
    Mr. Marcus. Congressman, ransomware is a really important 
issue, and the way we are thinking about it as far as the 
Calibra Wallet is concerned--
    Mr. Foster. No. I am interested in Libra, all right? Libra, 
which is, as I understand it, an anonymous bearer instrument. 
Is that correct?
    Mr. Marcus. Congressman, it is not anonymous--
    Mr. Foster. Is self-custody allowed in Libra?
    Mr. Marcus. Congressman, yes, within limits. And as a 
result, we believe that especially in countries like the U.S. 
and others, you will have all the wallets that will have--
    Mr. Foster. I am not worried about wallets. I am worried 
about abuse of self-custody. If I own the cryptographic code 
for a piece of Libra, do I own that Libra, full stop, or not?
    Mr. Marcus. Yes, Congressman.
    Mr. Foster. Yes, you do. Okay. Now, if I go on the Dark Web 
and start offering to trade that, do you have any technical way 
of stopping me from doing that anonymously?
    Mr. Marcus. Congressman, yes, because there are on- and 
off-ramps, and all of the on- and off-ramps are properly KYC'd.
    Mr. Foster. All of them?
    Mr. Marcus. Yes, that will be--
    Mr. Foster. Once a large fraction of Libra would be 
transferred into self-custody and then there starts to be a 
significant flow among the self-custody entities out on the 
Dark Web or other places, how do you prevent that from actually 
allowing things like ransomware?
    Mr. Marcus. Congressman, again, it's a very important 
problem, and the way that we are tracking--the way that the 
association will enable tools so that law enforcement and the 
different wallets can understand where the movements are 
happening to prevent those issues is going to be one of the 
ways that we will address this. The other way that we will 
address--
    Mr. Foster. We are going to have to be absolutely dependent 
on the fact that every single wallet is in a regulatory regime 
that we trust, is that right? So if there is one wallet out in 
some set of islands or something like this that does not follow 
U.S.--are we just out of luck there and that all of the illicit 
transactions will flow through there?
    Mr. Marcus. No, Congressman, because if you are a U.S. 
resident and you want to use a wallet, the wallet offering 
services in the U.S. will need to be properly regulated in the 
United States.
    Mr. Foster. All right. We will have to have an ongoing 
discussion.
    I would like to also mention cybersecurity. One of the main 
jobs of FSOC is to oversee cybersecurity at systemically 
important firms. Now, you have seen fit to make a new 
programming language for here, and I spent a little while 
looking over that. There is some creative stuff in it. Some of 
it is pretty much copying other things that have been done 
before. Some of it is brand new. But even if it had zero 
creativity in it, there would still be a problem that one wrong 
line of code could generate a hole that could crash the entire 
Libra ecosystem. And so the governance of that language and all 
the infrastructure, from what I understand from my reading of 
it, is that you are going to be distributing runtime 
executables and things like that as well. And so that all of 
that has to be bulletproof cybersecurity, and I was wondering 
how you are going to deal with the governance of that?
    Mr. Marcus. Congressman, two ways. First, we agree with you 
that this is of absolute importance, and the way we are dealing 
with that is that the move language that you are referencing 
will have formal verification in place to avoid issues that--
    Mr. Foster. To the extent that there are no compiler bugs.
    Mr. Marcus. Yes, but the the compiler will not execute the 
code if the code is not formally verified, and we have the 
chance of having David Dill, who is a professor from Stanford 
in formal verification, helping us with this issue.
    The other thing that I want to say is that the association 
will have guidelines on what third-party code can be published 
or not. And at the very early stages, it will be very limited 
to a set of templates that will avoid the issues that you are 
raising.
    Mr. Foster. All right, but it will be an ongoing target 
because if Libra is taken to scale, it will be an enormously 
fat target for cyber attacks, intrusion, insertion of inside 
threats, and so on. So, this is something that, in terms of 
overall financial stability, is probably as crucial as anything 
else.
    Thank you. I yield back.
    Chairwoman Waters. The witness has requested a 10-minute 
break. The committee stands in recess.
    [recess]
    Chairwoman Waters. The committee will come to order.
    The gentleman from Colorado, Mr. Tipton, is recognized for 
5 minutes.
    Mr. Tipton. Thank you, Madam Chairwoman. Mr. Marcus, thank 
you for being here. This is a fascinating conversation, and I 
think a lot of the questions are expressing concerns not for 
innovation but just in terms of what we are going to be seeing 
come out the end once the process is completed.
    I did have one question, because there does seem to be some 
confusion, and you didn't actually clarify, in terms of exactly 
what we are talking about with Libra, in terms of being a 
security, an ETF. You said possibly a commodity that could be 
there.
    Along those lines, when you are looking at your 
association, the Libra Association, you have Visa, MasterCard. 
Are you doing any active recruitment, talking to any other 
financial institutions to be in the Association?
    Mr. Marcus. Congressman, the Association membership is 
actually open, as long as members meet the criteria that has 
been published. Of course, that could be subject to change and 
is in control of the Libra Association. But we expect that 
there will be a number of financial institutions, including 
banks, joining its ranks.
    Mr. Tipton. Will that have continued monitoring as you are 
bringing in association members, just to make sure that bad 
actors don't potentially get into the association?
    Mr. Marcus. Yes, Congressman.
    Mr. Tipton. One of the things that we have had a fair 
amount of conversation on is Know Your Customer, the ability to 
be able to identify who those people are. And I wanted to be 
able to follow up a little bit on that, in terms of the 
commitment that you are seeing coming out of Calibra.
    We passed and signed into law last year the Mobile Act, to 
be able to open up a bank account with your driver's license. 
But it was followed with commitment from the banks that that 
information would be eliminated once the account was open, and 
it wasn't going to be retained. Are you making the same type of 
commitments?
    Mr. Marcus. Congressman, the general desire, as far as the 
Calibra Wallet is concerned, is to only retain the data for as 
long as it actually is required to operate the service, not any 
longer. If the government-issued ID that is captured is not of 
any use, notably, for protections, then we will commit to the 
same rule.
    Mr. Tipton. Okay. And I think it is important because, not 
to parse on words, but when you say ``desire to,'' I think that 
is something that we would like to be able to see a commitment 
to, in terms of the policies that you are going to be putting 
in, just to be able to protect privacy, because I think it has 
been spoken here several times. You know there are some real 
concerns over Facebook and issues with privacy right now.
    You have talked a lot about also wanting to be able to 
reach out to the underserved, talking about overseas payments, 
but we have actual banking deserts within the United States 
right now. One of the key components is obviously to be able to 
have high-speed internet access. In my home State of Colorado, 
14 percent of our population does not have access to high-speed 
internet. Do you have any plans to be able to do outreach, to 
be able to build out some of those networks, to be able to 
provide the access that you said that you would like to see for 
underserved markets?
    Mr. Marcus. Congressman, not as part of the Calibra effort 
per se. That being said, Facebook has invested, and continues 
to invest in helping providing access around the world, and 
will continue doing so. But as far as the Calibra Wallet is 
concerned, we are really focused on that population that 
currently has smartphones and a basic data plan and is 
underserved or not served at all by current financial services.
    Mr. Tipton. Okay. Thanks. And we have had concerns from 
some of our constituents, some of our community banks. They are 
saying that they have some worries that Libra, Calibra, the 
Libra Association represent a point of competition for 
traditional financial institutions and payment systems as they 
overlap on some of the core functions between your proposal and 
the kind of products that your proposal could lead to, into the 
regulated institutions.
    Do you believe that Libra, Calibra, and the Libra 
Association should be subject to some of the same regulations 
on the banking side as our financial institutions are?
    Mr. Marcus. Congressman, first I want to recognize the role 
that community banks play. It is absolutely essential and I 
hope that they can participate in services on top of the Libra 
network as well.
    And as far as banking regulation, if we ever enter into 
providing banking services, which right now we are not 
considering, then yes, we would need to have proper banking 
regulation. But as it is contemplated right now, as far as the 
Calibra Wallet is concerned, we are going to be focused on 
payments.
    Mr. Tipton. Great. And my time has expired. Thank you. I 
yield back, Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentlewoman from Ohio, 
Mrs. Beatty, who is also the Chair of our Subcommittee on 
Diversity and Inclusion, is recognized for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman, and thank you, 
Mr. Marcus, for being here today.
    This is kind of a great segue for me, with my colleague 
talking about the underbanked and the unbanked. You have heard 
a lot today, and we have tried to gather a lot of information, 
whether it was cybersecurity, governance, antitrust, investment 
ownership, and now the unbanked and underbanked.
    As you heard, I am the Chair of the Diversity and Inclusion 
Subcommittee. So when I hear underbanked and unbanked, 
traditionally that goes to a lot of people who have some 
challenges economically. I have gone through your White Paper, 
and as I look at that, it wasn't very unique in your problem 
statement to me when you were citing 1.7 billion adults 
globally remain outside of the financial system and that Libra 
will connect the world to them in a unified financial 
ecosystem. I think that is a lot of words, but when I think 
about the underbanked and unbanked, here is the question that I 
want to ask you.
    I want to focus on one of the reasons that I read that 
Libra gives us for why we need a global currency, and that is 
to address the millions of unbanked and underbanked people in 
the world. Despite this claim, in response to a question at 
yesterday's Senate Banking Committee hearing from Senator 
Brown, you stated that Libra is not designed to compete with 
bank accounts. Additionally, you said, in response to Senator 
Kennedy, that Libra will not engage in banking.
    Can you tell me how Libra banked and unbanked and 
underbanked, how you will work with them if it is not meant to 
compete with the banking accounts, and if you are not engaging 
in banking?
    Mr. Marcus. I am glad you asked that question, 
Congresswoman, and I want to separate the different types of 
services that will be provided.
    Mrs. Beatty. You have to do that quickly because I have two 
more questions.
    Mr. Marcus. I will do my best. The first one is that we 
are--
    Mrs. Beatty. Let me ask you this way. Yes or no, are you 
competing with banking or not, in your opinion?
    Mr. Marcus. No, Congresswoman, but we will offer--
    Mrs. Beatty. Do you consider yourself a bank?
    Mr. Marcus. No, because we will not offer--
    Mrs. Beatty. Are you taking people's money and letting them 
pay for things, letting them transfer monies?
    Mr. Marcus. We will be active in payment services, 
Congresswoman, and enable all of these people who currently 
don't have access to modern payment systems to move their money 
around and have access to the world economy, and as a result we 
will be in the payments business, Congresswoman, as far as the 
Calibra Wallet is concerned.
    Mrs. Beatty. Let me ask you another question on governance. 
I think in your opening statement, you said that it would not 
be overpowered by Facebook because you would only have one 
vote. In the world of banking--because in my mind it is still 
banking--we are dealing with a lot of banks who merge. So let's 
say with your one vote you would buy Stripe, or you would buy 
Spotify. Would that now still give you just the one vote or 
would that give you more control? Because we know these things 
merge and get bought out all the time. If you bought those 
things, would that give you more power?
    Mr. Marcus. It would not, Congresswoman, because in the way 
that the governance is currently structured no one entity can 
have more than one voice or one percent of the vote.
    Mrs. Beatty. Someone asked about the training in financial 
literacy. We know those who are unbanked and underbanked are 
that for a reason. This is very complicated. We have some of 
the best minds here, on both sides, and clearly there are a lot 
of unanswered questions, or clearly you can tell from our 
questions there is a lot of disagreement with this.
    How do you take somebody from my district, who is 
underbanked or unbanked, and educate them? No financial 
literacy. They think you are a bank, because even when you 
mention PayPal and those systems, which you were the president 
of--I used PayPal as a store owner, but it was tied to my 
credit card, it was tied to the regulations of the Federal 
Government. How do you tell us that it is not banking? Because 
if it is not tied to any of those things, how does it work? 
Where is my protection? What happens if I do this--and we 
already know I am ignorant to the process--and then I want my 
money, I want my Libras back. Can I get them all back?
    Mr. Marcus. Yes, Congresswoman.
    Mrs. Beatty. With no problems, I can get them all back and 
put that money back into my account?
    Mr. Marcus. Yes, Congresswoman. In the same way that PayPal 
and others are connected to the banking system, Calibra Wallet 
will be also connected.
    Mrs. Beatty. My time is up. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Williams, is recognized for 5 minutes.
    Mr. Williams. Thank you, Madam Chairwoman. I want to echo 
the comments of some of my colleagues that this hearing 
somewhat seems somewhat premature. So far, private companies 
are beginning to form an association and have released, as we 
have talked about, a 12-page White Paper describing the general 
idea of this global cryptocurrency.
    It seems like there is a lot more work to be done 
internally at Libra before we, in Congress, can seriously 
examine all the regulatory and security hurdles that we all are 
concerned about, that you have heard from both sides today.
    There are many more pressing issues that we need to deal 
with, I believe, before we all go home for the August recess in 
a couple of weeks. We have not acted on the impending debt 
ceiling. Our reckless government spending is out there. There 
is still no budget deal. There is no EX-IM authorization bill, 
and that has businesses all over the country nervous. And we 
are at the beginning of hurricane season and we still can't get 
the flood insurance package to a vote on the Floor.
    I understand the interest in this new idea. I am from the 
old school. But I think our time would be much better spent 
working on issues that will benefit the American people 
immediately rather than pre-emptively trying to stop this idea 
from even being explored by Facebook and other industry 
participants.
    We should not discourage the private sector. I am a big 
private sector guy. We should not discourage the private sector 
from investing their own time, and their own money to research 
these new technologies. No matter what policies we enact up 
here in Congress, the private sector is the engine that creates 
solutions to some of these great problems.
    Mr. Marcus, I applaud your entrepreneurial spirit, and it 
leads me to believe you are probably a capitalist; are you not?
    Mr. Marcus. I believe we all are in this country.
    Mr. Williams. Okay. Thank you. That is good. That helps our 
record there.
    And also, with that in mind, do you believe that the 
private sector rather than the government is better suited to 
explore the potentials of blockchain technology in the 
financial services space?
    Mr. Marcus. Congressman, I believe that in this specific 
case it requires both the innovation capabilities of the 
private sector and the oversight of the government and 
regulatory bodies for this project to be successful, 
specifically.
    Mr. Williams. Facebook has already stated that it won't 
launch the cryptocurrency in India, due to regulatory issues. 
Can you explain the issues you ran into in India, and do you 
anticipate that you will not be able to launch this project in 
other countries?
    Mr. Marcus. Congressman, there will be countries in which 
the Calibra Wallet itself will not be able to operate, but 
since the network is interoperable and other wallets can emerge 
in different regions, and transactions are possible between 
wallets, unlike the current system, which constrains 
transactions within one wallet, we believe that others will 
emerge in other countries that will enable access to a greater 
number of people who currently don't have access to modern 
financial services.
    Mr. Williams. Something that I saw in your White Paper is 
that the Libra Association will be run as a nonprofit, yet it 
will pay dividends to investors who provide capital to jump-
start the ecosystem. Can you go into greater detail on how you 
reconcile the association being a nonprofit yet you will pay 
dividends to the investors?
    Mr. Marcus. Yes, Congressman. The association is a 
nonprofit, membership-based association under the laws of 
Switzerland, that are slightly different. And the goal for the 
association is not to generate a profit, but if it has to pay 
out income streams, it will pay taxes on those income streams, 
as covered by the Swiss law.
    Mr. Williams. As a small business owner, I am a Main Street 
America guy, 50 years in business. I see the benefits that this 
could have on remittance payments to other countries, and with 
the lowering transaction costs. Innovation is a good thing and 
there is no reason we should be stopping this idea so early in 
its existence.
    With that being said, I begin to get concerned if this were 
going to be used in lending. Is the eventual goal to use 
cryptocurrency for lending?
    Mr. Marcus. Congressman, as far as the Calibra Wallet is 
concerned, it doesn't have any plans to do so, as of now. I do 
believe that there might be banks around the world that might 
want to engage in those types of services, but this is 
definitely the province of banks and not something that the 
Calibra Wallet will do itself, and it is not in the plans right 
now.
    Mr. Williams. Okay. Really quickly, the White Paper also 
states that the Libra blockchain is pseudonymous, as you say, 
and allows you to hold one or more addresses that are not 
linked to their real-world identity. How do you plan on 
striking the correct balance between privacy and a user's 
ability to hide criminal activities?
    Mr. Marcus. I am really glad you asked this question, 
Congressman, because I think this is misunderstood. That fact 
that there is no personally identifiable information on the 
blockchain is not a virtue of the fact that people are not 
identified on the platform. It is just that it would be 
irresponsible to have personal data be publicly available. That 
being said, wallets and on- and off-ramps will be regulated and 
will have proper KYC.
    Mr. Williams. Okay. My time is up. Thank you for being here 
today.
    Chairwoman Waters. The gentleman from Guam, Mr. San 
Nicolas, who is also the Vice Chair of the committee, is 
recognized for 5 minutes.
    Mr. San Nicolas. Thank you, Madam Chairwoman.
    Mr. Marcus, what does the organization project the average 
user will have as a Libra balance?
    Mr. Marcus. Congressman, we have not projected average 
balances at this point.
    Mr. San Nicolas. Do you really expect me to believe that? 
Facebook is built around average users, average number of hits. 
Visa, MasterCard, all these huge players are signing up, and 
you guys have no idea how much you expect to have in the 
average Libra account?
    Mr. Marcus. Congressman, it will really vary, depending on 
where the usage of Libra, the currency and the network--
    Mr. San Nicolas. Okay. Can you give me a low estimate and a 
high estimate of what the variation is expected to be?
    Mr. Marcus. Congressman, again, we have not made 
projections for this but we would be happy to follow up with 
your office and your team when we do.
    Mr. San Nicolas. First of all, I absolutely disbelieve 
that. Like I said, those organizations are built around 
understanding their users and what they are anticipating their 
usage is going to be. And I think that you are just trying to 
hide that figure, because when you actually start doing the 
math, it becomes very, very alarming.
    In your own posts, sir, you mentioned that billions of 
users--``We firmly believe that if Libra is successful, it can 
be a nonlinear step change for billions of people who need it 
the most.'' So if you are talking about $100 in a Libra 
account, if you are talking about $100 billion. If you are 
talking about $1,000 in a Libra account, if you are talking 
about $10,000 in a Libra account--and so I think that the 
amounts that we are talking about, in terms of an average user, 
is critical in order to understand the full scope of how 
pervasive this kind of action is going to be, and I am going to 
go through why that is so critical.
    If 20 founding members, a lot of big-shot companies that 
have come together seemingly overnight and surely under the 
radar, and the White Paper that you submitted says that you 
will have 100 members in the second half of 2020, which is a 
year from now, that is 72 new members. You are going to triple 
your growth in one year, and you guys don't even know what the 
average Libra wallet is going to hold. We are just going to 
pretend that that figure is just some unknown number, but we 
are going to bring in 72 new players.
    Are any of these players Fortune 500 companies?
    Mr. Marcus. Yes, Congressman.
    Mr. San Nicolas. How are you able to convince Visa and 
MasterCard and 72 new Fortune 500 companies to sign up for 
something without even knowing what the average user amount is 
going to be?
    Mr. Marcus. Congressman, I want to respectfully say that I 
am not hiding anything. I am here responding truthfully to all 
the questions with the information I have at this time.
    Mr. San Nicolas. Yes, that is what you are saying, but 
sensibly, I think we can all be sensible people. You won't get 
these huge Fortune 500 companies signing up if they don't 
understand what they are signing up for.
    And the reason why this is so critical is because when you 
have--even Facebook alone, in your own post, you said you have 
90 million businesses on the Facebook platform that are going 
to be able to attest to how this is going to be something that 
is going to be an empowerment for those businesses. And that is 
just the Facebook platform. We are not talking about the 
MasterCard platform or the Visa platform or the platform of 
these 72 other companies that are all lining up without any 
kind of idea of how much they are actually going to be getting 
involved with.
    And this is so important because we are talking about 
billions of users, and tens or even hundreds of dollars. That 
is money that is getting sucked out of the U.S. financial 
system and being put into whatever this cabal is putting 
together in terms of Libra and Calibra.
    The USA has less than 5 percent of the global population 
and yet 15.28 percent of the global GDP, in dollars. That many 
users and that many dollars means that the USA is going to be 
disproportionately affected by Calibra and Libra. And once we 
impact disproportionally U.S. dollar demand by sucking dollars 
into Libras, interest rates will have to rise to attract 
dollar-denominating investors, higher interest rates will 
injure the U.S. economy and U.S. jobs, and higher interest 
rates, perhaps more importantly, will raise the financing cost 
of funding U.S. military operations and national security.
    And if that is going to be the case, how do we put a stop 
to it? Let's say we have hundreds of millions of users in the 
U.S., and they have all put in thousands of their own dollars. 
How do we put a stop to it once that risk presents itself? 
Because if that risk presents itself and we can't put a stop to 
it, what happens then? And if you think that the Congress or 
the elected leaders are going to be able to put a stop to it, 
one thing that you need to realize is, when you have hundreds 
of millions of users, in thousands of districts, it is going to 
be next to impossible politically to do that.
    I yield back.
    Chairwoman Waters. The gentleman from Georgia, Mr. 
Loudermilk, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman. Mr. Marcus, 
thank you for being here. I know it has been a long day. Look, 
I want to thank you for not only your time being here but also 
your willingness to look at new ways of doing things. That has 
been the strength of our country.
    Quite frankly, I don't care for Facebook. It is a nightmare 
for many of us in this type of position. I don't care for some 
of the filtering that is done, suppressing some of our posts 
because of political content, but if you are a private 
business, that is your right to do so.
    But I do appreciate anyone who challenges the status quo to 
look for something new and a better way of doing it. We have 
concerns here, and I think this is actually a platform where we 
can address those concerns. We can begin a dialogue, and I 
appreciate that.
    What you are experiencing right now has been experienced by 
any innovator throughout our history. The Washington Post, in 
the early 1900s, had an article entitled, ``Man Will Never Fly, 
and Shouldn't.'' And it went through all the reasons why we 
should even stop testing an airplane, especially when you had 
two bicycle mechanics from Dayton, Ohio, trying to fly when 
scientists and engineers couldn't.
    Thomas Edison--there were dozens and dozens of articles 
written about how the light bulb was a dangerous invention if 
it was ever accomplished, and would be a public health threat, 
and it should be stopped immediately.
    Now all of those ended up being great advancements that, 
rightfully so, were regulated by government for public safety 
and health benefit--reasons that it could be done safely.
    But the point is we can't demean these things until we 
actually look into them, and this is the dialogue I want to 
have. I have concerns. I do have concerns, but I think unless I 
am willing to express those concerns, and I am willing to 
actually hear your answers, we are getting nowhere. And so with 
that, I don't want to use up all of my time.
    One of the big concerns of mine, from spending time in the 
IT industry, in data security, is, look, cryptocurrency is used 
for illicit financing--money laundering, terrorism financing, 
human trafficking. In fact, it is estimated that criminals used 
cryptocurrency to steal $1.7 billion from investors just last 
year, and 56 percent of that happened here in the United 
States. The Treasury Secretary said he is concerned that Libra 
could be used for these purposes.
    How can you assure us and the American people that this 
isn't going to be just another illicit financing tool?
    Mr. Marcus. Congressman, thank you, and I share this 
concern, and this is actually something that I care about 
personally, a great deal. I don't want the creation that we are 
working towards to be used for those types of purposes at all, 
and we believe that with the appropriate controls, with the 
proper AML programs, the proper KYC on- and off-ramps, that we 
will improve on the current system.
    There are a lot of illicit activities that are currently 
happening in our existing financial system, and I actually 
believe that with the combination of the right technology and 
the ability for law enforcement and regulators to also have a 
view into some of the movements, that we will improve on the 
efficacy of AML and counterterrorism funding programs.
    Mr. Loudermilk. Some of the pushback we have gotten from 
law enforcement--I have been an advocate for looking at 
blockchain for the technology. A lot of folks here have a fear, 
some justifiable fear, of cryptocurrencies. When you remove the 
stigma of cryptocurrency I think blockchain is a valid 
technology we look at for data security, but we do get a lot of 
pushback from law enforcement on the use of blockchain.
    Have you had engagement with law enforcement on this, and 
if so, what are their thoughts, their concerns, their 
acceptability? How are you going to do that interface?
    Mr. Marcus. Congressman, we will continue to engage, 
notably with FinCEN and the Treasury Department, and notably 
the department that looks after money laundering and 
counterterrorism funding, with Under Secretary Mandelker and 
her team, and also globally with a number of law enforcement 
and regulators.
    Mr. Loudermilk. With the remaining time I have, I have 
other questions I can submit for the record, but you basically 
are going to be a global payment system, which is typically 
regulated, as central banks are done, pretty heavily regulated. 
Would it be appropriate for FSOC to actually designate Libra as 
systemically important, as some have said that you will be?
    Mr. Marcus. Congressman, again, it is really not for me to 
say who should regulate us, but we definitely have been engaged 
with not only FSOC but all of the agencies under the FSOC 
umbrella, and we will engage mostly in payment services. But it 
is not for us to determine.
    Mr. Loudermilk. Thank you.
    Chairwoman Waters. The gentlewoman from Massachusetts, Ms. 
Pressley, is recognized for 5 minutes.
    Ms. Pressley. Thank you, Chairwoman Waters. I really do 
appreciate your continued leadership and returning this 
committee to its oversight role. I want to emphasize to you, 
Mr. Marcus, and to my colleagues on both sides of the aisle, 
that the reason we are here today is oversight, or more 
accurately, the lack of oversight in this space. The fact that 
we have arrived this far along in the conversation without any 
regulatory guardrails to inform the development of this 
project, on its face, just that fact alone is a problem.
    It is long past time that we stop compromising on 
consumers' privacy in the pursuit of profit. When consumers' 
well-being is on the line, echoing the sentiments of the 
gentleman from Arkansas, we cannot afford to simply trust but 
not verify. And so that is what we are here to do today, to 
verify.
    So, Mr. Marcus, yes or no, since my time is short, are you 
familiar with the content of Facebook's press release 
announcing the launch of Calibra?
    Mr. Marcus. I am, Congresswoman.
    Ms. Pressley. Great. At the end of your press release, 
there is a disclaimer that states, ``These forward-looking 
statements may differ materially from actual results, due to a 
variety of factors and uncertainties, many of which are beyond 
our control.'' In it, you go on to admit that this is all, 
``based on assumptions that you believe to be reasonable'', as 
of the date of this press release.
    Madam Chairwoman, I ask for unanimous consent to submit to 
the record Facebook's press release announcing the launch of 
Calibra.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Pressley. So, yes or no, would you trust your money 
with a company that essentially admits that it is just winging 
it?
    Mr. Marcus. Congresswoman, I don't believe that is the case 
and this is why we have shared our White Papers and our--
    Ms. Pressley. Reclaiming my time, the disclaimer ends by 
saying that you, ``undertake no obligation to update these 
statements as a result of new information or future events.'' 
Again, moving on.
    On the issue of underbanking, which is an issue this 
committee is very committed to addressing under the leadership 
of Chairwoman Waters, Representative Beatty was citing your 
White Paper where you identify 1.7 billion people globally who 
lack access to financial institutions. That is a lot of people. 
Half of all adults who don't have bank accounts are living in 
just 7 countries: Bangladesh; China; India; Indonesia; Mexico; 
Nigeria; and Pakistan.
    Yes or no, are any of Libra's 27 partner organizations 
based in these countries?
    Mr. Marcus. Not at this stage, Congresswoman, but by the 
time we get to 100 members we hope to have a more 
representative slate of the very people that we want to serve.
    Ms. Pressley. Mr. Marcus, do you believe, as has been 
claimed, that authentication is the reason many of these people 
don't have bank accounts?
    Mr. Marcus. Congresswoman, there are a number of issues but 
my understanding is yes, identity is a big problem and--
    Ms. Pressley. Okay. Moving on--
    Mr. Marcus. --a greater problem.
    Ms. Pressley. Reclaiming my time. So the same bank report 
finds that almost two-thirds of people who don't have bank 
accounts say it is because they lack enough money to open one.
    Here is a rapid-fire round for you, Mr. Marcus. Does the 
Calibra Wallet require a bank account? Yes or no?
    Mr. Marcus. No, Congresswoman.
    Ms. Pressley. Does the Calibra Wallet require a smartphone?
    Mr. Marcus. Yes, and now you can buy one for--
    Ms. Pressley. Reclaiming my time. Would these potential 
users be paid any interest on the money they store in Libra 
currency?
    Mr. Marcus. Congresswoman, it is like cash, and as a result 
it doesn't earn interest.
    Ms. Pressley. Okay. So if your solution to the world's 
unbanked is a currency that requires them to have a bank 
account--
    Mr. Marcus. It doesn't.
    Ms. Pressley. --a smartphone, and no returns on their 
savings, I am not actually sure you really understand what the 
source and root of the problem really is. It is clear to me, 
when it comes to Facebook and its initiatives, we simply cannot 
trust or verify.
    But I would add and underscore that the reason we are here, 
and that you even have this opportunity to pursue it, is 
because the Federal Reserve has failed to offer Americans an 
equitable, reliable, efficient, safe, and secure system to 
access and move their money.
    I yield back.
    Chairwoman Waters. Thank you.
    The gentleman from Ohio, Mr. Davidson, is recognized for 5 
minutes.
    Mr. Davidson. Thank you, Madam Chairwoman. I really 
appreciate you holding this important hearing today. A 
bipartisan group of my colleagues have worked for nearly 2 
years trying to provide light touch regulatory certainty to 
many aspects of this market.
    Mr. Marcus, I appreciate you being here on behalf of 
Facebook, and in some ways a representative from the Libra 
Association, because you have brought to the world's attention 
a space that previously has been dynamic in the American 
market, lots of American innovators, but you see a lot of 
companies leaving the U.S. market for Switzerland, for 
Singapore, and for others, not to avoid U.S. laws, but to find 
the regulatory certainty that we have highlighted does not 
currently exist in the United States today.
    With that, Madam Chairwoman, my hope is that the committee 
will hold future hearings on cryptocurrency regulation so we 
can properly address these issues, and as we have seen, not 
entirely conflate them with Facebook's mixed messages here or 
mixed history across numerous other platforms, if there are 
platforms.
    Already, there are several legislative proposals in 
Congress that address the cryptocurrency sector, including the 
Token Taxonomy Act, a bill which I am leading alongside fellow 
committee colleagues Gottheimer, Budd, Gabbard, and Rose.
    With that, one of the key differentiators with Libra as a 
currency, from many other tokens in this space, is 
centralization. When you look at an open blockchain token, or 
you look at the Bitcoin that has come to represent the entire 
blockchain, to many people, it is like the architecture is the 
internet but the specific instance is a website. People know 
this famous website, Bitcoin, but they are not able to really 
associate the broader architecture of blockchain.
    And just like Facebook launched, and many other things will 
continue to launch, when the internet was in its early stages, 
we couldn't conceive of all the specific instances that would 
take place on the internet, in the blockchain space, in the 
tokenized economy. We are not really yet able to foresee all of 
the specific applications. That is why I think it is very 
important that we continue to hold hearings on the topic. 
Tokens could represent title to a car, deed to a land, software 
license, or goods or services.
    But what you are proposing is essentially different. It is 
a currency. It is not just a payment system. Calibra is a 
payment system, but you want to do it in a way that is 
different with the means of exchange. A store of value that is 
exchanged in a similar way to currency--not yet legal tender, 
not required to be accepted everywhere. But, essentially, how 
is this different than what Christine Lagarde at the 
International Monetary Fund proposed as a synthetic currency?
    Mr. Marcus. Congressman, the first big difference is that 
unlike the SDR that you are referencing, this digital currency 
will be available to consumers and will be designed as a medium 
of exchange from the ground up.
    Mr. Davidson. Yes, I don't think that is different at all. 
It is just whether the central bank is the Libra Association or 
the IMF. So, you still have a central banker. If you think of 
it as a bank, in the sense of that, the central authority, the 
idea that the Libra Association could ever become 
decentralized, I think gives a lot of people pause, because you 
intend to have it pegged to not just a bundle of currencies, 
but in the White Paper, short-term securities.
    Currently, under U.S. law, if you are trading in securities 
as the underlying basis for the asset that you are selling, 
that is regulated as a security. Why would it not be considered 
a security? Do you have a special Facebook clause?
    Mr. Marcus. No, Congressman, certainly not, and the reason 
we believe that Libra is not a security is because it is 
designed as a payment tool, and that -
    Mr. Davidson. Okay, reclaiming my time. Others have posited 
that a relatively simple, stable coin--which isn't entirely 
stable because it is denominated in other things--could be 
characterized as swaps or demand notes, both of which are 
treated as securities. The SEC's head of digital assets, 
Valerie Szczepanik, confirmed at a hearing last week that it 
does not matter that the stable coin does not have an 
expectation of profits. The expectation of profit is key 
because of the structure of it. In the case here, it would be 
regulated as a security.
    Setting that aside, we look at the other issues. The 
board--I am going to have to submit a ton of these questions in 
writing--when you look at the Know-Your-Customer provisions, 
and I listen to so many of my colleagues talk about how are we 
going to prevent illicit finance, I look forward to seeing 
Secretary Mnuchin or Chairman Powell ask how we are going to 
regulate the dollar. Mr. Duffy had an exact right point.
    And if you, at Facebook, or the Libra Association presume 
to sit over top of this and filter transactions the same way 
that you filter content on your alleged platform, I think the 
public is going to be out.
    Last I would say, do you plan to launch this outside the 
United States if you can't get regulatory certainty in the 
United States?
    Mr. Marcus. Congressman, I am glad you asked the question, 
and we will not actually proceed until we get all of the 
concerns addressed and the properly regulatory oversight here 
in the United States.
    Mr. Davidson. My time has expired.
    Chairwoman Waters. The gentleman from New Jersey, Mr. 
Gottheimer, is recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Madam Chairwoman, and, Mr. 
Marcus, thank you for being here today.
    Facebook claims that its new Libra venture is motivated, in 
part, by a desire to serve the unbanked. While I appreciate 
this motivation, I am a little confused on how your product 
will directly help the unbanked and underbanked, given that the 
unbanked are operating solely with cash. How is a person who is 
unable to open a bank account going to be able to open a Libra 
account, convert their cash to Libra, and then transmit those 
Libra to third parties?
    Mr. Marcus. Thank you for your question, Congressman. The 
way that the Calibra Wallet will approach this is in 
partnership with cash-in and cash-out agents in the relevant 
countries where banking penetration is very low. And as a 
result, consumers who don't have bank accounts will have the 
ability to access the Libra network and buy and sell Libra.
    Mr. Gottheimer. So they have to have a center where they 
would go to, to actually convert, and help to set those up?
    Mr. Marcus. Congressman, we would use the existing network 
of cash-in and cash-out. Again, this is speaking for the 
Calibra Wallet.
    Mr. Gottheimer. Okay. Thank you. I think we agree on a key 
point, that blockchain technology is inevitable, and I believe 
that the new frontier presented by blockchain and similar 
financial technologies are an opportunity for American 
leadership, economic growth, and job creation, versus losing 
out in disgust to China and to Europe and others.
    In my district, the 5th District of New Jersey, so many 
different people work in the financial sector or on the cutting 
edge of financial technology, and it can be a tremendous job 
creator for the State. We also agree that we need to create an 
environment that encourages technologies to start here, grow 
here, and create U.S. jobs rather than going overseas.
    We know the Libra Association is currently composed of 28 
American companies. I am deeply concerned that Libra will be 
based in Switzerland, as you have also heard. This is a big 
concern of ours. And so, echoing Mr. Davidson and others, would 
you agree that part of the reason why you made the decision was 
not to avoid guardrails but instead to avoid the lack of 
legislative certainty we have here in the United States?
    Mr. Marcus. Congressman, again, thank you for raising this 
because the choice of Switzerland, again, had nothing to do 
with us evading our responsibilities or oversight. But we 
really wanted the Libra Association, and the Libra digital 
currency, to be recognized globally as a unit of measure that 
was acceptable, and as a result, Switzerland offered the 
international platform to do that. And we hope that one day, 
many, many years down the line, the Libra Association can work 
very closely with organizations hosted in Geneva, like the WTO, 
the WHO, and the Bank of International Settlements in Basel.
    Mr. Gottheimer. We have heard quite a bit, many of us, if I 
can unpack that a little bit more, and why Mr. Davidson and I 
and others focused on that Token Taxonomy Act, which was 
bipartisan legislation, as you just heard, which provides some 
rules of the road for blockchain with a light touch but leaves 
space for American innovation.
    Part of our goal, because many companies that have been to 
our offices have said, ``Hey, we need some certainty here. We 
need some guardrails.'' Maybe not Facebook, but others have 
certainly said to us, ``Hey, the reason we are going elsewhere 
is because we don't actually know the rules of the road here.''
    Have you heard that? Is that something--and it may not have 
factored into your decision-making in that direct case, but is 
that something that you have heard from partners you have 
talked to?
    Mr. Marcus. Congressman, yes, I have heard from different 
companies in this space that regulatory clarity would be 
helpful, yes.
    Mr. Gottheimer. And I know you have seen our piece of 
legislation. Are there other things that you think we should be 
doing to help the United States establish itself as a global 
leader on cryptocurrency? Are there other steps we could be 
taking in this body?
    Mr. Marcus. Congressman, I think the first thing we can do 
is ensure that projects that are within the right oversight and 
done responsibly actually see the light of day instead of 
losing our leadership to other nations that are plowing ahead.
    Mr. Gottheimer. That is one of our big concerns here is 
losing that space but also making sure that people don't, as 
you pointed out, don't evade, whether it is on privacy issues 
or others, evade U.S. jurisdiction just to do that, and I think 
it is a very big concern, I know, of me and many of my 
colleagues. We are very concerned, and this affects a lot of 
people and especially, as I pointed out, the unbanked and the 
underbanked that I am worried about, as time goes on, and how 
do we make sure that we don't abandon them in this process. I 
think it is very, very important as we grow.
    I yield back. Thank you very much, Madam Chairwoman.
    Chairwoman Waters. Thank you. The gentleman from North 
Carolina, Mr. Budd, is recognized for 5 minutes.
    Mr. Budd. Thank you, Madam Chairwoman. I think it is 
important that members of this committee be able to 
differentiate between Libra, which as I am understanding it, is 
not truly cryptocurrency, and then other tokens like Bitcoin, 
before discussing legislation. And I would encourage Members to 
use outside groups like the Coin Center, the Blockchain 
Association, and the Digital Chamber as resources. Those are 
very helpful and they provide a lot of clarity. Topics like 
this require a different sort of regulation, so the more 
educated we become, the better.
    If America is to remain and continue to grow and be a world 
leader in financial innovation and technology, then it is vital 
that this committee not embrace reactionary laws against 
cryptocurrencies, or even this, Libra. But we must 
differentiate between Libra and similar tokens, to Bitcoin from 
Libra.
    Mr. Marcus, I want to talk about the issue of Libra 
remaining politically neutral. I know this came up yesterday in 
the Senate, and my colleagues who have gone before me, 
including Mr. Duffy, Mr. Barr, and Mr. Davidson, and some 
others, have raised concerns on this, and I share those same 
concerns.
    In that vein, do you have any guidelines in place at this 
point in the process on how you will maintain political 
neutrality on your platform, and if not, will you commit to us 
today that you will develop guidelines and make those 
guidelines transparent to the public?
    Mr. Marcus. It is an important question, Congressman, and 
there are two parts to this answer. The first is the Libra 
Association, and the Libra Association will naturally not have 
oversight or decision-making around how Libra can be used, as 
long as it is lawful uses. And then the second part is the 
Calibra Wallet, and my commitment to you is that as far as 
policies come, we will be very thoughtful and we will share 
these with you when we get closer to finalizing the policies 
that are specific to the Calibra Wallet.
    Mr. Budd. Thank you. When you were talking about part one, 
the Libra Association, to be differentiated from Calibra, you 
said, ``if it is lawful.'' I think Mr. Duffy really pointed 
this out, that if it is lawful, it should be able to be used--
you should be able to use Libra, and not the whims of the 
ideology of Facebook.
    My concern is that you are going to let hearings like 
these, where you get nailed on national TV, inform decisions 
about who you do business with, and who you don't do business 
with, similar to financial institutions that have sat right 
where you did.
    We trusted Facebook with our data and they failed, so I am 
concerned that without the proper protocols in place, people 
should pause before trusting Libra with their financial 
information. And this opinion is based on countless examples of 
conservative de-platforming, in general, by big tech.
    As my colleague, Senator Marsha Blackburn, said, ``Tech 
companies like Google and Facebook need to start embracing the 
spirit of the First Amendment, not just their own employees.''
    Moving on, in its published materials, the Libra 
Association commits to the Libra network transitioning from a 
permissioned network to a permission-less one. I think that is 
in 5 years. Is that correct?
    Mr. Marcus. The stated goal, Congressman, is to start that 
slow transition 5 years after the launch.
    Mr. Budd. Mr. Marcus, given that this would require 
investors in the association to give up all their interest in 
revenue generated from this created reserve, what incentive 
would they have to do that?
    Mr. Marcus. Congressman, actually this is not the way it 
will work, because we believe that the current members who will 
run nodes on the blockchain will likely continue to be 
represented, because in a transition to permission-less you 
would have delegation of voting, and the delegation will likely 
be done to the members that would actually have activity on top 
of the network. So we believe that it won't be as dramatic of a 
shift in governance than what has been portrayed.
    Mr. Budd. How can we be assured by you that this off-ramp 
to permission-less actually occurs?
    Mr. Marcus. Congressman, this is something that we would 
need to embed in the governance of the association, and we are 
currently working on finalizing the charter with the other 
members, and this charter and the set of rules, notably on AML, 
KYC, and others, will be made public.
    Mr. Budd. Okay. Thank you very much, and I yield back my 
remaining time.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you so much, Madam Chairwoman. I 
am grateful that we are having this hearing today. Thank you, 
Mr. Marcus, for coming forward today to testify before our 
committee.
    I believe we are here today because Facebook, which is a 
publishing platform, an advertising network, a personal 
telecommunications network, a surveillance corporation, and a 
content distributor, now also wants to establish a currency and 
act, through its wallet, as, at minimum, a payment processor. 
Why should these activities be consolidated under one 
corporation?
    Mr. Marcus. Congresswoman, the one thing that we are 
focused on, really, is solving problems for the very people who 
are left behind right now, and we believe it is important 
because we have the ability to invest, and we have the products 
to deliver those services that will solve problems, the same 
way we have reduced costs for people to communicate on our 
messaging apps.
    Ms. Ocasio-Cortez. I see. Libra is, according to your White 
Paper, a unit of currency backed by a reserve governed by the 
Libra Association. Now, to economists, to Members of Congress, 
and to accountants, the term ``backed'' has a very specific 
meaning, and usually incorporates monetary policy, yet the 
Libra White Paper does not define ``backed.'' Rather, it states 
that Libra will be ``backed by government currency and 
government securities.''
    So what does ``backed'' mean, in your sense?
    Mr. Marcus. Congresswoman, it means that it will have a 
reserve, one for one. For every unit of Libra, you will have 
the corresponding value in stable currencies.
    Ms. Ocasio-Cortez. Does this mean, as stated, that the 
Libra Association does not set monetary policy but it mints and 
burns coins in response to demand from authorized resellers. As 
it appears today, if there are more Canadian Libra users than 
U.S. users, will there be more Canadian dollars in the Libra 
reserve to meet potential redemptions?
    Mr. Marcus. No, Congresswoman. The way that the reserve 
basket will be determined will be stable and continue to be 
stable, and we will work with the G-7 working group to ensure 
that it has the proper--
    Ms. Ocasio-Cortez. Thank you. And so this governance over 
the reserve is the Libra Association, correct?
    Mr. Marcus. Yes it is, Congresswoman.
    Ms. Ocasio-Cortez. And currently, the Libra Association is 
governed by Facebook, Uber, eBay, Spotify, Visa, Thrive 
Capital, Union Square Ventures, and a handful of nonprofits as 
well as some other partners, correct?
    Mr. Marcus. That is correct, yes.
    Ms. Ocasio-Cortez. Were they democratically elected?
    Mr. Marcus. No, Congresswoman, but we hope that we will 
have the proper regulatory oversight, because we agree with you 
that this should have the proper oversight to ensure proper--
    Ms. Ocasio-Cortez. Who picked the founding members of this 
governance over the currency?
    Mr. Marcus. Congresswoman, the membership is open, based on 
certain criteria. The first 27 other companies that have joined 
are the companies that have shared that desire to come and 
build this network and solve problems.
    Ms. Ocasio-Cortez. I see. We are discussing a currency 
controlled by an un-democratically selected coalition of 
largely massive corporations.
    Do you believe currency is a public good?
    Mr. Marcus. Congresswoman, I believe that sovereign 
currencies should remain sovereign, and we do not want to 
challenge sovereign currencies. We just want to augment their 
capabilities in a way that they can be--
    Ms. Ocasio-Cortez. But do you believe currency is a public 
good?
    Mr. Marcus. Congresswoman, I believe that sovereign 
currencies are sovereign, and as result they should continue to 
be sovereign--
    Ms. Ocasio-Cortez. Do you believe Libra should be a public 
good?
    Mr. Marcus. Congresswoman, again, we will work with all of 
the regulators and address all concerns, and the regulators 
will determine--
    Ms. Ocasio-Cortez. I will take that as a no? I should take 
that as a no?
    Mr. Marcus. It is not for me to decide, Congresswoman.
    Ms. Ocasio-Cortez. Okay. I will take that as a no.
    You stated yesterday, in front of the Senate Committee, 
that you would be open to accepting 100 percent of your pay in 
Libra. In the history of this country, there is a term for 
being paid in a corporate-controlled currency. Do you know what 
that term is?
    Mr. Marcus. I do not, Congresswoman.
    Ms. Ocasio-Cortez. It is called ``scrip.'' Are you familiar 
with ``scrip?''
    Mr. Marcus. I am not, Congresswoman.
    Ms. Ocasio-Cortez. It's the idea that your pay could be 
controlled by a corporation instead of a sovereign government. 
Do you think that there is any risk here? From scrip to the 
issues with how Facebook handled our elections, we are seeing a 
destabilizing in our public goods. By facilitating 
instantaneous purchases to a digital wallet, Calibra and Libra, 
how could--my time has expired. Thank you very much.
    Chairwoman Waters. The gentleman from Tennessee, Mr. 
Kustoff, is recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman, for convening 
today's important hearing, and thank you, Mr. Marcus, for 
appearing today. You have been through 2 days now of 
questioning, both on the Senate side and now before our 
committee. And as I have sat here today, I have heard a number 
of comments, certainly those who appreciate the innovation that 
Facebook is trying to apply and those that don't want to stifle 
innovation, but certainly concerns from both sides of the 
aisle.
    And as I listen to the questions being asked today, and 
your responses, the graphics that have been shown periodically 
through the day of President Trump's tweets about what Facebook 
and Libra are trying to do and accomplish, and his concerns--
just a few minutes before this hearing, I did a local radio 
interview in my part of West Tennessee, and the radio host 
expressed very general concern about Facebook and Libra, which 
all boils down to this: How do you propose educating and 
talking to my constituents about the need for what you are 
trying to do and how it will benefit them? How do you explain 
it to them where they are not concerned and they are not 
scared?
    Mr. Marcus. Thank you, Congressman. The way that we are 
going to make sure that there is proper education in the 
Calibra Wallet is that it will be designed with education in 
the product experience itself. And so at every step of the way, 
consumers will understand what they are doing and what Libra 
can do for them.
    I do believe that it will help many people reduce costs, 
notably for sending money around the world, and we will be very 
clear in education on the Libra Association side. We will 
continue to have social impact partners that are focused on 
financial literacy, because all around the world it is really 
important to improve on financial literacy, to improve on 
financial inclusion itself. And as a result, we, at the Libra 
Association, will continue funding programs and let experts 
help on that front.
    Mr. Kustoff. Do you understand why consumers, and from my 
standpoint, constituents, are concerned and even maybe a little 
scared of your technology and what you are trying to do?
    Mr. Marcus. Congressman, absolutely, and this is why we 
will need to do this the right way. That has been my commitment 
and is my commitment, that we will take the time to get this 
right, including on education and communication to consumers.
    Mr. Kustoff. Mr. Marcus, a number of questions have been 
asked, most recently by Congressman Gotteheimer, about the 
decision to locate in Switzerland. You have heard that. I 
assume you heard those concerns yesterday. I assume you have 
heard those concerns for some period of time. I would just ask 
you directly: Why not have it located in the United States?
    Mr. Marcus. Congressman, I want to say that Switzerland has 
nothing to do about evading our responsibilities or oversight, 
but we do want the Libra digital currency to be accepted and 
recognized as a global unit of measure on the internet, and as 
a result, placing it, homing the association in Switzerland was 
the right choice because it is the home of many internationally 
recognized and trusted organizations.
    That being said, I believe that the vast majority of 
corporations, companies, startups, that will benefit from 
developing and building on the Libra network will be here in 
the United States and will create jobs here in the United 
States and will, of course, be subject to all U.S. law and 
regulation.
    Mr. Kustoff. Mr. Marcus, I can appreciate that, but isn't 
it important that Americans trust what you are trying to do, 
and wouldn't they more likely trust it if it were located in 
the United States and, in some way, lightly regulated by 
American authorities?
    Mr. Marcus. They probably would, Congressman, although they 
will have a relationship with American companies, and as a 
result they will have a trust, or not, of the different wallets 
that will operate. And that being said, the goal of the Libra 
digital currency is also to serve a lot of populations that are 
not in the U.S., and as a result, we felt that the choice of an 
international home for the Libra Association was the right 
decision.
    Mr. Kustoff. Last question: You understand why American 
consumers would be concerned that it is not located in the 
United States and instead located in Switzerland?
    Mr. Marcus. Congressman, I think as far as the consumers 
here in the U.S. are concerned, their funds, if they use an 
American wallet, will be here, not in Switzerland.
    Mr. Kustoff. Thank you. I yield back.
    Chairwoman Waters. The gentlelady from North Carolina, Ms. 
Adams, is recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman, and thank you for 
convening the hearing, and, Mr. Marcus, thank you for coming. 
Like many of my colleagues, I, too, have great concerns about 
Facebook's entry into the financial services industry. I have 
gained a little more insight today, but I do have some 
questions.
    I want to follow up on Ms. Ocasio-Cortez and ask you to 
explain a little bit more how a company becomes a member of the 
Libra Association. Can you just give me a brief answer? I have 
several questions I want to ask you.
    Mr. Marcus. Of course, Congresswoman. There are sets of 
criteria that have been established and that are public, and 
any company or organization meeting these criteria can actually 
join the association as a member. This is a process that is now 
being led by the Libra Association.
    Ms. Adams. Is the process public?
    Mr. Marcus. Yes, Congresswoman.
    Ms. Adams. Okay. So, can a wealthy individual investor 
become a member?
    Mr. Marcus. No, Congresswoman, because the criteria has 
different buckets, so it is either corporations that are active 
in delivering services or companies in the blockchain area, 
or--
    Ms. Adams. Okay. Let me move on. So, consumers can't 
either?
    Mr. Marcus. Congresswoman, all consumers will be able to 
use Libra.
    Ms. Adams. That is not what I asked, though. Can consumers 
become members of the Libra Association? No, they cannot.
    Mr. Marcus. No, Congresswoman.
    Ms. Adams. All right. It costs at least, what, $10 million 
to become a member of the association?
    Mr. Marcus. Congresswoman, this is not a cost. Members will 
have to invest in the ecosystem to ensure that it is properly 
funded--
    Ms. Adams. But that is an entry fee?
    Mr. Marcus. It is not a fee, Congresswoman. This is an 
investment in the ecosystem.
    Ms. Adams. Okay. Let me circle back on Mr. San Nicolas' 
line of questioning. Why would any of the companies in the 
Libra Association make a major investment like this in this 
payment tool?
    Mr. Marcus. Congresswoman, I believe in my conversations 
with all of them, they agree with us that the status quo is not 
working for too many people and that people deserve better. 
They deserve lower cost and they deserve a lower barrier of 
entry to digital money, and that is why they have joined. And 
then, of course, they have their own goals that are business 
goals because they believe that if lower cost--
    Ms. Adams. Okay, let me reclaim my time, and move on then. 
As a free service, Facebook's business model relies primarily 
on advertising and its marketing platform to make a profit. In 
2017, 90 percent of Facebook's $40 billion in revenue came from 
digital ads and users' data. And that is the core business 
model. Is that correct?
    Mr. Marcus. Of Facebook, the company, Congresswoman?
    Ms. Adams. Yes.
    Mr. Marcus. Yes, it is.
    Ms. Adams. Okay. So you expect us to believe that you are 
going to start collecting financial data and not share it 
because you promised not to do that?
    Mr. Marcus. Yes, Congresswoman, and as well because there 
will be many other wallets that we will have to compete with 
that are not active in social media or advertising, and as a 
result, we will have to make good on those commitments.
    Ms. Adams. Okay. What, if anything, has been learned from 
the Cambridge Analytica scandal that other data hacks that have 
occurred on Facebook's platform? What, if anything, have you 
learned?
    Mr. Marcus. Congresswoman, we have learned a lot, and we 
now have tighter controls on data. We have tighter controls on 
keeping data from people using our services safe. We have 
tighter controls on election integrity, and we have invested 
greatly in election integrity and ads transparency.
    Ms. Adams. I would be interested in what the steps are. 
When you say tighter control, can you give me an example? I 
have 45 seconds.
    Mr. Marcus. Congresswoman, yes. For instance, what happened 
with Cambridge Analytica, the way the platform was opened back 
then is not possible anymore on the Facebook platform today.
    Ms. Adams. Okay. How much has Facebook invested in the 
formation of Libra, Calibra, and the Libra investment token 
that will earn a share of interest?
    Mr. Marcus. Congresswoman, this investment has not happened 
yet. We are in the phase of ratifying the charter with other 
members of the association, and then members can decide how 
much they want to invest, and we will take part in that process 
like every other member.
    Ms. Adams. Thank you, sir.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman, and 
thank you, Mr. Marcus, for being here. I am going to jump right 
in.
    I think what today's discussion is really about is trust 
and whether we can trust your company. I think you are pretty 
low on the trust spectrum currently, for very good reason. But 
essentially, what we are talking about on the association side, 
is the governing body of Libra, correct?
    Mr. Marcus. Yes, Congressman.
    Mr. Gonzalez of Ohio. Okay. And of the members today, how 
many did you hand-select?
    Mr. Marcus. I'm sorry?
    Mr. Gonzalez of Ohio. How many did you recruit? How many 
did Facebook recruit?
    Mr. Marcus. Congressman, we approached a wide range of 
companies.
    Mr. Gonzalez of Ohio. But how many did you approve of? One 
hundred percent of them?
    Mr. Marcus. Congressman, they met the criteria, and they 
had the willingness to participate. When we get to the 100--
    Mr. Gonzalez of Ohio. But you got them, right?
    Mr. Marcus. --we will not be involved in the decision of 
who gets to join.
    Mr. Gonzalez of Ohio. Okay, but to date, you have recruited 
all of the members, correct?
    Mr. Marcus. Congressman, we have approached a number of 
companies. Those are the companies that--
    Mr. Gonzalez of Ohio. I think the answer is yes, so we will 
keep going. First, you created the coding language. Most 
decisions to date have been made by your company. The claim has 
been Facebook will not have undue influence over the platform. 
We are all politicians in this room. I think if we could hand-
select our voters, we would feel pretty comfortable about our 
ability to influence whatever decisions are made. So, I would 
suggest that that is not an accurate claim.
    Second, there is something glaringly missing from the 
group, which is everyday users. Why would you exclude users 
from having voting authority over the association?
    Mr. Marcus. Congressman, first, I do want to correct one 
fact, which is, yes, we have created an investment in all of 
the code up to this point, but now it is in the open-source 
community and available to be contributed.
    Mr. Gonzalez of Ohio. Great.
    Mr. Marcus. And to the consumers' question, because we 
believe that to meet our regulatory requirements across the 
association we need entities that are established, that know 
how to operate those types of programs that are trusted, but 
this is also why we believe that over time, it is important to 
have a transition to giving people more of a voice in--
    Mr. Gonzalez of Ohio. I will talk about that in a second. 
Quickly, on the membership side, you have to be able to 
validate, and you need a $10 million investment. Can a Chinese 
state-owned enterprise get in?
    Mr. Marcus. Sorry, I could not--
    Mr. Gonzalez of Ohio. Can a Chinese state-owned enterprise 
get into the membership?
    Mr. Marcus. Congressman, this is not my decision. It is the 
Libra Association's decision. But there is--
    Mr. Gonzalez of Ohio. Which you have undue influence over.
    Mr. Marcus. There is a key principle, which is that if 
Libra is not accepted in a certain country or cannot be used, I 
believe that companies for said country should not be part of 
the--
    Mr. Gonzalez of Ohio. So, the answer is maybe. Now, I want 
to talk about how you are actually going to transition. I 
wonder how you will actually do this, because the promise of a 
permission-less system is the decentralization. It seems like 
if you are fully decentralized, you would not actually need the 
Libra Association. Help me square those two. They seem to be in 
conflict.
    Mr. Marcus. You are right, Congressman, to raise this 
important point, and the way that we are thinking about this is 
that since Libra will always have to have a reserve, that it 
will be backed one to one, there will be some form of 
centralization in the management of the reserve because we will 
need the right oversight to ensure that it is managed 
appropriately to retain stability. And as a result, we believe 
that there will still be an association that will not only look 
after the key principles to operate the network within the 
bounds of regulation and ensuring that proper programs are 
around, but that does not mean that the governance and the 
voting has to be the same as today.
    And so I think we can achieve the balance of having more 
openness, and to me the key issue with a permission-less 
network is the ability to have nodes be more fungible and as a 
result ensure the integrity of the network over a long--
    Mr. Gonzalez of Ohio. I actually think this is the hardest 
thing for you. I do not actually think it will occur. If I had 
to predict, I just do not think it will occur because they are 
just fundamentally in conflict. When you talk to crypto purists 
or blockchain purists, these things do not match. So I do not 
think it will happen. I think what we are most likely to see is 
a 100-member organization that you guys basically control, 
which, frankly, I love the innovation, but that scares me, if I 
am being honest.
    And then the last point on Calibra specifically, a quick 
question: Is it the only wallet that will be directly 
integrated to Facebook?
    Mr. Marcus. Congressman, it will be interoperable with 
other wallets.
    Mr. Gonzalez of Ohio. But directly integrated.
    Mr. Marcus. Calibra Wallet will be integrated in WhatsApp 
and Messenger, alongside other wallets for traditional fiat 
payments.
    Mr. Gonzalez of Ohio. And so as a fully controlled company 
of Facebook, a subsidiary of Facebook, the argument that you 
will not be sharing data across--I would imagine you share data 
between Facebook, the Big Blue App, Instagram, and Messenger. I 
would be shocked if you are not also sharing data at some point 
with Calibra and Facebook. I hear you: ``We promise we will do 
this.'' Back to what I said at the beginning, nobody trusts you 
right now.
    I yield back.
    Ms. Tlaib [presiding]. Thank you. The gentlewoman from 
Pennsylvania, Ms. Dean, is recognized for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman.
    Mr. Marcus, thank you for being here before us, and what I 
would like to do is, with a focus on that notion of trust, 
number one, say that I was dismayed by your comments that you 
said we do not need to trust you--I think this was before the 
Senate--that we do not need to trust Facebook because there are 
28 other partners, and eventually 99 other partners in the 
association.
    No, we do need to trust you. We absolutely need to trust 
you.
    Before we look forward to the possibility of Libra, why 
don't we look back and take a look at the record $5 billion 
recommended fine against Facebook. Could you be very specific, 
not euphemistic but very specific, as to the wrongdoing that 
generated a $5 billion recommended fine?
    Mr. Marcus. Congresswoman, first, I do agree absolutely 
that trust is essential and that Facebook should be trusted. 
What I meant in my comments is that even if you do not, you 
will not need to because Facebook will not have outside power 
or governance over the network.
    Ms. Dean. I wonder if maybe you would answer the other 
piece of my question, which was, it is tough to trust when the 
collection, storage, and misuse of information of your users 
generated a $5 billion recommended fine. Can you be specific? 
What have you learned? What has Facebook learned? What is the 
specific wrongdoing for which you are being fined?
    Mr. Marcus. Congresswoman, I cannot comment on the FTC 
investigation because it is not yet public, but what I can tell 
you is what we have learned. And what we have learned is that 
we cannot launch a service and then figure out how it can or 
cannot be misused. We have to take steps in order to ensure 
that what we launch is actually--
    Ms. Dean. You cannot be more specific than that when the 
very thing you are putting before us today, a preformed 
association, is the exact same idea of what you just talked 
about, putting something forward without really testing it all 
first?
    Mr. Marcus. Congresswoman, nothing is launched and nothing 
will launch until all concerns are addressed.
    Ms. Dean. Again--
    Mr. Marcus. I made that--
    Ms. Dean. Again, Facebook has to learn some lessons, 
lessons that you can actually say in open testimony to the 
public as to the wrongdoing and the misuse of information. 
Please, assure us that Facebook has the ability to say so now.
    Mr. Marcus. Yes, Congresswoman, we have made mistakes, it 
is true.
    Ms. Dean. What are those mistakes, so that we can learn and 
make sure that you have learned?
    Mr. Marcus. We have made mistakes around how to best 
protect consumers' data and privacy. We have been working on 
getting better at that.
    Ms. Dean. Did you share consumers' data in unauthorized 
ways?
    Mr. Marcus. Congresswoman, there were a number of issues, 
and we made--
    Ms. Dean. So, the answer is yes. Thank you.
    Mr. Marcus. --a number of mistakes, and we--
    Ms. Dean. The answer is yes. In connection with that fine, 
consider this: The FTC's investigation was set off by a New 
York Times and Observer of London report which uncovered that 
Facebook, the social network, allowed Cambridge Analytica, a 
British consulting firm to the Trump campaign, to harvest 
personal information of its users. Do you find that incredibly 
troubling?
    Mr. Marcus. Yes, Congresswoman, but those things are not 
possible anymore on the Facebook platform.
    Ms. Dean. But they were possible and they took place.
    Mr. Marcus. Because we reacted too slowly, but this is 
not--
    Ms. Dean. You allowed the harvesting of information for the 
Trump campaign. Is that correct?
    Mr. Marcus. Congresswoman, I do not have the details--
    Ms. Dean. Thank you. It is apparent that the reporting 
shows so.
    Let us flip to the other side. I think before you move on 
to Libra, you ought to clean up the messes of the past and be 
very transparent. The opaqueness is not working.
    Let us talk about this. This is structured as a nonprofit, 
and yet we know that you are going to take dividends or 
interest and then distribute it out to the association members. 
Is that correct?
    Mr. Marcus. Congresswoman, yes, this is correct.
    Ms. Dean. Will that be dividends and income?
    Mr. Marcus. Congresswoman, for whatever streams of income 
the association will pay out and not keep because it is a 
nonprofit, it will not generate a profit for itself. It will 
pay appropriate taxes. And I do want to say that I completely 
agree with your statement that this process cannot be opaque. 
It has to be in the open. And this is exactly why we have 
shared our plan so openly--
    Ms. Dean. And yet you had trouble being transparent about 
the past, so I do worry about the future.
    What is the projected income that will be generated, the 
interest that will be generated, say in the first year? 
Certainly, you have some timelines: a first year; a second 
year; a third year. What is the income you are anticipating for 
Facebook?
    Mr. Marcus. Congresswoman, we are not optimizing for that. 
What we are optimizing for--
    Ms. Dean. I do not want to talk about optimizing. I want to 
talk really hard facts, numbers that people can dig into, 
because I do not think the simple example you gave of the young 
woman trying to send $200 and you guys are just on a mission to 
help her send money to her mother in a war-torn country really 
explains why you would want to get into this business. It has 
to be for profit? Where is the profit?
    Mr. Marcus. Congresswoman, we have done that for 
communications, for the very same woman you were describing. 
Now, she can communicate with her family for free using our 
products. It was not the case before those products were 
available.
    Ms. Dean. I will note--
    Ms. Tlaib. Time is up.
    The gentleman from Indiana, Mr. Hollingsworth, is 
recognized for 5 minutes.
    Mr. Hollingsworth. Good afternoon, Mr. Marcus. I appreciate 
you being here and investing some time with us and talking 
about these things.
    I wondered if you might take a deep breath, and take a step 
back. This is something that you are clearly passionate about, 
something that you clearly believe in. I wonder if you might 
tell us kind of what that North Star is? I know you have said 
it many times here, but I wondered if you might say it again, 
kind of why are you so passionate about this? Who is this going 
to help and how is it going to make a difference to that 
person?
    Mr. Marcus. Thank you for that opportunity, Congressman. I 
am passionate about this because too many people are left 
behind, the costs are too high, and the very people who are 
left behind are the people who cannot afford to be left behind. 
So the less you have, the more you pay within our current 
financial system, and the more you need to depend on digital 
money and free or very low cost services to move your money 
around, the less access you have. And so we believe that 
advancing technology and building the ability for people with a 
simple $40 smartphone and a basic data plan to have access to 
digital money services would be a huge progress for many people 
who need it the most.
    Mr. Hollingsworth. All right. Certainly, the fields of 
Indiana are far from Silicon Valley, but that is exactly 
something that they can sympathize with, the feeling as though 
they are on the outside of the financial system or marginally 
hanging onto the financial system or that the costs of using 
the financial system are very high to them. That is something 
that I hear every day all the way across the district, and it 
is something that is really important to them. This committee, 
over a number of years, has done a lot of great work in trying 
to right-size some of the regulatory framework, trying to help 
participants get into the market, trying to enable and empower 
those Hoosiers, who are Americans, and those around the world 
that you mentioned as well.
    If the architecture of this is to be a transaction-oriented 
platform, tell me a little bit about how that differs from a 
cryptocurrency? Because this is really a digital currency 
versus a cryptocurrency, and the architecture is very 
different, and I wanted to talk about that for a second.
    Mr. Marcus. Congressman, there are two parts that are 
different.
    Mr. Hollingsworth. Yes.
    Mr. Marcus. The first one is really the digital currency 
itself because it is backed one for one with a very stable 
reserve that will confer stability to the digital currency.
    Mr. Hollingsworth. When you pay something, you know what 
the value is that you are paying, and all the stories about 
cryptocurrencies--gosh, I paid for my pizza with this, and I 
could be a billionaire today if only it were worth that then, 
right? So, it's designed for stability in the system to ease 
transaction flow?
    Mr. Marcus. Correct. This is one. And, two, the way that 
the technology has been built and the blockchain has been 
designed, it has been designed for speed and scale so that it 
can meet the demands of the large community that we hope to 
serve one day.
    Mr. Hollingsworth. Right, but the fundamental difference in 
the architecture--and, again, I will not purport to be a 
technology expert--is that this is not a permission-less 
system, right, in the sense that it is peer-to-peer? This will 
go through a central clearinghouse that says XYZ individual 
owns Libra because they are in this register. They can access 
it, but you have to be a permissioned corporation to access it 
or a permissioned member to access that database. Is that 
right?
    Mr. Marcus. It is partially right, Congressman. The 
blockchain is a permissioned but open blockchain, and as a 
result, you do not need to be a member to be able to build 
services or products on top of the blockchain.
    Mr. Hollingsworth. Truth. Right. To build services on top 
of, but you cannot go in and make changes to the ledger itself, 
right? That requires permission?
    Mr. Marcus. Congressman, there is no central body that 
actually decides what can be added to the blockchain. The way 
that the consensus algorithm that is used works is that a 
transaction is proposed, and then as long as two-thirds of the 
nodes approve of that transaction being added to the ledger, it 
is added to the ledger.
    Mr. Hollingsworth. Right, right, which is different, 
though, than a pure peer-to-peer technology, right?
    Mr. Marcus. That is correct, Congressman, because it uses a 
consensus algorithm.
    Mr. Hollingsworth. And I guess what I am getting to is this 
is a different type of asset/currency that looks and feels a 
lot more like a currency and should be regulated more like a 
currency, right? As though it is a transacting business, where 
there is a central place at which we can do AML work? We can do 
other pieces. That is very different than a cryptocurrency and 
I guess maybe haphazardly or maybe in a C-minus way I am trying 
to draw that distinction so that individuals understand that 
this is different than a pure peer-to-peer network that has no 
ability to do that by virtue of its design. But the 
architecture that you have thoughtfully proposed here--not put 
in place but thoughtfully proposed--has that central piece 
where we can do that very work. Because the goal of AML is to 
deny access to the financial system by nefarious actors, right? 
We have the ability to do that here, that we would not 
otherwise have the ability to do in a pure peer-to-peer 
architecture. Is that true or untrue?
    Mr. Marcus. Congressman, yes, and that is why we took the 
permissioned approach to start with so that we can have trusted 
parties run nodes to start.
    Mr. Hollingsworth. And I sincerely appreciate how that 
architecture reflects the North Star that you first--
    Ms. Tlaib. The gentleman's time has expired.
    Mr. Hollingsworth. --started talking about. Thank you, Mr. 
Marcus.
    Ms. Tlaib. The gentleman from Illinois, Mr. Garcia, is 
recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman. Thank 
you for being here this morning, or this afternoon now, Mr. 
Marcus.
    Following up on some of the previous questions, what is in 
it for partners if not to entrench Facebook or their own market 
power by participating in this coalition that you have 
assembled?
    Mr. Marcus. Congressman, thank you for your question. The 
different members have different roles that they will play on 
top of the Libra network, and it will benefit their core 
business. So, for instance, when you think about the network 
companies like Visa and Mastercard, they will play a role of 
enabling that Libra is accepted at their merchants, and as a 
result will have a business opportunity to do so. When you 
think about the companies like Uber and Lyft, they will be able 
to not only reduce costs for accepting payments, but also a 
number of their drivers, when they get paid, send money back 
home, and they could build services around this at a lower cost 
for them.
    Mr. Garcia of Illinois. Okay, so it is all benevolence.
    Mr. Marcus. No, it is not, Congressman.
    Mr. Garcia of Illinois. Let me change gears briefly. 
Hawaii's Senator Brian Schatz has noted, in a private 
conversation he has had with some of the 27 members of the 
Libra Association--and the Association includes companies like 
Uber, Mastercard, and Visa as well as some nonprofits like 
Facebook and Mercy Corps--that Facebook has portrayed the Libra 
Association as a collective as if Facebook is just one of many 
voices in this venture. But as Senator Schatz revealed, 
Facebook's voice is more like the godfather's voice in the 
family. It is true that it is just one voice among many, but it 
is also the only voice that matters.
    Here is what Senator Schatz said: ``Members of the 
consortium actually have lots of questions, too, similar to the 
questions that are being offered on this dais. And they have 
great reservations about moving forward, but they do not want 
to be left out because of Facebook's market power.''
    Facebook's history with partners has added to their 
caution. The game maker Zynga, for example, faced a dramatic 
loss of revenue after Facebook backed away from a close 
relationship with the company. Facebook also strained 
relationships with many publishers last year when it changed 
the algorithms behind its newsfeed to de-emphasize news 
stories.
    My question is: Are they participating because they are 
afraid of Facebook and they might as well be friends with 
Facebook?
    Mr. Marcus. No, Congressman, and I want to fully own the 
fact that we are in a leadership position now, but we will not 
be in that same position by the time the network launches. And 
the existing 27 other companies and the number of other 
companies, the long list of other organizations all around the 
world that are applying to join the association just want to 
join because they believe that together we can build a better 
system for people.
    Mr. Garcia of Illinois. And a better world, I suppose.
    A quick question. What content will Facebook harvest when a 
user transacts with Libra? Will it be just the transaction 
data?
    Mr. Marcus. Congressman, yes, so on the Calibra Wallet, we, 
of course, will need to authenticate consumers before they can 
open an account. But there will be no other data than the 
actual transaction data that is needed to serve the purpose of 
the wallet.
    Mr. Garcia of Illinois. What other data will Facebook 
monetize apart from the transaction data?
    Mr. Marcus. Congressman, we will not monetize transactional 
or account data nor share it even with Facebook itself.
    Mr. Garcia of Illinois. Okay. We have learned that Facebook 
has repeatedly allowed third-party users access to data without 
Facebook users' consent. Now Facebook promises that its Calibra 
subsidiary will not share data with Facebook. How can we be 
sure that this policy will not change in the future? And what 
would enshrine this promise that you have made?
    Mr. Marcus. Congressman, it is a very fair question, and I 
understand that people have concerns, and commitments have been 
made, and here there is one thing that will be very different, 
which is that if we fail to earn people's trust and fail to 
deliver on our commitments, then they will not use the Calibra 
Wallet. We will have portability built in, and we will have the 
ability for anyone to use any of the many wallets that will be 
available that will all be interoperable. And if we do not make 
good on commitments and if we do not earn people's trust by 
making good on these commitments for very long periods of time, 
we cannot actually win. And we do want the Calibra Wallet to be 
successful, and as a result, we will have to make good on these 
commitments.
    Mr. Garcia of Illinois. Thank you. I yield back, Madam 
Chairwoman.
    Ms. Tlaib. The gentleman from Virginia, Mr. Riggleman, is 
recognized for 5 minutes.
    Mr. Riggleman. Thank you, Madam Chairwoman, and thank you 
for being here, Mr. Marcus.
    One more time, since you can see I am usually close to last 
in these proceedings, what is your title one more time as we go 
forward?
    Mr. Marcus. My title is, I am the head of Calibra at 
Facebook.
    Mr. Riggleman. Head of Calibra at Facebook. I have some 
questions, and we are going to get right into it, because we 
have had enough getting going on here.
    My first question is: After a White Paper, there is usually 
an implementation plan. Do you foresee all of your partners 
being involved with the implementation plan for Libra or for 
Calibra? And once in place, can we as partners in the U.S. 
Government look at the regulatory side of this as we go 
forward?
    Mr. Marcus. Congressman, yes, this is my commitment that we 
will not go forward until we have addressed all concerns and 
met the regulatory bar and oversight bar that is needed for 
this network to operate the right way.
    Mr. Riggleman. Yes, sir, and you might have answered this, 
but are the partners right now involved in the open-source 
development of Libra and its applications?
    Mr. Marcus. Congressman, some of them are stepping up and 
are actually starting to be involved in the development, and I 
expect that since we just open-sourced the code base about 4 
weeks ago, we will have a lot of outside contributions going 
forward.
    Mr. Riggleman. That was my surprise, so I took a little bit 
of a look at Libra Core, the JavaScript front end, it actually 
accesses the back end, which is Rust. It helps with the actual 
transactions. And I know it is very, very new, but what 
surprised me was it looked like there is already an 
international flavor to it. I think Rust is 37 people in San 
Francisco, so I went ahead and did a GitHub search on who is 
actually leading the development on the Libra Core side, and it 
looks like--I think it is going to be international because it 
looks like a native Nigerian is actually building the actual 
Libra Code in front of the code development of Libra Core. When 
I look at things from an intelligence background, I wonder, is 
this going to be international? Are there going to be 
scalability issues? Because when you look at the number of 
transactions that you are doing right now, but I was really 
surprised by the Rust language as it was in the background.
    My first question is: Why was the Rust language chosen as 
the implementation language for Libra? And do you believe right 
now from what you have seen, that it is mature enough to handle 
the issues and the security challenges that will really affect 
these large cryptocurrency transactions?
    Mr. Marcus. Congressman, excellent question on the security 
of the code and who can commit to the code, and the Libra 
Association will own the repository for the code, and as a 
result, while there are many flavors and branches being 
developed by third parties, only safe, verified code will 
actually be committed to the actual Libra Core base that is 
going to be under the governance of the Libra Association.
    Mr. Riggleman. And that is what I really am hoping, because 
right now--and when I was looking at the nightly build 
releases, it looks like Libra was built on nightly builds of 
the Rust programming language. And it is a little interesting 
because that is not how we usually did releases in the DOD, and 
I was wondering what features of Rust are only available in the 
nightly builds, and this is something you can get back to me 
on. What features are only available in the nightly builds that 
are not in the official releases of Rust? And does Facebook see 
that as a concern that they are depending on unofficially 
released features of the Rust program language? In other words, 
do you see right now why the nightly releases and do you see 
this as just a function of the prototyping phase of this?
    Mr. Marcus. Congressman, I do not have all the answers to 
your very technical questions, but I commit that we will get 
back to you with more details on your question once my 
technical team can get back to you.
    Mr. Riggleman. And, really, some of this is not just based 
on technical questions but the international applicability of 
Libra. For instance, we just had 8 members of the major banks 
sitting here, and their issue was information sharing based on 
laws that we have in place right now and the confusion over 
sharing that data with foreign subsidiaries. And I will link 
into this: If we already have those laws on the books, and if 
we are looking at CFT, if we are looking at AML, based on my 
background that is some of the things that concern me. And also 
with scalability, you are looking at large transactions and 
blocks, I think, that maybe have never been done before, and 
you can probably agree that is why we need the White Paper and 
the open-source development. But when you are looking at the 
issues that you have for regulatory, especially for AML, I 
think the problem for me is we have to look at this as an 
international problem because I think eventually you are going 
to have international wallets. I think wallets will be built 
around the world, and I think that is something that we are 
going towards, and that is why the scalability question, who is 
actually doing this, who is partnering, and this is very 
concerning to me. And it is really easy to access these 
individuals on GitHub and to see that somebody from Lagos, 
Nigeria, is the main code writer for one of these instances is 
something that concerns me, just based on my background.
    Mr. Marcus. Those are absolutely fair concerns, 
Congressman, but, again, I want to stress that the Libra 
Association as a governance body will actually validate 
committers to the code and will make sure to be very thoughtful 
about who can commit to the code. And I would be happy to 
follow up with your office on--
    Mr. Riggleman. And at the end, I think many Members, 
bipartisan-wise, would love to see an implementation plan built 
on top of the White Paper. Thank you, sir.
    Mr. Marcus. Thank you, Congressman.
    Ms. Tlaib. The gentlewoman from Texas, Ms. Garcia, is 
recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank 
you, sir, for being here. I know it has been a long day, and I 
think the end is almost in sight. But I must tell you I have 
some real concerns about your premise that you are really doing 
this to help the unbanked. For me, it just seems that although 
you have said in a Washington Post article that this will 
enable anyone who has a $40 smartphone and a basic data plan to 
have access to a digital form of money--I do not know about 
you, but my smartphone costs a lot more than $40, and my data 
plan costs maybe that or more.
    How is this really going to work for the unbanked? The 
unbanked, to me, are like the people in my district, a working-
class district in Houston, who really are money-order or 
paycheck-to-paycheck, cash-only consumers. How is that really 
going to help them? How are they going to really have access to 
something like this and be able to negotiate what I think could 
be a very complex system?
    Mr. Marcus. Congresswoman, thank you for your question. The 
reason in America that people remain on the fringes of the 
system is because the costs are too high, and--
    Ms. Garcia of Texas. But the cost of the phones and data 
plans are also high. Are you going to work with your Facebook 
foundation to provide more connectivity for people around those 
areas who do not have access to mobile plans?
    Mr. Marcus. Congresswoman, the focus of Calibra is really 
on the financial side and enabling people to have digital 
money. But the costs of smartphones and data plans are coming 
down as a result of competition in--
    Ms. Garcia of Texas. But why would they need digital money? 
They can get that $20 bill that my colleague was showing off at 
the other end?
    Mr. Marcus. I'm sorry. I could not hear you.
    Ms. Garcia of Texas. I said, why would they want digital 
money if they can get the green dollars?
    Mr. Marcus. Congresswoman, they would because probably they 
need to send a portion of that money to someone in another 
country or on the other side of the country, and the ability 
for them to access these--
    Ms. Garcia of Texas. Let us go to that example that you 
used, $200 that somebody wants to send, and I think you said it 
would be, I forget, did you say--
    Mr. Marcus. $14.
    Ms. Garcia of Texas. $14? I guess you are talking about 
either a money order or some sort of wire transfer?
    Mr. Marcus. Cross-border remittance or payment.
    Ms. Garcia of Texas. They can do that fairly quickly, and 
they can do it without any advertisement. They can do it 
without any other charges. So the consumer is the decider of 
what is going to happen, right? Like with you, how do you see 
the person who is utilizing this? Are they a customer? Are they 
a consumer? How will you treat this? And are you just frankly 
using that person to be able to sell another ad and do 
something for your company?
    Mr. Marcus. No, we are not, Congresswoman, and I do want to 
stress that not only the current system is expensive, but it is 
extremely slow. Cross-border payments take on average 3 days--
    Ms. Garcia of Texas. I think you have already said that, 
but I am talking about in terms of costs. I sit here and I 
frankly cannot believe that you are not going to charge anybody 
for anything. You are not a charity, right?
    Mr. Marcus. No, Congresswoman, and I can explain--
    Ms. Garcia of Texas. You are not a charity. How much money 
have you all already invested in this project? I think an 
article I read said you have been in this for a couple of 
years. How much have you all spent already?
    Mr. Marcus. Congresswoman, quite a bit of resources, but I 
can explain what--
    Ms. Garcia of Texas. How much have you--
    Mr. Marcus. --the upside is for Facebook.
    Ms. Garcia of Texas. How much have you spent?
    Mr. Marcus. I do not know the exact number but--
    Ms. Garcia of Texas. $20 million, $30 million, $40 million, 
$100 million?
    Mr. Marcus. We have invested what is required, and I think 
that is why it is a good--
    Ms. Garcia of Texas. So you are not going to tell me how 
much you invested, but you are trying to convince me that there 
is not going to be a time that you are going to want to recoup 
that investment?
    Mr. Marcus. Yes, we will, Congresswoman, and--
    Ms. Garcia of Texas. And how will you do that without 
charging people, charging for ads, or charging the person who, 
in my view, you are using for your agenda to get--I do not even 
know what to call what you all do. It sounds almost like 
something straight out of a Dan Brown novel: ``We belong to the 
Libra. We get to decide.''
    Mr. Marcus. Congresswoman, if I may answer your question, 
I--
    Ms. Garcia of Texas. I want you to be more transparent.
    Mr. Marcus. I want to be more transparent, and I want to 
tell you what is in it for Facebook, if you give me 1 minute.
    Ms. Garcia of Texas. Well, you have 20 seconds. That is all 
I have.
    Mr. Marcus. Okay. I will do it in 20 seconds. There are two 
things that we will benefit from at Facebook. One is we have 90 
million small businesses and a lot of users who will have the 
ability to transact with one another and they currently cannot 
transact with one another. And once that happens, that means 
more commerce--
    Ms. Garcia of Texas. But see, again, that is something they 
can do with a credit card--there are so many other ways that 
they can do that.
    Mr. Marcus. They cannot in a number of regions because they 
do not have access to those services.
    Ms. Garcia of Texas. Regrettably, I have lost my time, but 
hopefully--
    Ms. Tlaib. Time has expired.
    Ms. Garcia of Texas. --you or someone from your group can--
    Ms. Tlaib. The gentleman from Tennessee, Mr. Rose, is 
recognized for 5 minutes.
    Mr. Rose. I want to thank Chairwoman Waters and Ranking 
Member McHenry for holding this important hearing, and, Mr. 
Marcus, if you want to finish the answer you were in the midst 
of right there, I would appreciate hearing that answer. You 
might just start over, actually.
    Mr. Marcus. Thank you for the opportunity, Congressman. The 
two ways that Facebook will make money off the Libra network 
is, number one, the ability for the 90 million businesses and 
the billions of users who are currently on our various products 
to transact with one another. And if they can suddenly transact 
with one another--some of those businesses cannot even accept 
digital payments today, so the idea that there is more commerce 
on the platform will actually drive those small businesses to 
expand, and as they expand, they will buy more ads on the 
Facebook platform, and that will be an indirect way for 
Facebook to benefit.
    The second way that we will benefit is that over time, if 
we earn people's trust and they use the Calibra Wallet, we will 
offer a range of services, lower-cost access to capital and 
others, in partnerships with banks and financial institutions, 
and this will be another source of revenue for the company that 
is completely de-correlated from ads, but that is in many 
areas.
    Those are the two ways that Facebook will benefit from the 
Libra network being a success.
    Mr. Rose. Okay. Thank you. One of my general thoughts 
surrounding blockchain space comes down to a simple dichotomy: 
either the crypto-tokenization blockchain space will be a 
valuable innovation in the long term; or it is not a 
particularly valuable innovation. If the former is true, then 
it is important that the U.S. creates as certain a regulatory 
environment or regime as possible. By creating regulatory 
certainty, the value of the growth in this space can be 
captured here in the United States, whether that value be in 
job creation or the creation of intellectual property or other 
benefits. If the latter is true, and this is not a particularly 
valuable innovation, then any discussion may not bear fruit, 
but it is ultimately no harm, no foul.
    However, the truth of the matter is that whatever one's 
feelings are on the Libra Project or any other blockchain-
related efforts, currently there does not seem to be an 
adequate regulatory structure to ensure that innovation can 
flourish while consumers are still protected. That is why I am 
a cosponsor of the Token Taxonomy Act. There are still many 
questions to answer in this space, but the goal of the Token 
Taxonomy Act is one that is quite laudable. Not all blockchains 
are created equal, and we as a committee and a Congress should 
discuss the nuances of distributed ledgers versus blockchains, 
permission versus permission-less blockchains, and utility 
tokens like Filecoin versus cryptocurrencies like Bitcoin.
    The Token Taxonomy Act is a good first step in that it aims 
to codify a regime for tokens that do not fit well into our 
current securities law framework.
    Mr. Marcus, was it a coincidence that the Libra Association 
decided to headquarter in Switzerland, when Switzerland has 
previously outlined clear regulatory guidelines for the 
industry?
    Mr. Marcus. Regulatory clarity in Switzerland was just one 
of the components, but, yes, it was factored in the decision.
    Mr. Rose. Libra strikes me as being very similar to a 
currency ETF both in that its value is derived from a basket of 
currencies and the way the basket is managed seems to operate 
much like an ETF. If this is true, perhaps it should be 
regulated by the SEC. Perhaps this is a mischaracterization. 
The point is that we need to carefully study the mechanisms of 
any new innovation in this field to understand how they should 
be regulated. Leveraging existing regulatory agencies like the 
CFTC, the SEC, and State agencies makes sense, but it is our 
job here in Congress to write laws that make it very clear who 
will be the ultimate regulator of a potential product. It is 
Congress' job to give the SEC clear rules that they can 
interpret and apply. The SEC is doing its best, but they are 
stuck applying a litany of very old rules to 21st Century 
technology. We need to help them succeed by providing some 
updated guidance. That is the only way we are going to ensure 
that any development in this space is safe and sound and occurs 
right here in the most innovative economy in the world.
    With that, I yield back the balance of my time.
    Ms. Tlaib. Thank you.
    Without objection, I would like to enter into the record 
the following materials: a letter from the Electronic Privacy 
Information Center, EPIC; ``Diversity in Blockchain's Initial 
Review of Facebook's Project Libra; a letter from the 
Independent Community Bankers of America; a letter from 
Americans for Financial Reform Education Fund; a New York times 
op-ed written by Chris Hughes, the co-founder of Facebook, 
entitled, ``It is time to break up Facebook''; and another op-
ed by the same person in the Financial Times entitled, 
``Facebook Co-founder, Libra coin would shift power into the 
wrong hands.''
    Without objection, it is so ordered.
    Ms. Tlaib. With that, I would like to recognize myself for 
5 minutes. Thank you, Mr. Marcus, for joining us. A lot of 
people have been using the word ``innovation.'' That is a bit 
misleading. I think what this is really about is making more 
money, owning people's information, owning their 
identification, owning their person, all of which very much is 
interconnected with the livelihood of the residents we 
represent.
    Mr. Marcus, who picked the first 28 corporations of the 
Libra Association?
    Mr. Marcus. Congresswoman, the original 28 members are a 
result of a wide outreach, and those are the first out of 100. 
Facebook will not be in a position to pick and choose the next 
members and will not be involved in the process. This is a 
process that is actually now driven and solely in the hands of 
the Libra Association.
    Ms. Tlaib. Thank you, Mr. Marcus. So, Marc Andreessen sits 
on the board of Facebook. Mark Zuckerberg, the CEO of Facebook, 
sits on the board of Breakthrough Initiatives. Peter Thiel is 
the founder of PayPal and is on the board of Facebook. Ben 
Horowitz is the founder of Anderson Horowitz and on the board 
of Lyft. Just looking at that, simply looking at the small 
sample of individuals, there appears to be multiple close 
relationships on Facebook's board and across the Libra 
Association members.
    Recently, Forbes asked the following question: Is Facebook 
forming a crypto mafia as the Libra Foundation members boost 
each other's business?
    One example they provided is that Anchorage, one of Libra 
Association's founding members, raised funding from Visa, which 
is also a Libra Association founding member. You do not think 
that creates a power imbalance for a small group of people to 
manage a high percentage of the world's transactions? Are you 
worried about undue influence?
    Mr. Marcus. Congresswoman, I appreciate your question. I 
can assure you that the participants up to this point are 
participants that have joined because they can add value on the 
network and provide services that are relevant to the people we 
serve--
    Ms. Tlaib. I am sure they are valuable, Mr. Marcus. No one, 
I think, would oppose that they are valuable. But each of the 
Libra Association companies have investors or shareholders to 
answer to, so how do you see them serving two masters in a 
competing payments world?
    Mr. Marcus. Congresswoman, we hope that the Libra network 
is just a network and that every single company will be able to 
build services on top of the network the same way that 
companies build services on top of the Internet, and as a 
result, we believe that conflicts will be limited by that, and 
the fact that, 100 members by the time we launch.
    Ms. Tlaib. Yes.
    Mr. Marcus. But we hope that we will have many more, and, 
again--
    Ms. Tlaib. So can a member of the Libra Association, the 
group of friends, be voted out by Libra users?
    Mr. Marcus. Congresswoman, no, this is not currently 
contemplated. But the way that the governance will evolve will 
allow for that in the future.
    Ms. Tlaib. Mr. Marcus--and this is important--the banked 
and the founding members have a choice to protect their data, 
but will the unbanked and underbanked have to trade their data 
and privacy to transact?
    Mr. Marcus. They will not, Congresswoman.
    Ms. Tlaib. How is that possible?
    Mr. Marcus. Because this is a payments network and a 
payments service, Congresswoman, and consumers will have 
choices. And if they want to use a wallet that is solely in the 
business of payments and not in the business of advertising at 
all, they will have the choice.
    Ms. Tlaib. One of the barriers for the unbanked community, 
as you probably know, is access to an ID. So if the same Know-
Your-Customer/anti-money-laundering restrictions exist here for 
the Libra network and wallet, how will this serve the unbanked 
now?
    Mr. Marcus. Congresswoman, this is a very important 
question, the problem of identification for financial 
inclusion, and this is something that we are actively working 
on with a number of outside NGOs and others to find the best 
approach. But there are a number of people who have the ability 
to identify themselves and who are left behind today, and we 
can serve them today.
    Ms. Tlaib. The public manages large cryptocurrencies such 
as Bitcoin, as you probably heard. However, with the Libra, 
each founding member had to pay a minimum of $10 million to 
join and become a validator, whatever, node operator, thus each 
founding member gaining one vote in the Libra Association 
council. How does the Libra Association reflect the diverse 
population you are trying to reach, including the underbanked 
and unbanked?
    Mr. Marcus. This is a really important question, 
Congresswoman, and the way that we plan to arrive to the right 
level of diversity and representation is by being very 
thoughtful at the Libra Association as we add more members 
towards the goal of 100 or more members by the time the network 
launches.
    Ms. Tlaib. Thank you, Mr. Marcus.
    I now recognize the gentleman from Wisconsin, Mr. Steil, 
for 5 minutes.
    Mr. Steil. Thank you. Mr. Marcus, I appreciate you being 
here. I have been listening to today's testimony. I appreciate 
you guys innovating, bringing forward a White Paper, having 
this discussion about how to properly regulate what is a new 
idea. I think some of the conversation today has drifted a bit, 
where people are coming after you as if you launched this 
product, and now we are upset that you did that without the 
regulatory framework in place. I commend you for the fact that 
you brought forward a White Paper. You are discussing the idea. 
We are having the conversation today so we can be ready 
tomorrow if you choose to move forward with this.
    In particular, in listening to the discussion today, I 
think it is clear that Libra exhibits characteristics of many 
different things for which we have a regulatory construct. We 
discussed whether Libra should be viewed as a currency, as a 
security, an ETC, a money market fund, et cetera. And whatever 
concrete institution ultimately emerges from this first draft 
of the White Paper, I think you have stated you do not dispute 
the fact that at some level it is going to be regulated and you 
are open to that.
    You also signaled that there are deficiencies in the U.S. 
regulatory approach, and that was part of the decision-making 
process to locate the Libra Association in Switzerland and not 
in the United States or in Silicon Valley and under a more 
clear U.S. jurisdiction. And for me, if America does not lead 
in the digital world, others will. And I am concerned about the 
values that some of these others might bring to the table where 
I feel confident in the values that the United States 
regulatory approach will bring.
    And so can I ask you the question how, not if, because I 
think we have answered that, that it should be regulated, but 
how should we regulate Libra, Calibra, the Libra Association, 
to be thoughtful about this in the context of policymakers?
    Mr. Marcus. Congressman, thank you for the question. There 
is one important point, which is that the clarity of regulation 
was definitely one of the factors for Switzerland, but one out 
of many.
    Mr. Steil. Sure.
    Mr. Marcus. I do think that we would have had the ability 
from a regulatory framework to do that in the United States, 
but it is less clear, to your point, what the framework would 
be.
    That being said, as far as the Calibra Wallet is concerned, 
it is very clear. We are registered as a money services 
business with FinCEN and with Treasury. We have State licenses 
that we are obtaining and continuing to obtain, and so there is 
total clarity there. And I believe that where we need more 
clarity is really around the Libra Association and how the 
reserve is managed. And even for that point, there is just no 
clear regulation right now, even in Switzerland or elsewhere. 
And this is why the engagement that we are having with the G-7 
working group, the Financial Stability Board, and others, the 
conversation that we are having we hope will result in some 
form of oversight, especially over the reserve, because this is 
something that a lot of people have concerns about. I have 
concerns about ensuring that commitment is bound by law when it 
comes to the reserve. And that is the commitment we are making, 
that we will take the time to find--
    Mr. Steil. I appreciate that, and the reason I am digging 
in on the regulatory approach is from a policymaker 
perspective, the area that I can have the most influence on is 
that regulatory framework.
    We have noted a couple of times, I think, in your 
testimony, that you do not look to be regulated as a security 
by the SEC. Can I ask, is there anything specific as it relates 
to securities laws that concerns you if you fell under the 
regulation of the Howey Test in our SEC regulation that we 
should be looking at today to be prepared for tomorrow?
    Mr. Marcus. Congressman, I do not believe we are a security 
because we are not--
    Mr. Steil. Not whether or not you are, but remove that 
because I think that will be debated for days and months to 
come. But is there anything in the securities law that gives 
you pause, that makes you not want to fall under the Howey 
Test?
    Mr. Marcus. Certainly, because as far as Libra is concerned 
it is a payment tool, and we want it to be accessible to 
everyone. This is not going to be an investment, and if it was 
not available to everyone, then it would not be able to deliver 
on its mission.
    Mr. Steil. I think that note is helpful about how our 
securities law limits people's access into some of the 
investment products that we have in the United States, and it 
will have a significant impact into the product that you are 
looking to deliver.
    I want to shift gears slightly. One of the areas in reading 
the White Paper and some of the commentary that is out there, I 
think there may be a real role in countries with unstable 
currencies. And as you look at the global perspective, shifting 
away from the United States for a moment--I appreciate your 
time today. I will follow up with you on the topic, and I yield 
back.
    Ms. Tlaib. The gentleman from Massachusetts, Mr. Lynch, is 
recognized for 5 minutes.
    Mr. Lynch. Thank you. I am not trying to get in the way of 
your job, but I do want to say, and I know the gentleman from 
Wisconsin is new, but I would respectfully remind him that that 
is exactly what Facebook did when they came in without a 
regulatory framework, without even a White Paper. That is how 
they operate. The mantra for Facebook was, ``Move fast and 
break things.'' That was their mantra when they got into 
business.
    Mr. Steil. Will the gentleman yield for a moment?
    Mr. Lynch. No. I have limited time here.
    I would add that they also have taken an approach to 
business that, rather than ask permission, they just apologize 
later, and that is what they have done over and over and over 
again with the personal data of their customers. Their business 
model--and thank you for coming--is to really use an adhesion 
contract, 18 pages, that basically authorizes Facebook to 
vacuum up the behavioral surplus, all of the information about 
their users, and then they sell it or they deploy it on behalf 
of their advertisers. That is the model that you have. And I am 
just worried that you are going to use the same model for 
Calibra.
    What is the terms-of-service agreement going to look like 
here? Is it going to be, you click, ``I agree,'' and then all 
of your rights are gone? Because that is the model you have 
with Facebook, right?
    Mr. Marcus. Congressman, if you will give me the 
opportunity, I do want to talk about--
    Mr. Lynch. Well, really quickly. You have to--
    Mr. Marcus. Thank you.
    Mr. Lynch. We only have so much time here.
    Mr. Marcus. First, I do want to defend the advertising 
business model that Facebook has. It enables people--
    Mr. Lynch. No, no. I am asking about Calibra. I am asking 
about what are you going to do, what is the terms of service 
agreement going to look like? Is this going to be another 
adhesion contract?
    Mr. Marcus. No, Congressman, and we will not share data, 
financial data and account data, even with Facebook itself, 
Congressman.
    Mr. Lynch. Okay. You have not had a good record on that. 
Let me ask you a couple of questions. According to ProPublica, 
you have about 52,000 data points on every one of your regular 
users on Facebook. Is that right?
    Mr. Marcus. I do not have the exact answer to that 
question.
    Mr. Lynch. That is what they have. I think they are right.
    We feel that the ability of this to scale is really where 
the dangers come in. You have 2.7 billion customers. When you 
come in, if this scales--and it is designed to scale, right?-- 
we are worried that, and not just us in Congress but Jay Powell 
over at the Fed, and Treasury Secretary Mnuchin, are concerned 
about the impact it would have on monetary policy and the 
strength of the dollar. Is this something that could be tested 
in a sandbox environment, in a smaller environment where we do 
not have to worry about those scaling problems affecting the 
economy more broadly or the strength of the U.S. dollar?
    Mr. Marcus. Congressman, the first point I would like to 
make is that we will--
    Mr. Lynch. Would you commit to doing this in a sandbox 
environment so that we do not have to worry about the 
regulatory issues and the privacy issues? We would have a 
chance to look at your product, and it is a product. You get a 
token here. That way we would be able to answer some of the 
regulatory questions. Are you willing to commit to that?
    Mr. Marcus. Congressman, I commit that we will take the 
time to address all concerns and to ensure that we do this the 
right--
    Mr. Lynch. In a sandbox environment.
    Mr. Marcus. Congressman, I do not want to get into the 
specifics now about--
    Mr. Lynch. Well, that is what I am asking you for.
    Mr. Marcus. But my commitment to you is that we will take 
the time, we will not move fast on this.
    Mr. Lynch. The commitment that you are going to take your 
time is, first of all, not the way you have operated in the 
past, and it is meaningless. It is meaningless. If I tell you I 
am going to take my time, what is that? What is that?
    Mr. Marcus. Congressman--
    Mr. Lynch. That is just an indication of pace. It does not 
mean you are going to do anything different than we want you to 
do. And I would just be--it looks to me like you are going to, 
right from day one you are going to be a systemically important 
financial institution, and so you should be ready for that 
regulation coming at you on day one, the way you are operating 
right now, the lack of transparency.
    Let me ask you, Facebook has not done privacy very well. 
Would you commit to accepting a fiduciary duty on behalf of the 
private--
    Ms. Tlaib. The gentleman's time has expired.
    Mr. Lynch. Okay. Thank you. I thank the Chair.
    Ms. Tlaib. The gentleman from Minnesota, Mr. Emmer, is 
recognized for 5 minutes.
    Mr. Emmer. Thank you, Madam Chairwoman.
    Mr. Marcus, I have heard some incredibly uninformed 
comments from Members of Congress today and yesterday. As I am 
sure you are aware, Bitcoin is now 10 years old and now 
suddenly, magically, Congress is responding. In other words, 
after more than a decade, Congress has apparently started to 
care.
    I am glad that after all these years, Congress has finally 
decided to pay attention to the technology that could again, 
just like the Internet, upend the way we do everything in our 
lives.
    Unfortunately, some people want to unnecessarily restrict 
it or even ban it. They fear change. Nothing has been more 
clear on this committee than the blind aversion to change that 
some of our Members have constantly espoused, even when it was 
not required, or even the subject of the hearing.
    I am amazed at how easily Representatives from California 
are so willing to suppress the innovation occurring in their 
own State and, as much as they would like to be a separate 
country, the benefits those innovations could have for these 
United States. I do not want to be partisan. This is not a 
partisan technology. In fact, Representative Bill Foster, a co-
Chair of the Blockchain Caucus like myself, has been a long-
time champion and advocate for these innovations. It has never 
been a cornerstone of my grandfather's Democratic Party to 
oppose innovation.
    Chairwoman Waters was, in fact, correct when she began this 
hearing that merely learning more about and understanding Libra 
does not have to include opposing it. I hope that will be the 
same approach to understanding the breadth and depth of 
cryptocurrency which Libra does not represent, but thankfully 
amplifies our discussion of that topic.
    Unfortunately, Mr. Marcus, you and your company have 
decided to approach this undertaking with as equal a level of 
ignorance and misunderstanding as those who wish to quell any 
new developments in cryptocurrency. I am afraid you have failed 
to realize that there is much to do in Washington in terms of 
educating both Members of Congress and regulators on the 
benefits of this technology. I hope someone whose opinion you 
value conveys to you how wrong you have been operating. People 
have concerns with the amount of data you have on them, and now 
you want to be their money, too.
    I hope members of this committee investigate the fact that, 
``The people already have options separate from your central 
control.'' My colleagues are incredibly fearful of the money 
laundering and criminal activity in cryptocurrencies, but the 
dollar in all fiat-backed currencies have been proven to be the 
largest means of illicit behavior and money laundering. This 
does not mean we need to suppress individual freedom. 
Individuals insistent on the exclusion of middlemen and the 
freedom of the individual will continue to create open networks 
separate from central control. Unfortunately, Libra is not 
designed to minimize middlemen. It, in fact, relies on them.
    At the end of the day, Libra presents an incredible 
opportunity to define what it is not. It presents an incredible 
opportunity for everyone on this committee to learn more about 
actual cryptocurrencies. The committee has already sent out a 
press release that this is only our first step in regulation of 
oversight of Libra. A lot has been said about the concern that 
the payment systems are unregulated. However, payment systems 
like the one you propose are already subject to regulation by a 
number of agencies. I think it is important that my colleagues 
have a full understanding of the law as it currently exists so 
that we may make better decisions here.
    Treasury, as demonstrated by Secretary Mnuchin on Monday, 
regulates payment systems for anti-money-laundering compliance. 
The FTC regulates them for fraud. Each State regulates them for 
consumer protection, among other things. New York has its own 
specific regime and so forth. This regulatory landscape applies 
to payment systems like Libra and is different and distinct 
from laws that may or may not apply to typical social media 
platforms.
    When this hearing was announced, I was optimistic that this 
was finally the time a major company wanted to be involved with 
this revolution and that the Majority wanted to actually think 
and learn about these new innovations. It appears, however, 
they have decided to entrench themselves in the fear of the 
unknown and the fear of change. And your company has done 
nothing to allay these fears.
    As you move forward acknowledging that the bill to ban your 
actions has no constitutional basis, let alone a basis in 
logic, and that no one is willing to actually put their name on 
this proposal to ban private innovation, will you work with me 
and invest in educational efforts to show these Members of 
Congress that we should work to better understand the 
innovations underlying cryptocurrency rather than doing their 
best to put their head in the same and ignore change?
    Ms. Tlaib. The gentleman's time has expired.
    The gentleman from Texas, Mr. Green, who is also the Chair 
of our Subcommittee on Oversight and Investigations, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman.
    Mr. Marcus, I am concerned about the dollar. As you know, 
there is a competition for currency supremacy. The dollar is 
the preferred currency in the world. The yen competes, the euro 
competes, and there are others. But the question I have for you 
is this: How will this impact the dollar? This is our currency. 
The dollar is the means by which we have the opportunity to 
influence the economic order in the world. How will this impact 
the dollar?
    Mr. Marcus. Congressman, the first thing that I want to 
state is that we are not competing nor do we want to compete 
with the dollar and--
    Mr. Green. The question is not whether you want to compete 
with the dollar. The question is, what impact will you have on 
the dollar? The dollar is supreme. Do we give up our supremacy 
because of a cryptocurrency?
    Mr. Marcus. No, Congressman, and we're engaged in 
conversations, notably with the Fed and the Financial Stability 
Board, to explore how we can ensure that the dollar and 
monetary policy is not influenced at all by--
    Mr. Green. Here's the concern. Things tend to metamorphose. 
Things rarely remain stagnant. We live in a dynamic world. 
You're starting out with just a small piece of the economy as 
it were. We don't know what this will become. Surely, you can 
understand the consternation of people who are charged with the 
responsibility of overseeing the Fed, which happens to be the 
means by which we have influence with our economy and the 
dollar.
    So we have this consternation and I would greatly 
appreciate it if you could allay some of my consternation with 
reference to the impact that this may have on the dollar.
    Mr. Marcus. Congressman, the reserve will be composed 
mainly of dollars and we expect that a number of--
    Mr. Green. Excuse me. Sorry to be rude, crude, and 
unrefined. Please forgive me, okay, but my time is limited.
    You said, mainly of the dollar. You said earlier when 
testifying in this room to questions posed by another Member 
that another country could also buy into the reserve. I believe 
China may have been mentioned.
    Is it true that China can buy into this reserve?
    Mr. Marcus. No, Congressman. The current contemplated 
reserve is to be approximately 50 percent dollars and a number 
of other currencies, euro, pound, yen, notably, and--
    Mr. Green. Euro, pound, yen, and I've indicated to you 
earlier that we are in competition with the euro. The pound we 
would be under competition with it, as well. The yen, that's 
the Japanese currency, we would compete there.
    So you have these other currencies and you have the dollar, 
but the question becomes, how is this going to be balanced such 
that it doesn't impact the marketplace itself for currency?
    Mr. Marcus. Congressman, I believe that the use case for 
Libra is such that it will be used mainly outside of the United 
States, although it has real solutions to real problems in the 
U.S., as well, and as a result, because of the composition of 
the reserve, we believe that the inflow to dollars will be 
important and as a result retain the relevance, of course, of 
the dollar.
    Mr. Green. Our dollar is a currency that is preeminent 
outside of the United States. So saying to me that this is 
something that will impact things beyond our borders does not 
give me the level of comfort I need when my concern is with the 
dollar, which seems to transcend boundaries.
    Any place in the world that you happen to visit, the dollar 
is available to you. There are countries that prefer the dollar 
to their own currency. I'm still asking for more, and if you'll 
send me something, I'll be more than honored to peruse it, and 
I will yield back the balance of my time.
    Mr. Marcus. Thank you, Congressman.
    Ms. Tlaib. The gentleman from Texas, Mr. Gooden, is 
recognized for 5 minutes.
    Mr. Gooden. Thank you, Madam Chairwoman, and Mr. Marcus, 
thank you for being here today.
    Mark Zuckerberg came in front of Congress in April 2018 and 
Facebook established its Blockchain Division in May of 2018. 
Does that sound accurate?
    Mr. Marcus. Yes, we started this journey in May 2018.
    Mr. Gooden. And you served on the board of directors for 
Coin Base, which is a billion dollar digital currency exchange, 
from about December of 2017 to August of 2018, is that 
accurate?
    Mr. Marcus. That is accurate, Congressman.
    Mr. Gooden. Would it be accurate to say that you're more or 
less an expert on this and you understand how this works, how 
these exchanges, Bitcoin, Blockchain, et cetera, et cetera, 
things that many of us are not experts on, you're pretty 
proficient in?
    Mr. Marcus. I would say that's accurate, Congressman, yes.
    Mr. Gooden. Going down that line, you would also say that 
you know how profitable this can be, right?
    Mr. Marcus. Congressman, yes, I believe that we have a good 
opportunity, if we enable more people to participate, to offer 
services that could generate revenues.
    Mr. Gooden. But this is supposed to be a nonprofit 
operation, isn't it?
    Mr. Marcus. I'm talking about the Calibra Wallet, which 
will directly impact Facebook.
    Mr. Gooden. It's going to be a nonprofit?
    Mr. Marcus. No. Calibra is a for-profit entity and it is 
the entity that will build the wallet that will be offered to 
Facebook consumers.
    Mr. Gooden. Is digital currency illegal in certain parts of 
the world? Can you touch on that?
    Mr. Marcus. Yes, Congressman, there are a limited number of 
countries that prohibit buying and selling or using digital 
currencies.
    Mr. Gooden. I also want to mention privacy violation 
concerns, things that Americans have been concerned with. The 
American consumers, would you say, do they trust Facebook? Do 
they feel comfortable with your company?
    Mr. Marcus. Congressman, I believe we have a lot of work to 
do to earn people's trust and clearly we have definitely to 
make those very strong commitments when it comes to privacy and 
make good on those commitments for very long periods of time.
    Mr. Gooden. I guess one of my concerns I share, I think 
it's bipartisan, we're a little concerned. I don't object to 
innovation and this sounds very exciting potentially, but 
there's a level of distrust with Facebook just because of some 
of the things that have taken place over the last year.
    Would you be able to tell us if the CEO plans to come and 
testify before us as this thing goes down the road?
    Mr. Marcus. Congressman, I can't speak to that, but I'm 
leading this project and I'm here today and I plan to continue 
to engage appropriately.
    Mr. Gooden. Thank you. I yield back.
    Ms. Tlaib. The gentlewoman from California, Ms. Porter, is 
recognized for 5 minutes.
    Ms. Porter. Hello, Mr. Marcus. Thank you for your patience 
during the long testimony today.
    I want to look back at the history as we try to understand 
what might become of our future with Libra. Are you familiar 
with the terms, ``Wildcat Bank'' or the ``Free Banking Era?''
    Mr. Marcus. I am, Congresswoman.
    Ms. Porter. I want to explain to everybody that there's a 
concept that Wildcat Bank was a bank that was chartered under 
State law back before banks were federally regulated from about 
1836 to the mid-1860s and they were called wildcat banks, 
according to one theory because they were in locations so 
remote that you may see wildcats.
    The point is that wildcat banks were ultimately unreliable. 
They became known for distributing worthless currency and 
putting customers at risk and as a result of that, in 1863, we 
enacted in Congress the National Banking Act.
    How is the basic concept of a single currency pegged Stable 
Coin, the Libra, where an issuer will take dollars and give 
digital bank notes and vice versa fundamentally different from 
the bank notes of wildcat banks where banks took U.S.-backed 
dollar coins in exchange for their own paper money which could 
and often did become worthless?
    Mr. Marcus. Congresswoman, I believe that the very 
important distinction here is that the reserve will be a one-
for-one reserve. I understand that the banks and the issues 
that arose from the wildcat banks are actually that they went 
into fractional reserves, and as a result had insufficient 
reserves to back the value of the currencies they were issuing.
    Ms. Porter. Good point, Mr. Marcus. Which regulator will be 
responsible for ensuring that the association maintains that 
one-to-one reserve? Will it be the FDIC?
    Mr. Marcus. Congresswoman, this is a concern we have, as 
well, and we believe that the association will need to have the 
right oversight and meet the satisfactory bar for oversight in 
how it guarantees that it cannot deviate from a full one-to-one 
reserve.
    Ms. Porter. So, it will be self-regulation? Isn't that what 
the wildcat banks were also doing and that's how they then 
drifted into fractional reserve and there was no oversight or 
knowledge of this, which is why customers put their money in 
those wildcat banks because they believed, perhaps wrongly, 
that there was a one-to-one reserve, or that their money was 
safe. Without the FDIC guarantee, isn't this just exposing 
people to the same--aren't you creating yesterday's problem 
tomorrow again?
    Mr. Marcus. We are not, Congresswoman, but I do share your 
concerns, and that's why I believe that having the proper 
oversight, not self-regulation, at the association level, 
notably on the reserve, is important, and I want to go further. 
What I would like is for any consumer at any given point in 
time when they hold the Libra to have full transparency of the 
value of the reserve backing the Libra coin at any given point 
in time.
    Ms. Porter. But structurally, that's always what we believe 
about banks, that if we go to get our money, it will be there, 
but that's precisely why we have banking regulations, so that 
in fact, the consumers' expectation is true.
    I wondered if I could ask you, I know with Libra, it's 
going to be pegged to a basket of currencies, about 50 percent 
dollars, I believe you just heard my colleague say, and 50 
percent like weirdly-sized paper currency from a few different 
other countries. It sounds a lot like what's in my daughter's 
piggy bank, which is kind of a mix of U.S. dollars and money 
she has been given from friends who have come back from other 
countries.
    What's to stop the association from changing the contents 
of the basket to, say, a hundred percent Venezuelan bolivars at 
the stated exchange rate and that would again have the effect 
of making the Libra currency worthless?
    Mr. Marcus. Congresswoman, that is why we believe that we 
need the right oversight for the reserve. The basket--
    Ms. Porter. What is the right oversight?
    Mr. Marcus. Proper regulation, and we--
    Ms. Porter. By whom?
    Mr. Marcus. To be determined by the G-7 Working Group in 
collaboration with--
    Ms. Porter. Let's run through some and see if you like any 
of these. FDIC.
    Mr. Marcus. Congresswoman, we will not engage in banking 
activities. As a result, I don't think that the FDIC--
    Ms. Porter. You're going to take people's U.S. dollars, 
give them something that you're going to call currency, and you 
don't call that banking activity? Do you call it money-changing 
activity, because we do have laws that apply to money-changing?
    Mr. Marcus. Congresswoman, you have my commitment that we 
will have the proper oversight and regulatory oversight of the 
association, notably on the key issue of the reserve, but I--
    Ms. Porter. And respectfully, Mr. Marcus, this is not a 
personal thing at all, but I had the commitment of so many 
bankers in my lifetime that they would do the right thing by 
homeowners they foreclosed on, that I have to have better than 
that.
    I just wanted in my last 5 seconds to suggest that you 
check out 18 U.S. Code 486, which makes it a crime to create 
private money that is metallic coin. I don't see why that 
criminal statute doesn't also inhibit the creation of digital 
coin.
    Thank you.
    Ms. Tlaib. The gentlewoman's time has expired.
    The gentleman from Missouri, Mr. Clay, who is also the 
Chair of our Subcommittee on Housing, Community Development, 
and Insurance, is recognized for 5 minutes.
    Mr. Clay. Thank you, Madam Chairwoman.
    Mr. Marcus, could you discuss where you believe Libra ranks 
on the scale of global innovation? Is it akin to Facebook, e-
mail, or is it merely a new way to move money, similar to 
PayPal or Square?
    Mr. Marcus. Congressman, at this point, it's an idea and a 
concept. I hope it is very successful because if it is, many 
people will benefit from it, and so I hope it's going to be a 
big success for the very people that we hope to serve.
    Mr. Clay. Thank you. Will Libra holders be subject to 
counterparty risk if the reserves are mismanaged?
    Mr. Marcus. Congressman, the reserve will be one-for-one, 
and we need to find the proper oversight so that it remains 
one-for-one.
    Mr. Clay. Under what circumstances could a holder of Libra 
lose their money?
    Mr. Marcus. Congressman, for instance, if they use wallets 
that do not offer consumer protections but in the case of the 
Calibra Wallet, we will offer full consumer protection in such 
a way that if you encounter fraud or have issues, we will make 
you whole.
    Mr. Clay. And so there would be some kind of insurance for 
the customer?
    Mr. Marcus. Correct. It's going to be something that is 
part of our Consumer Protection Program when it comes to the 
Calibra Wallet.
    Mr. Clay. My colleagues have already discussed systemic 
risk, but I'd like to dig a little further. What are your 
thoughts about having a separate regulator who would only 
regulate digital currencies, such as Libra?
    Mr. Marcus. Congressman, it is not for me to say who should 
regulate us, but my commitment is that we will meet all 
regulation and work with and consult with regulators and 
lawmakers to ensure we do this right.
    Mr. Clay. And, of course, the customer would pay a premium 
for the regulation. Is that how you envision that?
    Mr. Marcus. I'm not sure I understand your question, 
Congressman.
    Mr. Clay. Someone would have to stand up and fund the 
regulator. How would that be paid for? Would you have any ideas 
or thoughts on that?
    Mr. Marcus. Congressman, that is not my province.
    Mr. Clay. Okay. Let's go to another subject. What 
guardrails would be in place to prevent a run on the Libra 
currency?
    Mr. Marcus. We have a one-for-one reserve, Congressman. As 
a result, a run on the bank would be impossible, provided the 
reserve remains one-for-one, and we hope to have the right 
oversight to ensure that it remains that way.
    Mr. Clay. Would portfolio managers be incentivized to seek 
higher returns on their investments from Libra association 
members?
    Mr. Marcus. Are you talking about the Libra currency 
itself, because the Libra currency is designed to be stable, 
and as a result, it will not have appreciation. It's designed 
to stay stable.
    Mr. Clay. And the association members are the investors, 
right?
    Mr. Marcus. Correct. Association members invest in the 
ecosystem in order to kick start the Libra network.
    Mr. Clay. And they would make a return on their money how?
    Mr. Marcus. Congressman, my apologies for not understanding 
your question the first time around. The way that investors 
make their money back is by having a portion of the income that 
is generated by the reserve after it has paid all of the costs 
for the Libra association.
    Mr. Clay. I see. Thank you for your responses, and I will 
yield back the balance of my time.
    Ms. Tlaib. Thank you. The committee will now take a 5-
minute recess to set up the second panel.
    I'd like to thank--I'm so sorry. I should have thanked you 
first, Mr. Marcus. I apologize. It's the first time I'm 
chairing this committee. But I'd like to thank you so much for 
coming before this committee.
    Again, we'll take a 5-minute recess to set up for the 
second panel.
    Thank you.
    [recess]
    Mr. Clay [presiding]. The committee will come to order. Our 
second panel consists of: Chris Brummer, professor of law, 
Georgetown University Law Center; Katharina Pistor, Edwin B. 
Parker professor of comparative law, Columbia Law School; the 
Honorable Gary Gensler, who is currently professor of the 
practice, MIT Sloan School of Management; senior advisor to the 
director, MIT Media Lab; and co-director of MIT's 
Fintech@CSAIL; Robert Weissman, president, Public Citizen; and 
Meltem Demirors, chief strategy officer, CoinShares.
    Welcome to all of you. Each of you will have 5 minutes to 
summarize your testimony. And without objection, your written 
statements will be made a part of the record. With one minute 
remaining, a yellow light will appear. At that time, I would 
ask that you wrap up your testimony so that we can be 
respectful of both the witnesses' and the committee members' 
time.
    Mr. Brummer, you are recognized for 5 minutes to present 
your oral testimony.

   STATEMENT OF CHRIS BRUMMER, PROFESSOR OF LAW, GEORGETOWN 
                     UNIVERSITY LAW CENTER

    Mr. Brummer. Thank you so much. Members of the committee, 
thank you for inviting me to testify at this hearing. My name 
is Chris Brummer and I am a law professor at Georgetown 
University Law Center. I am here today solely in my academic 
capacity, and it is an honor to be before this committee again.
    White Papers like the one we are struggling to understand 
today have emerged as the common tool through which digital 
asset companies communicate with potential consumers and 
investors about new projects and ventures. However, White 
Papers have faced a mountain of criticism for their hyperbolic 
language, false promises, and omissions of material information 
that consumers would need before purchasing a digital asset. 
Indeed, the last time I was here to share my views before many 
members of this very committee, we discussed precisely these 
challenges.
    But today, we have a twist. Criticisms of White Paper 
disclosures have focused on early-stage, cash-strapped 
startups. Rarely have they been directed at a multinational 
technology company with the resources to marshal top-flight 
legal as well as technological talent.
    Yet, this time it is different. The Libra White Paper is 
peppered with big promises and few details, and the project 
involves risks to purchasers and, at least potentially, the 
financial system, that are not disclosed. And yet even for me, 
a staunch supporter of innovations and upgrades to our 
financial system, this is, at a minimum, disappointing.
    The White Paper is no mere public brainstorming exercise or 
a technical exposition, but is instead intended to condition 
the market for the adoption of a product that Facebook wishes 
to sell to billions of people around the world, and the lapses 
are all the more problematic given the securities-like features 
of Libra coins and possible implication of U.S. securities 
laws.
    In the limited time available, I want to focus on some of 
the most problematic red flags. First, the Libra White Paper 
fails to inform people, in unambiguous terms, that they can 
lose their money, and that runs on the coin are possible. 
Instead, the White Paper routinely suggests, and doubles down 
on the idea that Libra will virtually always provide stability 
in terms of the purchasing power of the new currency.
    But that is not necessarily the case. The Libra is subject 
to foreign currency risk, something the White Paper does not 
clearly acknowledge, and, indeed, could cost their holders 
money in the form of lost purchasing power, should there be a 
run on any of the underlying currencies in the basket.
    Moreover, runs on the Libra itself could be catalyzed for 
reasons that have nothing to do with the underlying basket, 
including a hack of Calibra, or revelations that sensitive 
consumer data had been shared with Facebook or other Libra 
Association members.
    Second, the White Paper fails to clearly explain that Libra 
holders will be exposed to counter-party risk should the 
reserve investment strategy prove to be mismanaged or poorly 
executed. Although, ``The goal will always be value 
preservation,'' any money raised from interest earnings 
ultimately, after operational and developmental expenses, is 
going to fund dividends to early investors in the Libra 
investment token for their initial contributions. As a result, 
the fund is structured in a way that creates incentives for 
their portfolio manager to accumulate, over time, higher-
yielding investments.
    Finally, the White Paper fails to disclose how its promise 
of a secure, scalable, and reliable blockchain could be 
compromised by whatever is the weakest link in its ecosystem, 
including changes in wallets operating in jurisdictions with 
lax AML and KYC rules.
    And this is, honestly, just the tip of the iceberg, with a 
host of critical questions about the rights, duties, and 
selection criteria for authorized resellers and Libra 
Association members, not to mention how the folks are intending 
to manage potential conflicts of interest.
    In my written testimony, I show how these kinds of 
disclosure issues populate the document and are especially 
problematic since this offering has, again, securities-like 
features, including the fact, among other things, that it 
appears to operate nearly identically to ETFs.
    Critically, these kinds of emissions are more than just a 
matter of technicalities. They indicate varying ways in which 
potential Libra coin purchasers, everyday people, are far from 
fully informed, and are not on a playing field, vis-a-vis 
Libra's sponsors.
    There are 99 problems, and this White Paper is one.
    [The prepared statement of Mr. Brummer can be found on page 
114 of the appendix.]
    Mr. Clay. Thank you, Mr. Brummer.
    Ms. Pistor, you are now recognized for 5 minutes.

  STATEMENT OF KATHARINA PISTOR, EDWIN B. PARKER PROFESSOR OF 
              COMPARATIVE LAW, COLUMBIA LAW SCHOOL

    Ms. Pistor. Thank you very much, Chairman Clay and Ranking 
Member McHenry. Thank you to the other members of the 
committee. Thank you for the opportunity to participate in this 
hearing to examine Facebook's proposed global currency, the 
Libra.
    I am a professor at Columbia Law School, where I have 
taught for the past 18 years, mostly in the field of corporate 
law and finance, comparative law, and law and development. I am 
also the director of the Law School's Center on Global Legal 
Transformation.
    Based on my research and analysis of the Libra White Paper 
and related documents that have been released so far, and a 
close reading of other comments and analysis of Libra, I have 
come to the following conclusions.
    First, Facebook's Libra is designed to become a new global 
currency that will complement existing fiat currencies. It is 
designed as a for-profit currency.
    The Libra White Paper promises to create a seamless, 
global, safe, and inclusive payment system based on modern 
digital technologies. Libra is labeled a stable coin and, as 
such, aims at delivering low volatility and high liquidity to 
its customers, the holders of Libra coins, who shall be able to 
exchange their Libras against local fiat currency on demand 
without suffering major haircuts.
    To this end, Libra is backed by a reserve composed of safe 
assets. The safe assets of choice are bank deposits and the 
liquid debt of reputable sovereigns. These assets owe their 
safety to public backstopping mechanisms in the form of deposit 
insurance and the full faith and credit of the issuing 
sovereign. In effect, the sponsors of Libra and their profit-
earning beneficiaries will be free-riding on a public safety 
net for which they are not paying, and they are extending the 
safety net to users around the globe.
    The main governance architecture of Libra resembles 
currency boards employed by some countries that use currency 
baskets to back their currencies, such as Singapore and Kuwait, 
with the important difference that Libra shall deliver profits 
for its beneficiaries. All interests and dividends will be 
allocated to the members of the Libra Association and/or 
investors in the Libra tokens, which are distinct from Libra 
coins; none to its customers, the holders of the Libra, and I 
would suspect that in the event of an insolvency of the 
reserves, there will be no money transferred to the users of 
the Libra.
    The central node of what will become an ecology of 
financial intermediaries is the Libra Association, based in 
Geneva, Switzerland. It will exercise control over the 
admission of future members, manage the Libra Reserve, 
determine asset eligibility for the Reserves, decide whether to 
amend the protocol on which Libra runs, and determine if, when, 
and how Libra's architecture will evolve from a club-like or 
permissioned system to a permission-less system.
    This concentration of power is unmatched by any meaningful 
accountability to anyone. The choice of the legal structure 
means that the members of the Libra Association will be 
insulated from liability and accountable only to themselves. 
They will not be accountable to holders of the Libra coins, nor 
to the citizens of countries that create the safe assets used 
to backstop the Libra.
    Facebook plays a central role in the creation of Libra, and 
the first 28 prospective members of the association have been 
recruited by Facebook, and given Facebook's control over the 
start-up phase, it is reasonable to assume that most, if not 
all of the other 100 original founding members will be hand-
picked by Facebook, as would be the management team which would 
be put in place after the first 5 members have signed up.
    Existing legal regulatory frameworks, in the United States 
and elsewhere, are highly incomplete and leave ample room for 
legal as well as digital arbitrage. They were not designed to 
govern digital currencies. Regulators are currently using a 
case-by-case approach to extend their reach, which is no match 
for the fast-moving technological change.
    Libra's global reach exacerbates these problems. Many of 
the activities associated with managing Libra and its reserves 
will be beyond the reach of regulators in the United States, or 
any other country, for that matter. The current level of 
transnational regulatory cooperation does not match the 
versatility of a private actor, such as Facebook, to pick and 
choose from legal systems around the globe which laws and 
regulations best suit its needs.
    Thank you very much. I yield back the rest of my time.
    [The prepared statement of Ms. Pistor can be found on page 
171 of the appendix.]
    Ms. Tlaib [presiding]. Thank you, Ms. Pistor.
    Mr. Gensler, you are now recognized for 5 minutes to 
present your oral testimony.

   STATEMENT OF THE HONORABLE GARY GENSLER, PROFESSOR OF THE 
PRACTICE, MIT SLOAN SCHOOL OF MANAGEMENT; SENIOR ADVISOR TO THE 
 DIRECTOR, MIT MEDIA LAB; AND CO-DIRECTOR, MIT'S FINTECH@CSAIL

    Mr. Gensler. Chairwoman Tlaib, Ranking Member McHenry, 
members of the committee, thank you for inviting me here to 
testify. It is so good to be back with you here again.
    I began my finance career in the private sector, with 
Goldman Sachs, for 18 years. Later, as a Treasury official, 
when I first testified in this room, I also was a witness of 
the sudden Asian financial crisis. I was later an advisor on 
the Sarbanes-Oxley Act, with Chairman Oxley right there, and 
after the crisis, I served as CFTC Chair, helping to reform a 
$400 trillion swaps market, and I am now honored to be a 
professor of the practice at MIT, teaching about fintech and 
digital currency.
    These experiences have taught me some lessons I bring to 
consideration of Facebook.
    First, all of the finance has one foundation, and it is 
trust, for hundreds of years. Unfortunately for Facebook, for 
some unexplained reason, they chose to make these bold 
proposals when trust in their company is not in good supply.
    Second, although Facebook's Libra proposal may seem 
unprecedented, if not just for its sheer breadth and scale, we 
have seen this show before. ``Trust us to innovate. Trust us to 
revolutionize finance.''
    Enron: ``Trust us to set up sophisticated, unregulated 
electronic energy trading.'' What did we get? Accounting 
scandals, manipulated electricity markets, and bankruptcy 
filing.
    Long-term capital management: ``Trust us to set up a new 
type of algorithmic hedge fund with $1 trillion of 
derivatives.'' Failure and systemic risk followed.
    LIBOR: ``Trust us to set up the world's most relevant 
interest rate.'' What followed? Manipulated rates on trillions 
of home mortgages and consumer loans.
    These all hurt millions of Americans. They are also 
personal for me, as I lived each one of these in the official 
sector, trying to clean up the mess.
    Third, tech has already made big strides. Think PayPal, 
Square, Stripe, TransferWise, Venmo, Zelle, China's Alipay, and 
WeChat Pay leapfrogged big finance and now dominate Chinese 
payments. There is Amazon Pay, Google Wallet, Amazon Coin, 
Apple Pay, and recently Apple announced, with Goldman Sachs, a 
MasterCard Apple card.
    You see, the truth of the matter is there is a lot of 
innovation going on, and Facebook has tried as well, 3 times, 
with limited success. Facebook Credits closed in 2013. Facebook 
Messenger Payments closed their peer-to-peer in Europe just 
this month. Facebook's What's App Pay Pilot has stalled in 
India.
    Fourth, Facebook's ambitious proposal needs significant 
regulatory guardrails.
    First, the Libra reserve. Where the money is needs to be 
regulated by the SEC for what it is, in essence, a pooled 
investment, multi-currency ETF. And if, for some reason, 
technically the law doesn't cover it, then Congress can step in 
and ensure that it is covered, or regulated as a bank, like 
Congresswoman Porter mentioned.
    Regulating the Libra reserve, like Western Union, under 49 
State money transmission laws, as Facebook suggested here 
today, forgets tough lessons of failed shadow banking. It just 
doesn't make sense.
    There needs to be tight investment restrictions, including 
prohibiting loans--I was glad to hear that today--but guarding 
custody of funds. That is what China and Kenya did when Big 
Tech came in. They said it was very restricted.
    Second, the Libra Association's manager should be 
registered as an investment advisor.
    Third, customers' Libra custody in Calibra needs to be 
tightly regulated for customer protection, ensuring Facebook 
doesn't use, lose, or abuse customers' Libra. I think that is 
part of the economics. They want to use those Libra coins. They 
also need to protect the data by true firewalls, not just by 
protecting customer consent clauses.
    Fourth, the accounting of the payment system: The Libra 
blockchain should adopt payment infrastructure rules consistent 
with Federal Reserve policies. And lastly, Libra will have the 
same challenges as Bitcoin guarding against illicit activity. 
Being registered by FinCEN won't stop the rest of the Libra 
network, the broad global network, from self-custody, and the 
ground truths are there are no easy solutions.
    Trust, so important to finance and innovation, is easy to 
lose, and best to verify, as Members on both the Republican and 
Democratic sides have said, and it is critical to be 
responsively regulated.
    I look forward to your questions.
    [The prepared statement of Mr. Gensler can be found on page 
145 of the appendix.]
    Ms. Tlaib. Thank you, Mr. Gensler.
    Mr. Weissman, you are now recognized for 5 minutes to 
present your oral testimony.

    STATEMENT OF ROBERT WEISSMAN, PRESIDENT, PUBLIC CITIZEN

    Mr. Weissman. Thank you very much, Madam Chairwoman, and I 
thank both you and Mr. McHenry for holding this hearing so 
quickly after the Facebook announcement, and treating this 
issue with the seriousness and thoughtfulness and care that it 
deserves.
    Facebook is not making this proposal because it is 
interested in competing with Western Union. Facebook is making 
this proposal because it wants to be in the middle of as many 
transactions that occur across the planet as possible. If it 
can get all of them, it will take that. That is a serious 
business that this committee absolutely must be paying 
attention to.
    I want to raise three particular concerns with Facebook's 
proposal that I think could be ameliorated with extremely 
aggressive regulation, but not cured.
    But before that, I want to make a point that follows on 
from what Mr. Gensler just said. Facebook, as a company, cannot 
be trusted. I mean that in two senses. First, it is not just 
that people don't like Facebook. Facebook has repeatedly 
violated its own privacy policies. It is not an external thing 
that was exposed on them. They adopted their own policies and 
they violated them, not once, not twice, but over and over and 
over and over and over again. Look at the last consent decree. 
See the listing. Wait until we see this consent decree. See the 
listing. This is a company that cannot be trusted.
    But it is worse than that, and this is the second point. 
Even as Facebook maintains its promises, they are unilateral, 
voluntary, and subject to change at any time. Key features of 
Facebook's Libra proposal are completely up for grabs and 
change over time.
    For example, the one-to-one reserve would make a 
difference, but they could unilaterally alter that commitment. 
The idea that the money will be invested in stable currencies 
would make a difference but a promise that could unilaterally 
be invested. The idea that there would be a firewall between 
Calibra and Facebook--a unilateral promise that could be 
invested, and you would be foolish to think they won't change 
that one, because they change their privacy policy almost every 
year.
    Against that backdrop, there are three particular 
considerations I want to raise. First, the competition policy 
and monopolistic implications of this proposal. As we have 
heard today from Facebook, immediately upon adoption of Calibra 
it will be available to 2.7 billion users around the world. It 
is a certainty that Facebook will dominate the market for Libra 
and perhaps for all digital financial transactions. There may 
or may not be other wallet competitors in Libra, but no one is 
ever going to compete with that. We are going to see Facebook 
immediately extending its dominance in social media to now the 
dominance in the payment transfer business.
    The Libra Association itself has the makings of a cartel. 
There is already talk about giving discounts among the Libra 
members, for sure going to be used to advantage those who are 
on the inside and disadvantage those who are on the outside, 
under the leadership of the dominant member of the cartel, 
Facebook.
    We have a long tradition in the United States of separating 
banking and commerce, under the Bank Holding Company Act. That 
has expressed a lot of wisdom, and protected us from a lot 
worse financial crises, and we need to apply those principles 
going forward.
    Second, there are big concerns about consumer protection. 
Inherent in the Libra proposal is the idea that you are going 
to make no-interest loans as a user to Facebook, the idea that 
you can adopt foreign exchange currency risk. Big problems. But 
within this new Facebook Libra ecosystem, there are massive 
consumer protection problems as you have a global privatized, 
orderless currency. What happens when you get that payday loan 
that they are bragging about? You just didn't realize it was 
from Ukraine, and the choice of law became Ukrainian law.
    Third problem, privacy. Again, as I say, there is no reason 
to believe that there will be a separation between Calibra and 
Facebook, but even if there is, Facebook will understand what 
is going on based on users' use of Facebook. They will gather 
all this data.
    Whether or not they do what they say they are going to do, 
if this process proceeds, we are likely to see the creation of 
a corporate surveillance leviathan with no precedent in world 
history, and only imagined in dystopian science fiction novels.
    That is not just a matter of things being creepy; it is a 
matter of them monetizing, commercializing our lives. It is a 
matter of them worsening, potentially, the algorithmic 
discrimination that is already an increasing problem. It is a 
matter of them then leveraging that data to crush their 
competitors. It is a matter of overall less innovation, not 
more innovation, both in the digital economy and in the rest-
of-the-world economy.
    Finally, as a last point, I just want to say this committee 
is now floating the idea of the Keep Big Tech Out of Finance 
Act. We think that is exactly the right approach going forward. 
This is far too dangerous a proposal to permit to proceed. That 
is one way to shut it down, and I hope this committee does, in 
fact, do that.
    Thank you very much.
    [The prepared statement of Mr. Weissman can be found on 
page 183 of the appendix.]
    Ms. Tlaib. Thank you.
    And Ms. Demirors, you are now recognized for 5 minutes to 
present your oral testimony.

STATEMENT OF MELTEM DEMIROS, CHIEF STRATEGY OFFICER, COINSHARES

    Ms. Demirors. Thank you.
    Good afternoon, Chairwoman Tlaib, Ranking Member McHenry, 
and members of the committee. My name is Meltem Demirors and I 
am chief strategy officer of CoinShares, a digital asset 
management firm that operates across four jurisdictions, 
including the United States and the European Union. As of 
today, we manage $800 million in assets, on behalf of thousands 
of investors.
    I am also here to share my insights as a business owner, an 
investor, and an advocate for and user of cryptocurrency.
    Today, I would like to discuss cryptocurrencies, mainly 
Bitcoin, emphasize why Bitcoin is different from Libra, and 
outline what that means for innovation here in the United 
States. Let's start with Bitcoin. Bitcoin is the best-known, 
most valuable, and most established cryptocurrency. Bitcoin is 
three things: Bitcoin is a technology; Bitcoin is a network; 
and Bitcoin is also a cryptocurrency.
    Now, Bitcoin as a technology is not regulated. Much like 
the internet, the Bitcoin network could be considered a public 
good. However, the companies being built to provide products 
and services on top of the Bitcoin network are subject to 
regulation in their respective jurisdictions.
    Over the last 5 years, I have built 3 investment firms and 
invested in over 150 cryptocurrency-focused companies in over 
30 countries. Fully over half of those companies have been 
incorporated in, and opened from, the United States of America. 
The United States enjoys a robust, well-developed capital 
market and boasts a long track record as a place where 
innovators can build businesses. These 150 companies now employ 
nearly 5,000 people, in cities like San Francisco, Charlotte, 
New York, Boulder, Austin, and Atlanta, but also London, 
Singapore, Zurich, and Berlin, just to name some.
    Cryptocurrency has reached a point of inevitability. It is 
inevitable that the Bitcoin ecosystem will continue to grow and 
contribute to the digital economy. The question is where.
    The traditional approach of drawing a regulatory perimeter, 
which has been used in the past to saddle jurisdiction, is 
challenging to apply in this digital world that is not 
constrained by the physical borders of the past. We are seeing 
a wave of interest in cryptocurrencies and countless imitators, 
which borrow some features of, but are decidedly not 
cryptocurrency.
    Libra is not a cryptocurrency. I am not here to pass 
judgment on Facebook or its efforts, and I commend their 
altruistic aspirations, but they are just that: aspirations.
    First, Bitcoin is decentralized, which means no entity or 
group has the power to block or censor the use of the network. 
Libra is centralized. A small group of companies will have the 
ability to block and censor transactions.
    Second, Bitcoin is its own asset, backed by its own 
scarcity and the demand for it. There is no entity that holds 
assets that gives Bitcoin value. Libra, in contrast, is backed 
by a pool of assets that are domiciled abroad. Asset management 
is a regulated activity.
    Lastly, Bitcoin is permission-less, meaning anyone in any 
part of the world has the ability to enter and exit the network 
without requiring permission. Libra is permissioned. The Libra 
network is controlled by a private group which will determine 
who has permission to access this network.
    The Bitcoin network supports thousands of companies all 
around the world. Libra benefits one entity, Facebook. Facebook 
is not a public entity. It is a privately owned, for-profit 
company.
    Libra may represent an exciting opportunity for Bitcoin but 
it cannot and should not be compared to Bitcoin. Like the 
internet, it is critical that Bitcoin remains open for 
permission-less innovation. Companies here in the United States 
serve tens of millions of customers, service billions of 
dollars of regulated legal commercial activity, and employ 
thousands of people who are building on Bitcoin and 
cryptocurrency networks.
    While the Bitcoin community is global, we should endeavor 
to keep companies here, in the United States, regulated under 
our laws, where benefits accrue to the American people and the 
economy, not to foreign jurisdictions.
    The decisions you weigh now will determine the future of 
these open, permission-less technology networks and capital 
formation. That future is not 5 or 10 years away. It is here 
and it is now. I urge you to view Bitcoin as open public 
networks that enable innovation and growth, and to treat Libra 
and its future imitators--and there will be many--in the 
context of the facts. Private efforts led by corporations 
holding billions of dollars of the public's money. These things 
are not Bitcoin and are not cryptocurrencies.
    I thank you for your time, and I look forward to your 
questions.
    [The prepared statement of Ms. Demirors can be found on 
page 131 of the appendix.]
    Ms. Tlaib. Thank you. I now recognize the gentleman from 
Missouri, Mr. Clay, who is also the Chair of our Subcommittee 
on Housing, Community Development, and Insurance, for 5 
minutes.
    Mr. Clay. Thank you, Madam Chairwoman, and let me thank the 
panel for your testimony today. Let me start with Mr. Weissman.
    Currently, many people believe that cryptocurrency can 
coexist within our current monetary system, given that 
cryptocurrencies only constitute a very small fraction of the 
economy's financial assets. However, if an entity like 
Facebook, with 2.5 billion users, decides to go ahead and bring 
Libra to market, this can change rather quickly. How can this 
pose a threat to the U.S. central banking system if the 
majority of Facebook users in the U.S., in a few years, use 
Libra as a viable currency?
    Mr. Weissman. I think there are a whole series of potential 
risks, Mr. Clay. One has to do with the systemic risk created 
by Libra itself. The possibility that there is a run on the 
Libra, if it gets up to scale, will require massive 
intervention by the public, on a scale that would probably 
dwarf TARP, or the alternative is to let the whole thing go 
under, which seems almost impossible to imagine.
    A second problem is that Libra itself may encourage runs on 
foreign currencies--maybe not the dollar at first, maybe 
eventually the dollar. If you lose confidence in a national 
currency, the ability to move into this allegedly stable 
alternative currency can create a quite self-perpetuating cycle 
that creates, itself, another kind of financial crisis.
    I think that the scale of this proposal is such that you 
have to run these scenarios that are very hard to get your head 
around and take them seriously. You are right to ask the 
question.
    Mr. Clay. Thank you for that.
    Professor Brummer or Mr. Weissman, regarding sanctions, can 
you please explain how the Libra Association and the companies 
that grow out of the Libra construct can ensure that 
international and U.S. sanctions regimes will be followed?
    Mr. Brummer?
    Mr. Brummer. Thank you, Mr. Clay, for that question.
    I think one of the challenges that pertain to the Libra 
ecosystem--and it is not just a problem with sanctions but it 
is a problem with anti-money-laundering and really the way in 
which it is being set up--is that ultimately the weakest link 
in the network can become a gateway for all kinds of 
wrongdoers.
    Now the promise that Facebook is making right now is to say 
that our infrastructure that we are developing, like Calibra, 
will be subject to all relevant U.S. rules. The challenge is 
that it is creating a platform that will allow others to 
develop infrastructure outside of the United States, and, 
indeed, outside of internationally well-supervised regimes, and 
they are making the promise that they will develop certain 
kinds of codes of conducts and standards for onboarding those 
applications into the ecosystem, but they fail to explain--
    Mr. Clay. Yes, how would they prevent sanctioned persons 
from getting on that platform and exchanging?
    Mr. Brummer. If there is the kind of anonymity that they 
are claiming, and they explicitly state in the White Paper that 
their blockchain will allow clients to hold one or more 
addresses that are not linked to their real-world identity, 
which, by the way, seems to--while the Bank Secrecy Act travel 
rule, which requires institutions to pass on certain customer 
information, including the name and address of the 
transmitter--it seems to certainly enable, in the absence of 
further elaboration from Mr. Marcus, exactly how they plan to 
prevent threats to U.S. national security.
    Mr. Clay. Let me ask anyone else on the panel, in the 
remaining time, what does the Libra Association need to do to 
vet those who wish to join it or build on this blockchain? 
Anybody?
    Mr. Gensler. If I could just say, there is not currently a 
way that you could actually foreclose somebody on the sanctions 
list from getting this coin and transacting. The on-ramps and 
off-ramps, the only way you could do that is if you literally 
put in the computer code, what they call Libra Core, put in 
there the prohibitions and so forth, and they are not going to 
plan to do that.
    To your second question, I think the Libra Association, 
because it could control, for particularly developing 
countries, the monetary policy, it needs to have wide-open 
governance, and right now it is just large corporations and a 
handful of nonprofits.
    Ms. Tlaib. Thank you.
    Mr. Clay. Thank you.
    Ms. Tlaib. I now recognize the gentleman from North 
Carolina, the ranking member, Mr. McHenry.
    Mr. McHenry. Ms. Demirors, my question for you is about the 
outline you have given in your testimony. You make the 
distinction between Libra and cryptocurrencies, so let's talk 
about cryptocurrencies. When you have the President of the 
United States, the Secretary of the Treasury, and the Chair of 
the Federal Reserve, in the same week talk about 
cryptocurrencies a decade after Satoshi wrote the White Paper, 
it is probably a decent thing to draw attention to the 
industry, right?
    How long have you been in the wider crypto or digital 
currency space?
    Ms. Demirors. I have been working in the digital currency 
space professionally for the last 5 years, and individually, as 
a member of this open source global community, for the last 7 
years.
    Mr. McHenry. Okay. Let's talk about the opportunities of 
cryptocurrency. Innovation is happening, and it is happening 
across the globe.
    Ms. Demirors. Absolutely.
    Mr. McHenry. You mentioned, though, that there are 
challenges working in the United States. What are those 
challenges right now?
    Ms. Demirors. The primary challenge is the lack of 
jurisdictional and regulatory clarity. I do commend many of the 
regulators here in the United States that companies interact 
with. I personally have interacted with the CFTC, the SEC, the 
IRS, OFAC, FinCEN, law enforcement, State banking regulators, 
and a host of other policy-making bodies and enforcement 
agencies.
    But even in the characterization of cryptocurrency, there 
seems to be key differences. The SEC has long deliberated 
whether cryptocurrencies are securities or not, and has reached 
the conclusion that Bitcoin is not a security.
    The CFTC treats Bitcoin, and some of the products around 
Bitcoin, as a digital commodity, if you will. In contrast, the 
IRS treats Bitcoin and digital currencies as property. This 
inconsistent treatment makes it very challenging for companies 
to determine how to operate within the existing regulatory 
frameworks here in the United States. It costs a tremendous 
amount of capital for these early-stage companies to hire 
lawyers, to find experts, and to come here to D.C., to speak 
with their representatives on these important topics.
    This is of big concern to me, as an investor.
    Mr. McHenry. What is the key takeaway, as a policymaker? 
How do we ensure that innovation is going to happen here in the 
United States, as opposed to some foreign regime?
    Ms. Demirors. We need clear guidance, much as Switzerland's 
FINMA laid out in 2018. They established a very clear set of 
policies and a regulatory framework that has been applied 
consistently.
    Mr. McHenry. Okay, permission-less versus permissioned 
networks, let's talk about the distinction between 
decentralization, permission-less, versus what is Libra.
    Ms. Demirors. Sure. The whole idea that makes the coin so 
compelling and so exciting is this idea that started with the 
internet, of open source software development, where you had 
code that anyone could use to build anything they wanted, but 
that a group of people chose to run, which established the 
foundations of the internet.
    Similarly, the Bitcoin network, which is operated by 
individuals and entities that run computers with the Bitcoin 
code around the world, is open and accessible to anyone. Anyone 
can make proposals to change the code, anyone can audit the 
code, but most importantly, anyone can build a business on top 
of the Bitcoin network and use this network to drive 
innovation, whether that is in enabling new types of value 
transfer or whether that's in enabling all sorts of other 
services we can't yet imagine.
    Mr. McHenry. Why is that important? Why is that an 
important distinction and architecture--decentralization, 
permission-less.
    Ms. Demirors. Absolutely. As the other experts on this 
panel have discussed in their testimony, there is a tremendous 
anti-competitive component to what Facebook is proposing to do. 
This is a private group of 100 corporations who have ties to 
Facebook and its executives in various ways, who will be 
responsible for determining what the code supporting the Libra 
network is, who gets to run nodes and participate in the 
network, and what transactions and applications and products 
and services are allowed and disallowed.
    This is in sharp contrast to what Bitcoin and other openly 
distributed cryptocurrencies are. They are open for anyone to 
build on. Libra is a private, for-profit enterprise that 
benefits large corporations and for-profit entities who already 
have a tremendous amount of power.
    Mr. McHenry. Okay. So what is your take on Libra, the 
currency, as another competitive force in digital payments?
    Ms. Demirors. My position is this: Facebook should be 
allowed to innovate, just as anyone else in this country is 
allowed to innovate, but it should not be allowed to pursue 
this path under the guise of being an open cryptocurrency like 
Bitcoin. That analogy is very dangerous and it is factually 
incorrect. It represents something entirely different. It has 
been categorized as an ETF. I would say it is a mutual fund 
that represents two classes of interest. It is a for-profit, 
anti-competitive effort that makes it much harder for small 
startups and innovators to build businesses serving that same 
audience and enabling digital value transfer.
    Mr. McHenry. While, at the same time a distributed ledger 
and cryptocurrency and digital assets are a wave of the future.
    Ms. Demirors. Absolutely.
    Mr. McHenry. I yield back.
    Ms. Tlaib. Thank you. The gentlewoman from New York, Ms. 
Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman. Earlier today, 
I told Mr. Marcus that this is not Silicon Valley and that all 
problems with the Libra and the association need to be worked 
out before the launch date. He wasn't clear on whether or not 
Libra was willing to delay its launch date.
    By a show of hands, do you agree Libra should delay its 
launch date until all legal and regulatory concerns have been 
addressed and approvals have been granted?
    [show of hands]
    Ms. Velazquez. Okay.
    Professor Pistor and Professor Gensler, many of us 
questioned Mr. Marcus this morning on the Libra Association's 
decision to place its headquarters in Switzerland. Why do you 
think the Libra Association chose Switzerland for its 
headquarters? What advantages could the Swiss regulatory system 
offer Libra that the U.S. system does not, and what problems 
does this present?
    Ms. Pistor. I do not want to deny the fact that Switzerland 
has the signaling effect of being the home for many 
international institutions, but that is also interesting 
because international organizations are actually public, non-
profit organizations, so I think there is a signal effect.
    In terms of the regulatory benefits, I think the set-up of 
the association itself is an interesting benefit, because you 
can set up an association that is supposed to be a nonprofit 
organization and yet use it to plow back these profits to its 
members. I also think that Switzerland is trying to position 
itself right now as a major jurisdictional hub for 
cryptocurrencies and has issued a number of papers where they 
are trying to do so.
    They have the benefit of trying to be less fragmented than 
the United States system, but I think they also have a long 
history of having laxer financial regulations.
    Ms. Velazquez. Thank you. Mr. Gensler?
    Mr. Gensler. I think that Switzerland offered them all the 
things that Professor Pistor just said, but I also think that 
they think that under Swiss law, it is probably a little less 
likely that it is a security than under U.S. law, so there is 
some of what we used to call regulatory arbitrage that is going 
on as well, and the tax law arbitrage that Professor Pistor 
mentioned, that you could have a nonprofit and yet still pay 
dividends, which is kind of foreign to the way we think here.
    I think it is also a signaling effect to all of their users 
that they are less controlled by the U.S., and when this Libra 
reserve gets big at some point in time, if any developed 
country is going to use the Libra instead of the U.S. dollar, 
and ``Libra-ize'' instead of ``dollar-ize'', I think it 
signals, in the future, hey, we are not under the control of 
whatever future U.S. President and sanctions regime of the 
future.
    Ms. Velazquez. Thank you. Professors Brummer and Pistor, 
earlier today I asked Mr. Marcus if the Libra Association would 
be willing to submit to enhanced oversight by the Federal 
Reserve if it was designated a SIFI by the FSOC. He initially 
responded by saying the Libra Association has no plans to 
engage in banking activities. However, as you both know, in 
Dodd-Frank we gave the FSOC specific authority to designate 
non-banks as a SIFI in order to increase their oversight so 
they do not threaten the financial system.
    In each of your opinions, what type of systemic issues 
could Libra and the association pose, and should the FSOC 
investigate these issues?
    Mr. Brummer. Thank you for that question. It is very 
important. First, to the extent that there is a run on any of 
the currencies in the basket, there could be an incentive to 
ultimately liquidate their Libra holdings, so that destabilizes 
the coin.
    Second, as I mentioned, if there is some kind of 
operational failure, people can decide, hey, someone can hack 
into this wallet so why should I keep it, in which case, again, 
you decide to liquidate the Libra holdings.
    If you scale up--and I wanted to add that that is entirely 
possible, in part because it is Facebook, but it is not just 
Facebook. What would happen if Uber and Lyft required the use 
of Libra for their services or offered some of their consumers 
the benefit? Then, you imagine it becoming quickly systemically 
important, and, as a result, that is a huge thing.
    And the last thing is banks. People are saying to regulate 
Facebook like a bank, perhaps. One of the questions that I 
think is worthwhile considering is would Facebook even be 
eligible for a banking license? A de novo review would require 
an investigation, of, say, Facebook's earlier violations.
    Ms. Velazquez. Ms. Pistor, do you have a comment?
    Ms. Pistor. Just briefly. I think because the United States 
is essentially with its own sovereign debt and with its bank 
deposits that might be used backstopping the currency probably 
will be the country that will have to backstop any 
uncertainties or run on the Libra, even if it emanates from 
elsewhere in the world.
    Ms. Velazquez. Thank you. I yield back.
    Ms. Tlaib. The gentleman from Arkansas, Mr. Hill, is 
recognized for 5 minutes.
    Mr. Hill. Thank you, Madam Chairwoman. Thanks for this 
panel. I hope you found the day as interesting as we have.
    Mr. Weissman, thanks for your watchdog work on behalf of 
Americans.
    One thing, listening almost to all the questions on and off 
today, there is a burden hanging over the room which is that it 
is Facebook in here testifying. So a question to you, if this 
were General Electric and they were proposing this innovation, 
you would still have your same questions, and we would still be 
monitoring trust-but-verify, Ronald Reagan style. But would you 
be downshifted a level of alert if it were--and again, we could 
say JPMorgan Chase or GE, just a personal view on that 
question.
    Mr. Weissman. Since you know the organizations, I don't 
want to say anything nice about those companies. But that is 
absolutely correct, and for a couple of reasons.
    Mr. Hill. And you would say with logical reasons, and the 
Majority has screened many reasons, and many Americans are 
frustrated with--
    Mr. Weissman. Two key reasons. One is the history of 
privacy violations, obviously implicated by this. Two, the 
anti-competitive effects. No other company can do what Facebook 
can do, and suddenly, magically make appear this new product, 
inside your phone, inside your life, inside our mind, for 2 
billion people.
    Mr. Hill. Yes. Good. Thank you for that.
    And on this issue on the business of banking, 
traditionally, yes, we have separated commerce from banking and 
we have a long legislative history on that, but the business of 
banking in those laws--whether you talk about the Bank Holding 
Company Act or any other--is taking deposits and making loans. 
And if you are not in both you are not, as a general statement, 
legally in the business of banking.
    Ms. Pistor, when you think about what you have seen, or Mr. 
Gensler, would you say that that remains to be seen and that is 
why we are having this hearing, just to find out, well, what is 
the business mission here? What are the businesses? You 
suggested that they be regulated like a bank, but they have not 
yet said they are a bank.
    Mr. Gensler. I spent 18 years at Goldman Sachs and my whole 
life has been about finance and money.
    Mr. Hill. Right.
    Mr. Gensler. I think when you take somebody's money and 
then you invest it--in this case they want to invest it very 
tightly and narrowly--it has a banking function. And we have 
this term, ``shadow banking,'' for banking functions that are 
not regulated like banks. I think it just would be malpractice 
to leave it to the 49-State money transmission.
    Mr. Hill. No, that is a good point. Thank you.
    Mr. Gensler. That is what I think.
    Mr. Hill. And I think that is what this hearing is about, 
is trying to decide what is the best oversight, and I think Mr. 
Marcus was fairly open to say, yes, we are interested in what 
the right oversight is too, and you have your views and we have 
ours. So, thank you for that.
    Ms. Demirors, I was very intrigued, and I thank you for 
your conversation about all the business you have. One that 
concerns me--I think a lot of international people fly on 
Boeing aircraft. I think a lot of them own Apple phones. I 
think a lot of them attend the World Bank meetings in 
Washington, D.C. A lot of people are satisfied that the United 
Nations is headquartered in New York.
    I am shocked that we have to go to a neutral country in 
order to have global acceptance of a product. You seem to take 
the other side, that you are happy to have these businesses in 
America. Can't the U.S. be a reasonably good location for the 
association to be headquartered? Why would we not put it here 
in the United States?
    Ms. Demirors. Absolutely. I think there are two fundamental 
issues here. First, in the U.S., there are a number of 
different agencies--the regulators, policymakers--that have 
oversight of the various functions that the Libra Association 
would like to perform.
    Switzerland, on the other hand, where the association is 
headquartered, has a different track record. It is in a place 
that has been very open to cryptocurrency projects and other 
similar innovators, and it has a clear regulatory framework 
that is more permissive.
    In my view, part of the effort to location the association 
in Switzerland is to provide that clear, simpler regulatory 
framework to the Libra Association and its members. So, I think 
it should be here.
    Mr. Hill. Yes, thank you, and I appreciate you having your 
businesses in the United States. And that is not a jingoistic 
point of view, from my point of view. You raised it in your 
testimony.
    My view would be that Mr. Weissman would be happy, and you 
might be happy, if they were domiciled here, and if that 
compelled the U.S. to have that better operating environment, 
regulatorily and legally, for this kind of activity, which I 
don't think we are putting the genie back in the bottle and 
therefore the use of blockchain, the use of tokenization is 
going to be around the world as we watch it. And so I would 
like to see that innovation here under the right regulatory 
framework. Thank you all for being here, and I yield back my 
time.
    Ms. Tlaib. The gentleman from New York, Mr. Meeks, who is 
also the Chair of our Subcommittee on Consumer Protection and 
Financial Institutions, is recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman. I like that--Madam 
Chairwoman.
    Thank you all for your testimony today, and Mr. Gensler, of 
course, it is good to see you here today. You were with us in 
the depths of the financial crisis, and I suspect that you may 
agree with my earlier statement, in fact, in listening to your 
opening statement, that no large company sets out to willingly 
break the financial system. But through a combination of moral 
hazards and failure to incorporate negative externalities and 
regulatory loopholes, have allowed major systemic crises over 
the past decades.
    So what I want to do is probably ask all of you some 
questions that I asked Mr. Marcus this morning, but before I do 
that, I want to point out an intellectual sleight-of-hand, if 
you will, that Mr. Marcus did in answering my questions, and 
those of many of my colleagues, many Members of Congress.
    He states that they seek to build a system for money 
transfer. The comparison is consistently made to PayPal or 
Venmo or Western Union, but to the best of my knowledge, users 
don't hold wallets on those platforms, don't store money until 
it is used in a Western Union account. Rather, customer 
accounts, which are held at banks, are deducted when a payment 
is made.
    Let me then ask a question, because I am worried about 
systemic risks, and I asked Mr. Marcus this morning, that if 
Facebook managed just 10 percent of its current user base to 
the Facebook Libra wallet, would you agree that they would be a 
systemically risky financial institution, and should they be 
designated as such by FSOC, and do the regulators even have the 
capacity to develop dedicated and enhanced oversight regimes 
for Facebook in such event?
    I will start with Mr. Brummer, and then Mr. Gensler.
    Mr. Brummer. That is an excellent question, and certainly 
if Facebook was managing those kinds of assets, given its 
customer base, I think it would be certainly be systemically 
important.
    And the question about the expertise at the Federal 
Government level is precisely the fact that you have to think 
about coordinating, under FSOC, an appropriate response, not 
just in terms of the banking and financial stability level but 
also with all of those consumers and all of the frailties that 
we have been discussing all day long--how exactly do you 
protect everyday Americans from those particular risks? And I 
think that you would have to be elevated to a matter of 
prudential, systemic, and also just customer and investor 
protection.
    Mr. Gensler. I will give a bit of a technical answer, but 
quickly, having helped you all work through that Dodd-Frank 
bill. Title VIII of Dodd-Frank had two systemic provisions. One 
is as companies, and one is as payment infrastructures or 
clearinghouses. There was actually a third one, activities.
    It depends on the size that this would get to, and even if 
it was 10 percent of their user base, if they only had small 
balances, I think Congress, rightly, made sure that the FSOC 
couldn't just designate anybody as systemic. If the balances 
were really small, it might be a little challenging for FSOC to 
designate them as systemic. If the balances were large, I think 
yes.
    I think on the payment infrastructure side, is it a 
systemically important clearing and payment and settlement 
system? If it was 10 percent and it was embedded in the world 
that way, I think it is quite likely that the FSOC would be 
able to do it. But it would depend on the facts and 
circumstances.
    Mr. Meeks. Let me ask this question, because I don't know, 
given that when we were asking the questions, we were talking 
about if it was a security or a commodity. That is a question, 
and then who would be the regulator? What would be the 
appropriate regulatory authority?
    Would you say that they should be listed so that all of the 
regulators, at some point, would be regulating them, or should 
Congress look at creating a new regulatory authority that just 
looked and specialized over cryptocurrency and Bitcoin, et 
cetera? Ms. Pistor or Mr. Gensler?
    Mr. Gensler. I will just say I don't think we need another 
regulation in Washington. I will just say that.
    Mr. Meeks. I agree.
    Mr. Gensler. But I think that if it impinges on investor 
protection, which this feels like--you know, a great Indiana 
poet, James Whitcomb Riley, said, ``When I see a bird that 
walks like a duck and swims like a duck and quacks like a duck, 
I call that bird a duck.'' I mean, this thing looks like an 
exchange trade and I am just using common sense here. If 
Congress needs to fill a gap to make sure it is--
    Ms. Tlaib. Thank you.
    Mr. Gensler. --under the securities laws, I would do that.
    Ms. Tlaib. The gentleman from Ohio, Mr. Davidson, is 
recognized for 5 minutes.
    Mr. Davidson. Thank you, Madam Chairwoman. Thank you to our 
witnesses and to my colleagues who are here on this really 
important topic.
    Mr. Gensler, you mentioned regulatory arbitrage, and 
certainly in this space we have seen a fair bit of it. The SEC 
has cracked down on some of the big fraudsters that essentially 
were just launching securities in violation of U.S. securities 
law.
    However, that regulatory framework, as Ms. Demirors has 
pointed out, has driven a lot of companies to find certainty in 
places like Switzerland or Singapore. Would a bright-line test 
that says if it meets this test right here, we know that it is 
a security, and if it falls on the other side of that, we know 
that it is not, provide the certainty the market needs?
    Mr. Gensler. I think that it could but it could also 
provide certainty for ways for good lawyers to cleverly work 
around it. I think whether it is the Supreme Court Howey test, 
or just in the last few weeks the SEC put out a lot of guidance 
in this area.
    It has been slower than I think we want. I will agree with 
that. But I think they are slowly, under Chairman Clayton, 
trying to give some certainty to this area.
    Mr. Davidson. Right. Bill Hinman has provided a lot of 
that, and, unfortunately, that is not really--I appreciate 
their efforts but, frankly, it is Congress' job to provide that 
certainty. And if we just want to live with a court decision, 
Howey, and apply the Orange Grove test to things--you know, if 
you are swinging an orange grove hammer, a lot of things look 
like an orange grove.
    Talking about one other principle that you talk about, we 
have provided that in a group of bipartisan folks, in the Token 
Taxonomy Act, and it lays out a four-part test that if it meets 
this, then you can know. You don't have to go on a case-by-case 
basis, and pre-clear your idea with the SEC, and maybe you talk 
to the right person and maybe you don't, and maybe you can 
spend as much on lawyers as Facebook did. Maybe you have 2 
years before you need to launch, but maybe you don't.
    And a lot of companies have just sat down and talked to me 
and said, ``Look, no offense, but we don't trust you guys. We 
are going to launch this in Switzerland or Singapore.''
    So, we are trying to provide that certainty for the market.
    I want to ask one question specific to Libra. Their 
association would be governed by a board. Their association has 
central control in its proposal, and those seats I think would 
be considered assets, right? They would be presumably fungible. 
They could be sold. They say they are going to be governed in a 
different way. The underlying proposal is not just a bundle of 
currencies but short-term securities. Under securities law 
right now, I think as you point out, you don't have to do 
arbitrage. You just have to apply existing law. That would be 
treated as a security, correct?
    Mr. Gensler. The members of the board would get something 
called a Libra Investment Token, and that is unambiguously a 
security, and I think even Facebook has agreed to that.
    Mr. Davidson. Okay. Thank you.
    Ms. Demirors, you have highlighted a lot of background 
information about Bitcoin and about the immutable distributed 
ledger and the benefits of that, decentralization versus 
centralization. A lot of people in this space will use a phrase 
that you may be familiar with: ``There is Bitcoin and then 
there is shitcoin.'' Are you familiar with that phrase and what 
people might mean by that?
    Ms. Demirors. I am.
    Mr. Davidson. Could you elaborate on how people would 
differentiate the two?
    Ms. Demirors. Absolutely. I think the idea here is Bitcoin 
has had a long track record. The network has been operating for 
10 years. The Bitcoin network has been tested. The 
decentralized nature of the Bitcoin protocol has been tested. 
People have tried to co-opt control of Bitcoin source code and 
push it in certain directions that benefit their business 
models, and this network, and this protocol, and its open-
source governance have withstood that test.
    It is robust, it has been tested, and it has had the 
benefit, frankly, of spending its first 5 years, in its 
nascency, sort of operating in this environment of innovation 
and not having a lot of regulatory attention.
    Mr. Davidson. Is there a central authority that could 
dilute the value of Bitcoin?
    Ms. Demirors. No.
    Mr. Davidson. Is there a central authority that could 
filter transactions at Bitcoin?
    Ms. Demirors. No. That can only be done through the 
products and services that people utilize to access the 
network.
    Mr. Davidson. Like Coinbase, for example?
    Ms. Demirors. Absolutely. That is a U.S. company that is 
regulated based on the facts of what its business model is.
    Mr. Davidson. Right. And just like in the U.S., the Federal 
Reserve or the Treasury doesn't change the dollar. The people 
at the edges, the banks, generally do that. But with Bitcoin 
you can still engage in peer-to-peer transactions, like cash, 
correct?
    Ms. Demirors. Absolutely.
    Mr. Davidson. And because of open source code, you could 
have a wallet, correct?
    Ms. Demirors. Absolutely.
    Mr. Davidson. All of these features are different than many 
of the things that people call, colloquially, ``shitcoin,'' 
because the value can be distorted by a central authority. So, 
people do really have their assets at risk.
    We absolutely need the certainty that legislation can 
provide in this space. I hope we have a hearing specific to the 
Token Taxonomy Act soon. I appreciate my colleagues and the 
time, and I yield back.
    Ms. Tlaib. The gentleman from Georgia, Mr. Scott, is 
recognized for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman.
    First, let me say what an excellent panel we have, very 
knowledgeable. Thank you.
    Mr. Gensler, it is great having you here, my good friend. 
We did a lot of yeoman's work with CFTC when you were Chairman, 
and me as Chairman of our committee on cross-border and on 
derivatives, swaps, the whole nine yards. It's good to see you 
again.
    Let me tell you what I think is the Achilles heel in Libra 
right now. This morning, if you recall my testimony, I kept 
asking Mr. Marcus, and several of us on the committee kept 
referring to the White Paper and so I looked at this White 
Paper and I think we found an Achilles heel here, several, but 
here's one that we may have omitted.
    In that White Paper, it states that globally, 1.7 billion 
adults remain outside of the financial system with no access to 
traditional banks, and I questioned him on that and he assured 
me that in order to obtain what he called a Calibra Wallet, 
there must be strong Know- Your-Customer requirements in place, 
including a government-issued ID, and this is particularly 
acute when you're dealing with online activity. When you're 
dealing online, one of the big reasons why many consumers are 
unable to access the financial services is due explicitly to a 
lack of identifiable proof of identification.
    I want to ask you all, how do you see Libra expanding 
access to financial services to the unbanked and underbanked, 
1.7 billion adults across the world, particularly on an online 
platform, when you can't simply hand over an ID card like you 
can to the bank teller, and while at the same time navigating 
the need to verify customers' identification who may not have a 
government-issued ID and are unable to get one? How do we mesh 
this with online?
    I think that is an Achilles heel there. We're moving fast 
in technology but I don't think, if I take this, I can't give 
an ID card.
    Go ahead, Mr. Gensler?
    Mr. Gensler. Three quick points. Sub-Saharan Africa, half 
is unbanked but half of the unbanked have mobile phones. That's 
the good news.
    The sad news is you're absolutely right about government 
IDs. I think the Calibra Wallet they're promoting will be 
inside of these anti-money-laundering laws, but there are also 
going to be a lot of other wallet providers, and so my other 
two points is those other wallet providers will be in the lax 
jurisdictions that might not take the necessary precautions to 
get the government IDs.
    The third point is it's absolutely true that this will have 
a lot of leakage, that there will be lots of Libra tokens, just 
like there are lots of Bitcoin tokens that are floating around 
outside of the Bank Secrecy Act and that's just going to 
happen.
    Mr. Meeks. Mr. Weissman?
    Mr. Weissman. Yes. I think you're exactly on point. I think 
it's an unsolvable conundrum.
    If you look at what they've said, in addition to exactly 
what Mr. Gensler is saying, they want it to be that you can 
walk up to a convenience store anywhere in the world, hand them 
money, and get Libra. That's the vision. Okay. That's one hat.
    They also say the Calibra Wallet will interconnect with 
other wallets. So even if Calibra does Know Your Customer, a 
different wallet that doesn't, you still put the money back 
into Libra.
    I think the possibilities for sanctions and money 
laundering and tax evasion are unlimited and history tells us 
if the opportunity is there, it will absolutely be exploited.
    Mr. Meeks. Yes, thank you.
    Ms. Tlaib. The gentleman from Tennessee, Mr. Rose, is 
recognized for 5 minutes.
    Mr. Rose. Thank you.
    Many have expressed concern that Facebook could out-compete 
banks and non-depository financial institutions and become some 
sort of financial services monopoly. I understand Facebook has 
demonstrated a dominance in the social media space, but I want 
to better understand this financial services monopoly idea.
    The Libra Association is made up of 28 founding members, 
with more to come, many of which have played in the payment 
processing space for a long time. Some of these firms are very 
large. Visa and MasterCard have billions of cardholders and 
process trillions of dollars' worth of transactions.
    Some have argued that this association is a thinly-veiled 
attempt of Facebook eventually attempting to create a bank. It 
may or may not be, but I am more reminded of another payment 
innovation that started in the 1950s and 1960s as associations 
of like-minded companies: the bank card payment networks.
    Banks issued their own cards but banded together as 
regional bank card associations to create networks that worked 
for the consumers, merchants, and issuing banks. Eventually 
those associations were spun off as independent companies that 
we have and use today.
    I'm not saying that Libra and bank card network innovation 
are the same thing, but it does strike me that there are 
similarities and it might be helpful to look at previous case 
studies to inform how we look at new innovations.
    Ms. Demirors, if we were to think of Libra like a payment 
innovation, can you talk a little about the potential 
similarities between card payment in its early stages and what 
Libra is or eventually might be?
    Ms. Demirors. I don't think any of us are saying that 
Facebook doesn't have the right to innovate. After all, the 
U.S. is the birthplace of many innovations and we're seeing a 
wave of financial technology innovations in different areas.
    I think what we are seeing here is that the ability to 
compete and to create innovative new financial products and 
services should be possible, regardless of an institution's 
size, balance sheet, or political power.
    I think what Facebook is attempting to do is fundamentally 
different from creating a card payment network. Facebook is 
already in the hands of 2.7 billion users. It already is on 
everyone's phones, on everyone's laptops, and has committed 
repeated violations of these users' privacy, and what they are 
attempting to do is not to create a new payment network.
    What they're attempting to do is pass off this idea as a 
cryptocurrency, which it is not. They're attempting to use 
regulatory cover to get away with doing something that would 
typically be regulated, which is asset management, 
fundamentally different.
    Mr. Rose. So, differentiate, go further and differentiate 
between the consumer protection concerns with what Libra is and 
what a true cryptocurrency is?
    Ms. Demirors. My fundamental concern is related to 
stability. If we think about the various types of risk that 
investors take when they custody their assets or purchase 
financial products from an institution--we experienced this in 
the United States 10 years ago--you are taking inherent risk.
    When someone purchases a Libra, they're giving up their 
real world assets. They are giving up fiat, giving it to the 
Libra Association to receive tokens. These assets are placed in 
depository banks and institutions around the world. This is a 
core banking function. This presents risk from counterparties. 
It presents risk in consumers being able to retrieve the 
principal that they have used to obtain the Libra tokens, and 
it presents systemic risk in the context of the broader 
financial system.
    Mr. Rose. And why are permission-less blockchains better 
for consumers?
    Ms. Demirors. When you buy Bitcoin, when somebody makes a 
decision to purchase Bitcoin, they are not buying a pool of 
assets. They are not exchanging their principal for financial 
instruments. They're buying what is essentially a digital 
commodity that is backed by its own scarcity and the demand for 
it. It is not a pooled fund. There are no assets or banks that 
have to create an instrument that backs the value of Bitcoin. 
This is fundamentally different.
    Mr. Rose. As we move forward and we think about this 
independent association, there comes a time when one would 
surmise that the participants might want to monetize their 
interest in the association.
    I'm curious, Mr. Gensler. You nodded your head. Paint that 
picture for me. How does that work?
    Mr. Gensler. I think particularly if the association is 
associated with the float, the interest that's coming off of 
this reserve, that would be very attractive. They're monetizing 
that really upfront called Libra Investment Token. There are 
two tokens here.
    I think to your earlier question, if I could just say I 
don't know if Facebook will be successful. This is their fourth 
attempt in payments, but we do know in China, the two big 
companies, Alipay and WeChat Pay, dominate payments, over 90 
percent of payments.
    Ms. Tlaib. The gentleman's time has expired.
    Mr. Gensler. I think that's what they're going to do.
    Mr. Rose. I yield back.
    Ms. Tlaib. The gentleman from Illinois, Mr. Foster, is 
recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman, and thanks to our 
witnesses.
    I'd like to talk a little bit about what the regulation 
requirements ought to be for not only Calibra but crypto 
exchanges in general.
    Do you think, first off, that Calibra and other crypto 
wallets should be subject to custody and segregation 
requirements, Mr. Gensler or anyone else?
    Mr. Gensler. I would say yes, and I think that a custody at 
Coin Base and Kraken and Gemini and the exchanges has been a 
honey pot for theft and cybersecurity risk, and that if 
Congress could step in, maybe not this Congress but a future 
Congress, to give clear authority, whether it's the SEC or the 
CFTC, but clear authority to regulate even a Bitcoin exchange, 
which maybe could be put into this token.
    Ms. Demirors. I'd like to make a factual distinction. Libra 
is not a cryptocurrency. Cryptocurrencies are fundamentally 
different. The business of exchanging cryptocurrencies is a 
regulated activity and has been for the last 5 years in this 
country, and so I want to distinguish and draw a very clear 
line that Libra and cryptocurrency should not be--
    Mr. Foster. But they don't differ in terms of the sort of 
frauds that can take place, frauds, theft of customer assets, 
everything bad that can happen if you don't have segregation 
requirements and so on.
    Mr. Brummer. And could--
    Mr. Gensler. I think that's right and Calibra is going to 
control the Calibra Wallet funds because it's a custody fund.
    Mr. Brummer. And ultimately, custody is a functional 
activity and even regardless as to what kind of sort of digital 
asset you're ultimately dealing with, you have to ask and 
tailor custodial rules to the nature of what you're trying to 
regulate.
    Certain kinds of questions as to what happens to the 
custodial responsibilities of a bank when there's a fork in 
that cryptocurrency, those kinds of questions obviously have to 
be answered, and it's not at all clear as to what those answers 
in actuality will be.
    Mr. Foster. Okay. And could you say a little bit about the 
sort of abuse of trading practices that are possible with 
current crypto exchanges and might be possible also with Libra, 
things like front-running, wash trades, all this sort of--
    Mr. Gensler. It's all possible.
    Mr. Foster. Is it taking place?
    Mr. Gensler. It's a feeling. It's well-documented by a 
company called, I think it was Bitwise, but you might remember 
a filing at the SEC about fake trading, but most exchanges 
around the globe are not regulated, other than this custody 
issue and for money laundering, but it's rare that they're 
regulated for manipulative behavior.
    Mr. Foster. Any anonymously held thing, is there any way to 
prevent things like wash trades even if they're anonymously 
held?
    Mr. Gensler. It's not even about the technology. Around the 
globe, the largest exchanges are not regulated by the SEC or 
similar securities regulators.
    Ms. Demirors. I have to point out, though, many exchanges 
are in fact regulated by the jurisdictional regulator where 
they operate and by the customers that they serve. There is a 
case that is now being tried, New York v. DFS, which is looking 
at a number of exchanges.
    The second distinction I would make here is since 2016, all 
of the exchanges here in the United States that are under the 
purview of U.S. regulators, including the CFTC, have 
voluntarily joined the CFTC in creating a market oversight 
committee that looks at these practices and these accusations 
that have been leveled around wash trading and there is effort 
within the industry to self-regulate in absence of clear 
guidance, but I will say that this wash trading activity is not 
happening here in the United States because exchanges here are 
regulated as any other exchange would be.
    Mr. Gensler. I differ with my fellow witness at the table. 
The wash trading is absolutely happening here. They're not 
regulated for market manipulation; they're regulated for 
custody of the funds and anti-money-laundering.
    Mr. Foster. It seems like if they are truly anonymous, it's 
very hard to even identify wash trading if you just don't know 
who's actually participating in it.
    Mr. Brummer. And it's notable that in the governance rules, 
there are no explicit ways to determine potential conflicts of 
interest or any other kinds of activities. So even from a self-
regulatory perspective, as it pertains to Libra, there are no 
obvious solutions to the problem.
    Mr. Foster. Then, it relies on the anonymity or the pseudo-
anonymity of it is in fact the fundamental design problem 
absent some way of going for the regulator to going through and 
finding out that the same person was on both sides, the 
beneficial owner on both sides of the trade. Unless there's a 
way to pull the mask off and look and see who's there, there is 
no way of even detecting it and that's sort of an unsolvable 
problem as far as I can tell.
    Let's see. I have 8 seconds left. I want to thank you for 
your input on this very important subject. I yield back.
    Ms. Tlaib. The gentleman from Kentucky, Mr. Barr, is 
recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman. Witnesses, thank you 
for your testimony and your expertise today. You have been an 
excellent panel, and this is an interesting topic. We're all 
learning, and we still have a lot to learn about this.
    As I was saying earlier to Mr. Marcus, I think the 
presumption should always be on the side of financial 
innovation, especially when there's the promise of greater 
financial inclusion, and reduction of transaction costs and 
friction.
    So, I do hope that this will result in a very positive 
impact on our society, but I do think we should ask probing 
questions, and I appreciate the panel for offering some healthy 
skepticism on one point or another.
    Let me just kind of start with the basics and I think I 
want to go back to Ms. Demirors. You made the comment that 
Libra is not the same thing as cryptocurrency. Can you 
elaborate and explain that to me?
    Ms. Demirors. Yes, there are three fundamental differences 
I would like to point out that are also recorded in my written 
testimony I submitted.
    Number one is that cryptocurrencies like Bitcoin are 
decentralized. No one entity or individual can block or censor 
transactions. Libra, by contrast, has an entity of these 100 
members that is able to block/censor transactions and manage 
the network.
    Mr. Barr. But only for 5 years, right?
    Ms. Demirors. That is the claim. I do not know how they 
plan to decentralize this and they have offered no solid plans. 
``Decentralization'' is a word that is used often, but it 
doesn't really have a tangible measure. It's fairly esoteric. 
I'm not sure how they will achieve it.
    The second point I'll make is that Bitcoin is not backed by 
anything but the demand for it. It is its own asset. It's a 
digitally scarce asset and it can be likened to a digital 
commodity. It is a new type of asset which introduces 
challenges in trying to fit it into a box, but it isn't backed 
by anything. There's no bank that holds funds. There's no 
entity that holds funds that are at risk.
    In contrast, Libra is the opposite. It is backed by a 
basket of currencies and other securities that are held by 
such--
    Mr. Barr. Stable coin.
    Ms. Demirors. Yes, that is what they like to call it. 
Stability is relative, as we have learned through the history 
of financial crises, but Libra does hold a number of assets 
that substantiate the value of its token, and so the security 
of those assets in question are tantamount to securing the 
principal that users post to obtain Libra.
    The last point I'll just make is the point of control. 
Anyone can build on top of the Bitcoin network or most 
cryptocurrency networks. Anyone can access these things. The 
code is open source. The network is open just like the 
internet. It could be considered a public good and people can 
compete and build businesses.
    In contrast, I don't know how the Libra network will be 
open when it's controlled by 100 for-profit corporations that 
are closely affiliated with Facebook.
    What I'm asking for here and what I'd like to just point 
out is that competitiveness and the ability to level the 
playing field for all types of organizations to be able to 
compete in the same market is important. Cryptocurrencies are 
an open market. Libra is proposing a closed controlled market.
    Mr. Barr. Let me switch to the stable coin idea and the 
fact that Libra is tethered to this reserve. Isn't that a 
positive innovation to reduce volatility? Shouldn't we think 
that this is a positive development?
    Ms. Demirors. I am not commenting on whether Libra is 
positive or negative. I am commenting on the fact that Libra is 
not a cryptocurrency. Libra is an ECF or mutual fund that is 
backed by assets and I am not arguing that the unbanked don't 
deserve access. But it's not the body shield.
    Mr. Barr. Mr. Gensler?
    Mr. Gensler. I think it's a very interesting innovation 
that has raised 5 to 10 really important public policy issues, 
but the idea that there might be a stable value coin backed by 
a basket of multi-currency risk in Sub-Saharan Africa or in 
Latin America or in Asia, there might be a demand for it. I 
wouldn't count it out.
    Mr. Barr. What is the incentive, besides this unbanked, 
underbanked problem, what would be the incentive for a banked 
person or the holder of a fiat currency to exchange it for--
    Mr. Gensler. It's very simple. Just like in many countries, 
sometimes there's a lot of transactions in dollars, because 
they don't feel comfortable with their central bank, with their 
monetary authority. It could be countries in very real extreme, 
like Venezuela or like Ecuador adopted the dollar as an 
official policy, or it could just be that a lot of things 
happen.
    Mr. Barr. Can someone address the risk of disruption to 
central banking and the disruption to traditional monetary 
policy?
    Mr. Gensler. It would definitely disrupt the central 
banking and monetary policy in these developing countries if 
they ``Libra-ize'' instead of ``dollar-ize'' and if it got very 
significant, it could start to influence the four or five or 
six currencies they have underneath it. So, the dollar is going 
to be half of this but if the association said it's only going 
to be 30 percent, you see. It's the transition.
    Mr. Barr. Thank you all. I'll have lots more questions, I'm 
sure, as this develops. I yield back.
    Chairwoman Waters. The gentlewoman from California, Ms. 
Porter, is recognized for 5 minutes.
    Ms. Porter. I was told on my way in that coming to give 
praise to the panelists was not my style, but I'm really here 
to just thank you in part for your service and for being here 
and explaining things to the committee.
    I wanted to pick up on something that Ms. Demirors said 
about the differences between Libra and cryptocurrency, and a 
lot of the concerns that I have about Libra, I do not have 
about crypto. There are issues with cryptocurrency and many of 
you have illuminated them, but I think your testimony is 
incredibly important.
    I wanted to pick up on the point you made about Libra being 
``backed in a way that Bitcoin and traditional crypto is not,'' 
and I wanted to ask, we heard Mr. Marcus talk about how Libra 
is backed and so I wondered if any of you, Mr. Gensler or 
Professor Pistor, could talk about, what do you think he means 
by ``backed'' and how should we have confidence in that, and 
how is this kind of a backed stable coin different than 
something like M-Pesa in Kenya, for example?
    Mr. Gensler. I'm going to agree with my colleague here. 
This is very different than Bitcoin for the three reasons that 
she said and for other reasons, as well.
    I think that it is very different than M-Pesa, but similar 
in this important way. The central banks and authorities in 
Kenya said anything in that fund, which was held by the phone 
company SafariCom, had to be in trust, could not be loaned, and 
100 percent of it had to go into the Kenyan banking system as 
deposits, and similarly, in China, they made it even more 
restricted, 100 percent had to go to the central bank.
    So, that's where the similarities are. It's different 
because this is multi-currency, and currently it's very 
different because they're saying don't treat us like a bank, 
don't treat us like a narrow bank and your exposition about the 
wildcat banking era of the 19th Century was very helpful.
    Ms. Porter. Others?
    Ms. Pistor. Yes, I think that can mean different things. 
It's not that the customers have a direct claim against the 
reserve but the idea is that the reserve will be held in safe 
assets and therefore will be able to provide liquidity.
    Of course, the important point that I'm trying to make in 
my testimony is that the safety comes from public-backed 
stopping in the countries that provide these safe assets. So, 
it's ultimately a public service provided to a private company.
    Ms. Porter. Right. And when we talked with him about the 
corresponding purchase with the FDIC, for example, I asked Mr. 
Marcus, do you think that Libra would be subject to the FDIC, 
to some kind of insurance scheme, like what is the backstop, so 
that when you tell customers that this is backed, that they 
know what they're getting, what kind of backstop and security 
they have?
    I wanted to ask--he didn't take me up on my offer to have 
the FDIC regulate Libra. I was happy to run through the 
alphabet soup. He can choose one of the weaker regulators, like 
the OCC, if he prefers. There's an alphabet soup here we could 
offer him.
    I wonder if you all could comment and we can just go from 
right to left here quickly, which regulators, and it could be 
more than one, do you think are appropriate for Libra?
    Mr. Brummer. One comment and observation that I recently 
had was whether or not Facebook, if it was to become a bank, 
would even satisfy the de novo review process from a banking 
regulator. It's entirely uncertain as to whether or not they 
would receive a license.
    Certainly, the ambiguity with the term ``backed'' is played 
throughout the White Paper where, on the one hand, especially 
if you're describing yourself as a currency board, you're 
thinking about ``backed'' in a kind of a monetary sense, but 
what they're really doing and what you see in the structure of 
what they're doing is creating an ETF, and yet you're creating 
the ETF but you're using the language of a kind of monetary 
world and that kind of obfuscation is not at all helpful to a 
potential purchaser, but certainly at a base level 
infrastructure, regulatory infrastructure level, you're going 
to have to go with some securities level, securities regulatory 
oversight through the 1940 Act and then looking at what 
differentiates in terms of both the breadth and the other 
characteristics and the systemic, potentially systemic 
implications to ramp up from there.
    Ms. Porter. Yes. This is a Full Committee hearing. It isn't 
clear to me whether this is a problem for the Investor 
Protection Subcommittee or the Consumer Protection 
Subcommittee.
    Ms. Pistor. I think the problem is that many of our 
categories don't easily fit and part of financial innovation, 
of course, is to create something that does not fit existing 
structures. That's part of how we get the comparative advantage 
and I think they're using the language in a very smart and 
discriminate way and I think to avoid the kind of regulatory 
framework that we have.
    Let me add one more thing, which is, of course, we're 
talking about a multi-jurisdictional regulatory approach that 
would be needed for a global currency. So even if you figure it 
out in the United States, you need to think about how 
complementary regulators are elsewhere.
    Mr. Gensler. SEC.
    Ms. Porter. My time has expired, but I would just welcome 
each of you to please follow up with me with your thoughts on 
this. I'm very interested.
    Chairwoman Waters. Thank you.
    I will now recognize myself for 5 minutes, and let me thank 
the panel for being here. You have spent some long hours here, 
while all of our Members have taken the opportunity to ask 
questions of Mr. Marcus, but I certainly appreciate your 
participation here today, and I thank you all for helping to 
unfold and make transparent some of the information that we 
should have had access to that we didn't get in the White 
Paper.
    Let me ask you this, because I've listened to many of the 
questions that you've been asked and you've covered an awful 
lot, but I've been thinking about the association and I've been 
thinking about the fact that the association includes about 27 
or 28 companies, and Mr. Marcus said that they were targeting 
about 100.
    But do you think that it's going to go well beyond that 
number because of what we are looking at? Are we looking at big 
companies with big databases that supply whatever goods and 
services and with the Libra, the Libra will be the currency 
that you have to have in order to get these goods and services, 
or am I just daydreaming about this? Mr. Brummer, what do you 
think?
    Mr. Brummer. Certainly, they have not disclosed exactly 
what the selection criteria would be for ramping up even to 100 
members. You have to expect that given the resources available 
to the existing members, that the entry point and the 
expectations of new members would be very large, and there's no 
clear path to reaching the kind of decentralization and 
decentralized infrastructure that Mr. Marcus is promising in 
terms of evolving into a Bitcoin-like infrastructure.
    Like you, I do have doubts as to how quickly they would be 
able to ramp up, much less become a permission-less system.
    Chairwoman Waters. Do you think they are thinking beyond 
100 members of this association? Because, remember what he 
said, ``Well, there's going to be a smaller governing group 
that will be making these decisions, I guess, for everybody.'' 
So, could there possibly be thousands of companies in this 
association?
    Mr. Gensler. There's nothing that forbids it, and if it 
helps the distribution of a product, economic rationale would 
be to help distribute the Libra, so--
    Ms. Demirors. But if I may, Chairwoman Waters, I think what 
we've seen historically in attempts by multinational many-
member consortia consisting of thousands of members to govern 
something that does involve profit and distribution of returns 
and we're speaking about the largest consumer base in the 
world, 2.7 billion users, that is going to quickly become 
contentious.
    If we look at much smaller organizations, comprised of 
smaller membership, they have many governance challenges, and 
my concern is that in the Libra White Paper, this governance 
structure is not clearly laid out. It's not laid out where the 
balance of power will be or if there is any one overriding 
party or entity that makes decisions in the case that the 
parties that are members of the association do not agree.
    Chairwoman Waters. Has there been any discussion--yes, Mr. 
Weissman?
    Mr. Weissman. Yes. I think that the Facebook vision is 
clear actually. I think it's that they intend to have an 
oligopoly that they dominate. It is a cartel. Absolutely, they 
want to--
    Chairwoman Waters. A cartel--
    Mr. Weissman. Yes.
    Chairwoman Waters. --to dominate.
    Mr. Weissman. Past 100.
    Chairwoman Waters. Is it possible that all of these 
companies with big data could end up with all of this data 
being merged into a humongous amount of individuals in this 
database that they could be merchandizing to, they could be 
marketing to? Is that a part of what's going on here?
    Ms. Demirors. I think until there's more transparency on 
how the association intends to make money, the organizations 
that join have to have over a billion dollars in assets and 
contribute $10 million to join, not just anyone can join this 
association, and in fact, no one was able to ask to join. I was 
not invited. None of the firms I work with were invited, and so 
I think that's for me the fundamental question.
    If Facebook aspires to create this open permission-less 
consortium that everyone can benefit from, then why is the 
selection process opaque and why does it only involve 
affiliates and associates of Facebook and its executives? That 
would be my question. That's not a criticism, but I think more 
transparency is certainly needed.
    Chairwoman Waters. That's my question, too, and I basically 
define this as, ``the Billion Dollar Boys are taking over.'' 
Thank you very much.
    Now, we are going to hear from the gentleman from 
California, Mr. Sherman. You're recognized for 5 minutes.
    Mr. Sherman. Thank you.
    We've heard from Facebook that they're absolutely dedicated 
to adhering to the anti-money-laundering and Know-Your-Customer 
rules. Mr. Brummer, if they were that dedicated, why would they 
hire as the head of the operation someone who was head of 
PayPal when they were fined $8 million for violating anti-
money-laundering laws?
    Mr. Brummer. I cannot answer that question.
    Mr. Sherman. None of us can. And will our anti-money-
laundering laws be binding on an institution headquartered in 
Switzerland and made up of international businesses, Mr. 
Brummer?
    Mr. Brummer. Well, certainly U.S. rules would not apply.
    Mr. Sherman. Those are the ones I'm talking about, yes.
    Mr. Brummer. U.S. rules would not apply, and the bigger 
risk obviously lies with those jurisdictions that are so weakly 
regulated that they're falling outside of international 
agreements, like the ones that FATF has recently agreed to in 
June.
    Certainly Swiss rules, particularly relating to both 
privacy and also relating to financial regulation, are not just 
different but have historically been considerably weaker, and 
real questions do arise as to the ability to enforce and to 
promote the kinds of norms and safeguards that we have here in 
the United States.
    Mr. Sherman. Okay. The history of currency, and I see we've 
got a ``Zuck Buck'' behind you, the history of the dollar, 
first it was based on how much gold we had in reserves. And 
only when we had an ounce of gold, did we print $35. Then, we 
started printing more than we had in reserves. Then, we got to 
the point where we made it nonredeemable and now the dollar is 
valuable. Gold is an interesting thing. It's a nice thing to 
have, but nobody says, ``I'm not interested in having U.S. 
dollars because they're not tied to gold.''
    If Zuckerberg can replicate that, then he can do what only 
the U.S. Government can do and that is print to reserve 
currency. They've promised that they won't do that but that it 
will always be one-to-one, but, Ms. Pistor, is that promise 
from Facebook binding on the Libra committee?
    Ms. Pistor. No, the association could, with a two-thirds 
majority, change that.
    Mr. Sherman. And if they change that, that means they get 
to print money. That would be quite an incentive to change it.
    Ms. Pistor. Yes. I would think that a private organization 
has a problem with doing what the United States did in the 
1970s because what they cannot do is unilaterally basically put 
the productivity of an entire country on the line, which is 
back--
    Mr. Sherman. That's true.
    Ms. Pistor. But they could try.
    Mr. Sherman. People are creatures of habit. If I can go on 
Amazon and buy a bunch of neat stuff for a thousand Libra or 
Zuck Bucks and then as long as I can do that, they're valuable 
things to have.
    Why don't I address this to Mr. Gensler? We have a problem 
in that people in Los Angeles are sending money to their 
grandparents in Guatemala and they're being charged 7 or 8 
percent sometimes to do that.
    How is a Guatemalan grandmother supposed to buy a bag of 
food for a bunch of Zuck Bucks? We're told that if we don't buy 
into this wonderful new thing, that we're disadvantaging that 
grandmother, but is this cryptocurrency really a solution for 
her?
    Mr. Gensler. What we found is Bitcoin, for all it is really 
innovation, it is not being used that much in retail 
transactions for the exact reason you're mentioning.
    Mr. Sherman. And certainly not in rural Guatemala.
    Mr. Gensler. What would have to happen is that some service 
provider would provide the technology so that behind the scenes 
the Libra or this Zuck Buck, as you referenced, would be traded 
for the local currency so that the store owner could get the 
local currency and there would be some crypto exchange or hedge 
fund--
    Mr. Sherman. It sounds every bit as expensive as what's 
going on now. I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from Michigan, Ms. Tlaib, is recognized for 
5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. Thank you all so 
much for being here.
    I have to tell you I'm learning a tremendous amount. The 
younger people on my team have been watching this closely and 
teaching me a lot, but the more I listen, and I was forced to 
stay here a little bit longer, which is okay, I was able to 
hear a lot more and learn more, but one of the things that 
comes to mind, and we'll talk about this, is this whole thing 
around systemically important financial institutions. I want to 
get there, but first, Mr. Brummer, how do you feel about a 
private company issuing currency? What ramifications do you all 
see? You all talked about it. Historically, have you ever seen 
outside--
    Mr. Brummer. Right. We have. What a private company does 
with money--when you use other people's money, then you should 
normally expect that the government or some kind of regulatory 
regime is going to want to know what you're doing with it and 
have you rightfully accessed or received that money, and 
whether or not it be an example, wildcat banking where you're 
not just taking the money, you're not keeping it entirely in 
reserve, but you're lending it on to someone else, creating 
certain kinds of risks.
    The challenge is when you have a private institution that's 
not just lending its own money but is lending with other 
people's money, and when they're trying to do that without 
offering the kinds of proper safeguards or disclosures to 
relevant stakeholders and investors, and that's when the red 
flags are raised.
    Ms. Tlaib. Okay. This question goes to everyone on the 
panel. In thinking about how to protect the residents, my 
residents at home, they're going to see this and they are not 
going to fully understand it, just like I didn't before I came 
here, the possibility of the Libra Association's failure, and 
if anyone on this panel can explain the systemically important 
financial institution, if they get labeled as too-big-to-fail, 
how is this connected to what we're talking about now, that 
this could be a possibility?
    Mr. Gensler. Can I just mention one thing that's buried in 
their White Paper and documents? They're trying to negotiate 
with central banks around the globe to get accounts at central 
banks, and your residents in your community have accounts at 
commercial banks, but an account at the central bank is quite 
different. That means that you get access to the discount 
window, the lender of last resort.
    I surely hope that Chairman Powell and others at the 
Federal Reserve would not give that to this association, but if 
it was very large, that would go to answer your question. At 
some point in time--
    Ms. Tlaib. But isn't that possible?
    Mr. Gensler. --in 2008, there were decisions made by good 
men and women trying to stop this country from going into 
crisis and they made decisions that many of us even said, that 
wasn't the right thing, to bail something out, but the Libra 
Association is already negotiating with central banks to try to 
get access to central bank money or accounts and that's what 
would happen if it was systemic.
    Ms. Tlaib. Did you have something, Mr. Weissman?
    Mr. Weissman. There's another element that I think we're 
not focusing on enough that relates to your constituents, and 
everyone's constituents.
    What Facebook wants is that transactions that occur in 
Libra, wher3e people sell things, provide things, in Libra, 
using Calibra, whatever, but when you have a borderless 
privatized currency, you now have created this global market 
with no reasonable regulation. They're talking about payday 
lending. They're talking about providing financial services in 
Libra. So all of the problems we know now with abusive 
financial lending, orders of magnitude worse because you've got 
jurisdictional problems and secrecy problems that have no 
possible plausible answer.
    Ms. Demirors. I'll also add, if I may, the disclosure 
aspect is very important. As many of us on this panel have 
mentioned, Libra represents an investment product that would 
typically be regulated under the 1940 Act, and so it's very 
important that people who receive Libra who may not know what 
they're getting, are educated as to what they're receiving.
    Financial education has been problematic across a number of 
different asset classes in this country's history and so the 
disclosure component, I think, is important in ensuring people 
understand the risk they're taking when they choose to take 
their dollars and turn them into Libra.
    Ms. Tlaib. Thank you. And I'll put the questions into the 
record, Madam Chairwoman, if that's permitted, but I want you 
all to know, one of the things I told Mr. Marcus is about the 
monopoly, the small group of friends that is being created 
with--the fact that a member can vote in contrary to the 
position advocated for Facebook, what would happen, what 
retaliation? There's this dynamic that's there, that I think 
needs to be fleshed out. We need another hearing for that. 
Thank you.
    Chairwoman Waters. Thank you.
    The gentleman from Illinois, Mr. Garcia, is recognized for 
5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman. I'd 
like to thank the panel for bearing with us and all the 
questions.
    I have a question on banking commerce for Mr. Weissman. In 
your written testimony, you mentioned that the Calibra Facebook 
arrangement, ``may run afoul of the bank holding company 
requirement,'' which enshrined the historic separation between 
banking and commerce.
    The regulatory framework in our country governing bank 
regulations established law between banking and commerce for a 
long time. The guiding principle of this separation, that banks 
should engage in impartial credit allocation, helps guard 
against market manipulation, conflicts of interest, and anti-
competitive behavior.
    When the lines are blurred, problems have emerged, such as 
during the gilded age when JPMorgan monopolized railroads and 
manipulated rates. More recently, in 2013, the New York Times 
revealed that Goldman Sachs had bought up more than a quarter 
of the aluminum market and had used this ownership of the 
aluminum warehouse to inflate prices of aluminum, costing 
consumers $5 billion.
    Mr. Weissman, would you please share why this principle is 
so important and what implications does Libra have for the 
erosion of this principle?
    Mr. Weissman. Your question illustrates many of the key 
examples. The problem is that banks get a lot of money and they 
get a lot of information and they're incentivized to use their 
money in risky ways, capitalizing on special information that 
they have.
    Now, you think about Facebook. If Facebook becomes both a 
social media oligopolist monopolist that it is and a major 
financial services provider, all of a sudden, let's just set 
aside their claim that they're going to respect privacy lines, 
assuming there's a firewall, all of a sudden now they can 
combine their financial information with their social media 
platform. They can advertise to you based on what you're 
buying. They can go into the business of providing goods and 
services and give you a discount in Libra. In fact, that's part 
of the plan, just not within for Facebook to be the provider 
but to be within the association.
    So the possibility is both for unjust competition and 
squeezing out any rival who's not part of the Facebook 
ecosystem, part of the ability to manipulate and misuse 
information they get from the financial side and to the non-
financial side, and there are problems that really don't lend 
themselves to regulatory solutions.
    There's a reason we've had that wall. It's served us well. 
When we've breached it, as you say, we've paid the price. If we 
breach the principles here, I think we're certain to pay the 
price down the line.
    Mr. Garcia of Illinois. Switching gears, there have been 
reports that President Trump intends to nominate Judy Shelton 
to the Federal Reserve Board of Governors. She has come out in 
favor of private currencies. In a speech that she made last 
year, she proposed a new international monetary system, saying 
an approach, ``that permits the issuance of virtual currencies 
in tandem with government-issued currencies adapting legal 
tender laws to permit healthy currency competition should be 
put forward.''
    If the Federal Reserve loses supremacy over control of the 
money supply, what challenges might that create?
    Mr. Weissman. I'll go first, and you can give the better 
answer.
    They're endless. That means the Fed can't create--that 
we've lost control of monetary policies. We've lost control of 
public influence over the direction of the economy. We're also 
almost guaranteeing systemic risk in situations where you're 
going to have again massive bailouts because the private 
currency, when it fails, and it will, is going to need some 
massive bailout from whom? From the public.
    Mr. Garcia of Illinois. Any others?
    Mr. Gensler. I think that the crypto movement, Bitcoin and 
the crypto movement has performed one thing. It's a private 
form of money, even Bitcoin, and it's putting some competition 
on central banks around the globe to take their legacy payment 
systems and move them into the 21st Century more fully.
    I actually say there's a balance. The Bitcoin and the 
crypto movement has created some competition for this public 
good, but then to the second part of the question, some central 
banks, like Sweden, are looking at issuing a central bank 
digital currency. It would still be government currency, but 
the public would have access directly to central bank reserves, 
and in Sweden you wouldn't just rely on the commercial bank. 
So, that would be competition from the commercial bank.
    Mr. Garcia of Illinois. Any final word on this, Ms. Pistor?
    Ms. Pistor. Exactly the point. I think that we should think 
about the form which could be crypto, but it could also be 
issued by a public agent, such as a central bank.
    Mr. Garcia of Illinois. Thank you. I yield back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you very much.
    Is there anyone else who seeks recognition?
    [no response]
    Chairwoman Waters. I think not, and let me just say to the 
witnesses how grateful we are that you have come today and 
you've spent time and you've helped us to formulate questions 
in the way that you've shared information with us, and so we're 
very appreciative on both sides of the aisle, and while we 
normally do not do this, for the few of us who are here, I'm 
going to break another rule.
    Can we give them a round of applause?
    [applause]
    Mr. Gensler. Thank you.
    Chairwoman Waters. Thank you very much.
    Prior to leaving, we're going to take another action we 
don't normally take, but I will yield 5 minutes to the ranking 
member for a closing statement.
    Mr. McHenry. We're each getting 5 minutes for a close?
    Chairwoman Waters. Yes.
    Mr. McHenry. Okay. Just to be clear, the M1 supply of money 
in the United States is approximately $4 trillion, $3.8 to $4 
trillion. We're talking about a private currency that has one 
to two billion users who could potentially use this product.
    I don't know how history is going to judge this hearing. I 
fear not well, though. There's a breathlessness to the 
hyperventilation about Facebook. I get that. We've seen that. 
We've seen that because of their use of data, consumer data. 
We've seen that because of how they responded, as well, but 
there's something additional here, which is that people fear 
something they don't understand.
    Facebook is using a language of cryptocurrency and digital 
currency. They're using the words of blockchain technology, but 
what they've created is actually perfectly not either. They're 
creating something different.
    But there is this underlying fear among policymakers here 
on the Hill because they don't understand cryptocurrency and 
digital assets. That's my fear, is that this will not wear well 
historically, the concerns raised, the questions raised, and 
it's because politicians, when they don't understand 
innovation, they want to kill it. There's a reaction and a 
quick response to it.
    We've even had folks at the hearing today who actually used 
the very quote that I was talking about, the hyperventilating 
nature of the headlines around Project Libra and actually more 
broadly about cryptocurrency. I opened with that, and we had a 
Member later use the exact same quote as a knock against 
Project Libra.
    We also had a member of the committee speak of this as a 
terrorist act, as one of the worst moments in the history of 
the last generation, an attack on our country, and likened 
Project Libra to that. I don't think this is going to wear 
well.
    There are legitimate concerns about this and I think of 
substance, I think that will wear well and including what this 
panel has said, but there are massive forces at play, massive 
skepticism of Facebook, that's clear. There are also massive 
anti-competitive forces at play.
    If you want to lower the cost of payments domestically and 
globally, we need innovation. It is absurdly high for somebody 
to remit money back to their family at home, absurdly high. 
Now, we don't want terrorism financing. We want those important 
protections. We also want that immigrant to be able to send 
their money to their loved ones or for somebody to be able to 
move their money more readily and more cheaply. We want those 
innovations. So, we need a new framework to do that.
    We have a technology here that is going to do that and it 
has this great opportunity to do that. We want to ensure people 
are protected, in particular consumers, but you can't knock 
every new innovation because it's a new idea and you cannot ban 
a new idea from even pursuing the regulatory framework to 
operate. That is absurd. It is wrong.
    But what I think this hearing does, and I think the 
discussion by our government around Project Libra highlights 
the nature and the utility of cryptocurrency, digital 
currencies, in particular Bitcoin, and as I said earlier, due 
to the nature of the technology of Bitcoin, governments cannot 
kill it nor should they, and you can't kill digital currencies 
broadly.
    They will be enduring. They will be strong. That is the new 
framework of the next generation of the internet. That is clear 
and in a generation, I hope that there's some statements here 
today that will still be pointed to as factual and correct 
about what we will live through in this iteration of financial 
technology, and I hope there won't be much that is laughed at 
in 30 years.
    My fear is, however, that the reactionary element that was 
brought up here today in part will be dealt with, with great 
disdain, after the next generation of internet technology.
    I do think, however, it was a really good hearing, because 
we now have before Congress a deeper understanding about these 
digital assets and the breathtaking speed at which the world is 
changing and how we have to catch up, and with that, thank you, 
Chairwoman Waters, for the opportunity to close, and thank you 
for hosting today's hearing.
    Chairwoman Waters. Thank you very much, Mr. McHenry.
    Allow me to begin my close with the fact that our Members 
did an extraordinary job today. Both sides of the aisle came 
well-prepared to ask significant questions. As a matter of 
fact, I believe that we had Members on our committee today who 
went a lot deeper than many of those observing what took place 
today ever expected them to do.
    I'm very pleased with the interest. I'm also very pleased 
that we had some of our Members saying that this was the most 
significant hearing we've had since the last election and this 
committee was reorganized, and so I'm very pleased about that.
    Let me just say I'm so pleased about the panel who is here 
today. This is a panel that we absolutely needed to have here. 
We don't know what it is, and when I first saw the White Paper 
unveiled, I went into almost a state of shock. I could not 
believe what I was seeing, that this massive effort was 
underway and we didn't know what it was, where it was going, 
how it was organized, who owned it, all of that, and so I 
determined as the Chair of this committee that we were going to 
move on it right away, that we were going to hold a hearing, 
that we were going to get involved in this and not wait until 
destruction takes place.
    As a matter of fact, you heard some of our Members today 
talk about--I think it was Mr. Meeks, he never envisioned what 
was to happen in 2008 with that subprime meltdown that we had 
with our financial institutions basically hitting the dust and 
leaving everybody hanging and all of the harm that was done to 
our constituents and communities where foreclosures took place 
and people had been involved and signing on the dotted line for 
mortgages that they didn't understand.
    We don't intend for that to happen with this. We are going 
to put the time in on it and we are going to learn a lot more 
about where all of the money is, who makes all of the money, 
and how it is done.
    When we say we don't know what it is, we don't know if it's 
a bank, if it's just a transmitter of payments, what it is, but 
we're going to find out. This representation that the 
association, I believe, is working as a nonprofit--no 
corporation this big and this powerful works as a nonprofit 
without making a lot of money, and while I am very appreciative 
for the fact that it has been represented that this is all 
about servicing the unbanked, that sounds good, but I'm very 
appreciative for the fact that somehow Libra is going to solve 
all of the problems of the dollar because the dollar is just 
not functional.
    The last time I had money in my pocket, it worked very 
well, so I'm not only focused on it and our Members are vitally 
interested in it, I think we sent a message today. I think we 
sent a message that no matter how big and no matter how 
powerful Facebook and all those who are aligned with Facebook 
and this association think they are and how they have advanced 
in our society in ways that they've collected huge data and how 
they have been using that data and how they sell that data and 
how they plan perhaps to sell even more data, I think we sent a 
message to them today that we are focused. We're focused. We're 
watching. We're on it. We're involved in it. We're going to use 
all of our time learning everything we can about it, and for 
those who say that we don't have an appreciation for 
innovation, that's not true. We have an appreciation for 
innovation, but we don't have an appreciation for those who 
have something masked simply as innovation that is a global 
effort for control of a currency, of a cryptocurrency.
    And so again, I thank the members of this committee on both 
sides of the aisle. I thank our panel, and I even thank Mr. 
Marcus for coming and attempting to answer the questions that 
we were asking him. He didn't answer my question about whether 
or not he would support a moratorium, and certainly he didn't 
answer the question about whether or not there should be a 
regulator of any kind, and certainly not FSOC, that could 
oversee them, so even though a lot of the questions were 
skirted, it has been suggested that certainly we should have 
more hearings and we should get Mr. Zuckerberg here himself. 
I'm on board with that.
    Thank you very much for being here, and let me just say 
that we have some information that we have to share with you 
before you leave that's called adjournment information.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    And with that, this hearing is adjourned. Thank you.
    [Whereupon, at 4:47 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             July 17, 2019
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