[Senate Hearing 116-71]
[From the U.S. Government Publishing Office]




                                                         S. Hrg. 116-71


    EXAMINING FACEBOOK'S PROPOSED DIGITAL CURRENCY AND DATA PRIVACY 
                             CONSIDERATIONS

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                                   ON

EXAMINING FACEBOOK, INC.'S PLANNED CURRENCY LIBRA, ITS GOVERNING LIBRA 
 ASSOCIATION, AND THE CALIBRA DIGITAL WALLET, INCLUDING THE STRUCTURE 
AND MANAGEMENT OF LIBRA AND ITS UNDERLYING FINANCIAL INFRASTRUCTURE AND 
           THE PARTNERS AND GOVERNANCE OF LIBRA ASSOCIATION.

                               __________

                             JULY 16, 2019

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
                                
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                           
                                

                       

                  Available at: https: //www.govinfo.gov/



                                  ________
                                  
                       U.S. GOVERNMENT PUBLISHING OFFICE
                
37-919 PDF                    WASHINGTON: 2019          





            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      MIKE CRAPO, Idaho, Chairman

RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania      JACK REED, Rhode Island
TIM SCOTT, South Carolina            ROBERT MENENDEZ, New Jersey
BEN SASSE, Nebraska                  JON TESTER, Montana
TOM COTTON, Arkansas                 MARK R. WARNER, Virginia
MIKE ROUNDS, South Dakota            ELIZABETH WARREN, Massachusetts
DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada
MARTHA MCSALLY, Arizona              DOUG JONES, Alabama
JERRY MORAN, Kansas                  TINA SMITH, Minnesota
KEVIN CRAMER, North Dakota           KYRSTEN SINEMA, Arizona

                     Gregg Richard, Staff Director

                Laura Swanson, Democratic Staff Director

                      Joe Carapiet, Chief Counsel

                        Catherine Fuchs, Counsel

                Brandon Beall, Professional Staff Member

                 Elisha Tuku, Democratic Chief Counsel

           Corey Frayer, Democratic Professional Staff Member

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                          Jim Crowell, Editor

                                  (ii)






                            C O N T E N T S

                              ----------                              

                         TUESDAY, JULY 16, 2019

                                                                   Page

Opening statement of Chairman Crapo..............................     1
    Prepared statement...........................................    44

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     3
        Prepared statement.......................................    45

                                WITNESS

David A. Marcus, Head of Calibra, Facebook.......................     5
    Prepared statement...........................................    46
    Responses to written questions of:
        Chairman Crapo...........................................    51
        Senator Brown............................................    56
        Senator Moran............................................    58
        Senator Reed.............................................    65
        Senator Menendez.........................................    69
        Senator Warner...........................................    73
        Senator Warren...........................................    78
        Senator Schatz...........................................    85
        Senator Cortez Masto.....................................    92

              Additional Material Supplied for the Record

Letter to Mark Zuckerberg submitted by Chairman Crapo and Senator 
  Brown..........................................................    99
Facebook response submitted by David Marcus......................   101
Letter submitted by the Electronic Privacy Information Center....   107
Letter submitted by the Independent Community Bankers of America.   110
Letter submitted by the National Association of Federally-Insured 
  Credit Unions..................................................   114
Statement submitted by Caitlin Long..............................   116

                                 (iii)
                                 
                                 
                                 
                                 

 
    EXAMINING FACEBOOK'S PROPOSED DIGITAL CURRENCY AND DATA PRIVACY 
                             CONSIDERATIONS

                              ----------                              


                         TUESDAY, JULY 16, 2019

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:01 a.m., in room SH-216, Hart 
Senate Office Building, Hon. Mike Crapo, Chairman of the 
Committee, presiding.

            OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

    Chairman Crapo. This hearing will come to order.
    Today we will receive testimony from David Marcus, head of 
Calibra at Facebook.
    On May 9, Senator Brown and I sent a letter to Facebook 
shortly after it was reported that the company was recruiting 
financial institutions and online merchants to help launch a 
cryptocurrency-based payments system using its social network.
    Our letter asked Facebook for more information about how 
the system would work, its access to and use of consumer 
financial information, and Facebook's access to and use of 
information on individuals or groups of individuals in credit, 
insurance, employment, or housing. I appreciate Facebook's 
response last week.
    Shortly after the letter was sent, Facebook formally 
announced its intention to launch the payments system Libra and 
issued a white paper providing some information about the 
project.
    Since then, U.S. and global regulators have taken notice, 
including the Federal Reserve, U.K.'s Financial Conduct 
Authority, Financial Stability Board, G7, and others.
    Last week during the Federal Reserve's semiannual Monetary 
Policy Report to Congress, Chairman Powell raised concerns 
about the cryptocurrency's potential for inciting money-
laundering and financial instability problems and also 
expressed concern over customers' privacy.
    Yesterday, Secretary Mnuchin stated the Treasury Department 
has ``very serious concerns that Libra could be misused by 
money launderers and terrorist financiers.''
    The Bank of England Governor Mark Carney said, ``Libra, if 
it achieves its ambitions, would be systemically important. As 
such it would have to meet the highest standards of prudential 
regulation and consumer protection. It must address issues 
ranging from anti- money laundering to data protection to 
operational resilience.''
    Concerns include, but are in no way limited, to how the 
payment system will work, how it will be managed, and how 
Libra, the Libra Association, Calibra, and Facebook will all 
interact; what consumer protections will apply, and potential 
implications for consumers with respect to financial loss from 
fraud or the project's failure; how individuals' data will be 
protected, and how individuals' privacy will be preserved; how 
the Libra ecosystem interacts with the Bank Secrecy Act and 
other existing anti- money-laundering regulations; and ways 
that Libra could threaten financial stability and the steps 
that could be taken preemptively to mitigate those risks.
    Despite the uncertainties, Facebook's stated goals for the 
payments systems are commendable.
    According to the World Bank, 1.7 billion adults remain 
unbanked, but two-thirds of them own a mobile phone or 
otherwise have access to the Internet.
    If done right, Facebook's efforts to leverage existing and 
evolving technology and make innovative improvements to 
traditional and nontraditional payments systems could deliver 
material benefits, such as expanding access to the financial 
system for the underbanked and providing cheaper and faster 
payments.
    Still, Libra is based on a relatively new and continually 
evolving technology in which it is not entirely clear how 
existing laws and regulations apply.
    I am particularly interested in its implications for the 
protection and privacy of individuals' data.
    Facebook has massive reach and influence within society 
with over 2 billion active monthly users and access to vast 
amounts of personal information, including that which is 
received directly from users and information that can be 
derived from their behavior, both on and off Facebook.
    Libra and Calibra will only expand this reach by increasing 
commerce on Facebook, Inc., platforms.
    This raises several questions.
    The Banking Committee has held hearings on data privacy, 
including as it pertains to the European Union's General Data 
Protection Regulation, data brokers, and the Fair Credit 
Reporting Act.
    Given the significant amount of user information already 
held by the largest social media platforms and the prospect of 
gaining even more financial information, Congress needs to give 
individuals real control over their data.
    Europe has already done this by imposing obligations on 
companies and establishing rights for individuals with respect 
to their data.
    We need to establish similar obligations for data 
collectors, brokers, and users and implement an enforcement 
system to ensure the collection process is not abused and that 
data is adequately protected.
    Individuals are the rightful owners of their data. They 
should be granted a certain set of privacy rights and the 
ability to protect those rights through informed consent, 
including full disclosure of the data that is being gathered 
and how it is being used.
    Regulations should be clear and understandable for both 
collectors and consumers and should not punish those who opt 
out of collection practices.
    Individuals should also have the ability to review their 
data, correct inaccuracies, and have ample opportunity to opt 
out of it being shared or sold for marketing and other 
purposes.
    Chairman Powell also said last week that, ``The privacy 
rules that we apply to banks, we have no authority to apply to 
Facebook or to Libra.'' He added that we may even need to 
create a new regulator to address such issues.
    As we determine the next steps, what is clear is the 
importance that financial innovation happen here in America. In 
this way, the Libra announcement has heightened the need for 
policymakers and regulators to establish clear rules of the 
road.
    During this hearing, I look forward to hearing more about 
Facebook's project, steps it plans to take and has taken with 
regulators to ensure compliance with all laws and regulations, 
and how it intends to ensure individuals' privacy is maintained 
and information is protected.
    Senator Brown.

           OPENING STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman.
    Facebook is dangerous. Now, Facebook might not intend to be 
dangerous, but surely they do not respect the power of the 
technologies they are playing with. Like a toddler who has 
gotten his hands on a book of matches, Facebook has burned down 
the house over and over and called every arson a ``learning 
experience.''
    Facebook has two competing missions: make the world more 
open and connected, and make a lot of money. And as Facebook 
attempts to serve both these missions, they wreak havoc on the 
rest of us.
    Look at its version of disrupting the newspaper industry. 
Facebook has made it easier to share what you are reading with 
friends. But at the same time, Facebook has redirected most of 
the media industry's profits away from actual journalists and 
into its own coffers. They have done it without the benefit of 
re-creating the local news desk, without conducting the hard-
nosed journalism that keeps politicians in business and honest, 
and without meeting even the most basic journalistic standards.
    This kind of ``creative disruption'' that does not actually 
create anything is just disruption.
    Or look at the impact Facebook's profit motive has had on 
the way it connects people. Facebook and other tech companies 
will tell you the Internet just holds up a mirror to society 
and reflects what we already are.
    But that is not true.
    To be profitable, Facebook has juiced its algorithm to hold 
up a magnifying glass to society rather than a mirror--kind of 
like the way I learned in Boy Scouts to use a magnifying glass 
to burn a hole in a piece of wood--concentrating our focus on 
the most divisive issues, pushing the most controversial 
opinions to the top of our news feeds. Usually those are posts 
that play on people's fears and worst impulses, but they may 
not be based on any sort of fact.
    Facebook does all it can to manipulate its billions of 
users so it can direct our eyes toward their ads and turn an 
even bigger profit.
    This is no exaggeration. In fact, Facebook tested whether 
it could manipulate our emotions. The corporation ran a 
psychological experiment on more than half-a-million users to 
see if it could manipulate our moods. Turns out it can.
    And that emotional manipulation has led to horrifying 
results.
    I do not have to tell you what amplifying our divisions has 
done to discourse in our country--not just between political 
parties. I would bet half the people in this room at least have 
had to block an old high school classmate or even a family 
member on Facebook.
    Or look around the world, more troubling. A U.N. report 
detailed how Facebook was used to spread propaganda in Myanmar 
that led to genocide. In the first month of violence, more than 
600 members of the Rohingya people were killed; more than 
700,000 refugees had to flee the country.
    I do not think for a minute that Facebook created hate, but 
we know that their competing missions of connecting people and 
turning a profit created an algorithm and a business model that 
intensified it.
    It is hard to remember a world without Facebook. It is hard 
to remember a time before we had to tell our kids ``be careful 
what you do on the Internet, because it will not go away.''
    Today we expect everyone to know that what happens online 
has consequences offline. It is just common sense.
    That is why it is so hard to for us to understand why 
Facebook--the company that ushered in this revolution--does not 
seem to comprehend that its actions have real-world 
consequences. They do not seem to understand why their 
intention to run their own currency out of a Swiss bank 
account, the topic of today's hearing, has been met with such 
fierce opposition.
    Facebook's CEO Mark Zuckerberg has said that Facebook might 
be more like a Government than it is a company. But no one 
elected Mark Zuckerberg.
    And what kind of dystopian Government wants to turn 
families and friends against each other rather than bring 
people together? Well, maybe I should not answer that.
    Facebook has demonstrated, through scandal after scandal, 
that it does not deserve our trust. It should be treated like 
the profit-seeking corporation it is, just like any other 
company.
    Mr. Zuckerberg and his executives have proven over and over 
that they do not understand governing or accountability.
    They are not running a Government. They are running a for-
profit laboratory. No Facebook executives, to my knowledge, 
have been harmed by Facebook's experiments. But look what has 
happened everywhere that Facebook has run its social experiment 
on us.
    Their motto has been, ``Move fast and break things''. They 
certainly have.
    They moved fast and broke our political discourse; they 
moved fast and broke journalism; they moved fast and helped 
incite a genocide; and they have moved fast and they are 
helping to undermine our democracy.
    Now Facebook asks people to trust them with their hard-
earned paychecks. It takes a breathtaking amount of arrogance--
a breathtaking amount of arrogance--to look at that track 
record and think, ``You know what we really ought to do next? 
You know what we ought to do next? Let us run our own bank and 
our own for-profit version of the Federal Reserve and let us do 
it for the whole world.''
    I understand that, given the financial crisis and given the 
massive inequality and unfairness to workers in our country and 
given the fact that so many in this body have forgotten what 
happened 10 years ago, it is tempting to think anyone could do 
a better job than the Wall Street megabanks.
    But the last thing we need is to concentrate even more 
power in huge corporations.
    Look at Facebook's record. We would be crazy to give them a 
chance to experiment with people's bank accounts, to use 
powerful tools they do not understand, like monetary policy, to 
jeopardize hardworking Americans' ability to provide for their 
families.
    This is a recipe for more corporate power over markets and 
consumers, and fewer and fewer protections for my constituents.
    Thank you, Mr. Chairman.
    Chairman Crapo. Thank you, Senator Brown.
    We will now proceed with your testimony, Mr. Marcus.
    You may proceed.

    STATEMENT OF DAVID A. MARCUS, HEAD OF CALIBRA, FACEBOOK

    Mr. Marcus. Thank you, Chairman.
    Chairman Crapo, Ranking Member Brown, 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. Secretary Mnuchin reinforced those 
views at his press conference yesterday. We strongly agree with 
both of them. We will take the time to get this right.
    We expect the review of Libra to be among the most 
extensive ever. We are fully committed to working with 
regulators here and around the world, and let me be clear and 
unambiguous. 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 does not 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, 
as well as nonprofits like Women's World Banking, who are 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 crime. We 
expect these safeguards will at least meet, if not exceed, 
existing standards and improve the integrity of the global 
financial system.
    When fully formed, we expect the Libra Association to 
include 100 diverse members. Facebook will only have one vote 
and will not be in a position to control the association. Nor 
will Facebook or the Libra Association position themselves to 
compete with sovereign currencies or interfere with monetary 
policy. In fact, the Libra Association will work with the 
Federal Reserve and other central banks to minimize the risk of 
any competition with their currencies or interference with 
their monetary policies. These areas are properly the province 
of central banks.
    Finally, I would like to turn to Facebook's role in 
establishing and realizing the potential of Libra. To 
facilitate Libra's use, Facebook has established a 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 smartphone. If this is successful, Facebook will 
benefit from more commerce across the family of apps.
    Calibra will be affordable and accessible and will also be 
safe and secure, with strong safeguards to protect users' 
accounts and information. We expect 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 with Facebook, 
except for limited circumstances such as preventing fraud or 
criminal activity and complying with the law.
    I am excited about the potential that Libra and Calibra 
hold, and I am proud to have initiated this effort here in the 
United States. I believe that if America does not lead 
innovation in digital currency and payments area, 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, Mr. Chairman.
    Chairman Crapo. Thank you very much, Mr. Marcus.
    I am going to start out with the question that--you 
anticipated my question, actually, at the beginning of your 
statement, with regard to jurisdiction, frankly, and the 
regulatory rules of the road. It seems to me that digital 
technology innovations like this may be inevitable and could be 
beneficial. I also believe that the United States should lead 
in developing what the rules of the road should be. You have 
already indicated your awareness of Secretary Mnuchin's remarks 
yesterday, a statement that Chairman Powell gave in responses 
to this Committee when he was before us just a week or so ago, 
and other concerns that have been raised by Federal regulators.
    By setting up Libra in Geneva, Switzerland, it makes me 
wonder whether the rules of the road and supervisory oversight 
will be focused more on the Swiss Financial Market Supervisory 
Authority. However, in your testimony you state, as you have 
again stated today, that ``Facebook will not offer Libra 
digital currency until we have fully addressed the regulatory 
concerns and received appropriate approvals.''
    My first question is: Do you agree with me that the United 
States should lead in establishing the rules of the road and 
the legal oversight of Libra and similar digital currency 
initiatives?
    Mr. Marcus. Chairman, thank you for your question. Yes, 
absolutely, I agree that the U.S. should lead, and I want to 
reaffirm that we chose Switzerland not to evade any 
responsibilities or oversight but, rather, because it is a 
well-established international place with headquarters for WHO, 
WTO, even the BIS, Bank of International Settlements. And 
despite the fact that the Libra Association will be 
headquartered in Switzerland, it will still register with 
FinCEN and, as a result, will have oversight from U.S. 
regulators. But I completely agree with you, Chairman, that the 
U.S. should lead.
    Chairman Crapo. I appreciate that, and you have already 
indicated that you see that in the United States you will need 
to deal with FinCEN, OFAC, SEC, and some State regulators. I 
have been thinking about this question. The United States 
approaches the regulation of data and data privacy in a 
sectoral way. We have multiple regulators over different pieces 
of economic activity and other types of social activity. Europe 
does this differently, for example, through its GDPR, where it 
is a broad-based rule across sectors.
    If you look at just FSOC in the financial world, we have 
got the Treasury, the Federal Reserve, the SEC, the FDIC, the 
OCC, CFPB, the NCUA, the CFTC, the FHFA. And I guess my 
question to you is: Have you analyzed and determined in our 
sectoral approach to regulation which of all of these 
regulators would have a piece of creating the rules of the road 
if the United States stays on this sectoral approach?
    Mr. Marcus. Chairman, this is not for me to say, but all I 
can say today is that we are committed to working until we 
satisfy all the concerns and meet the regulatory bar before we 
proceed. In the U.S. there are a number of regulators that we 
are engaged with, and we are also engaged with the G7 working 
group that includes finance ministries and central banks that 
are looking into Libra, and we are working collaboratively with 
them as well.
    Chairman Crapo. Well, thank you. And it seems to me--I 
understand that you cannot tell us which agencies really are 
going to take a claim to some piece of what is happening with 
the establishment of Libra. But you have committed that you 
will comply with the regulatory requirements of all U.S. 
regulators.
    Mr. Marcus. Yes, Chairman.
    Chairman Crapo. Let me go quickly to one more question. I 
have got a lot of them. I will have to submit some of those to 
you after the hearing. You recently told the Banking Committee 
that Facebook, Inc., collects data from transactions that occur 
on platform and use it for advertising and personalization. 
Briefly, would you please describe the personal data collection 
from on-platform transactions? And what I am talking about is 
will this type of information be collected for on-platform 
transactions that use the Calibra wallet? For example, when a 
user buys a product on Facebook through Calibra, will Facebook, 
Inc., allow other digital wallets to be used within its family 
or products? And if you could, just explain how that will work.
    Mr. Marcus. Chairman, one thing is really important, and I 
want to state this very clearly. We will have with the Calibra 
wallet to compete with a number of other wallets that will 
operate on top of the Libra network, and the Libra network will 
be interoperable, meaning that wallets can send money from one 
wallet to another wallet, which is not possible with the 
current system. And as a result, to earn people's trust, we 
will have to have the highest standards when it comes to 
privacy, and the way we have built Calibra is that no financial 
data or account data that is actually collected in Calibra to 
offer the service will actually be shared with Facebook, and 
the way that we have built this is to separate social and 
financial data because we have heard loud and clear from people 
they do not want those two types of data streams connected. So 
this is the way the system is designed.
    Now, for transactions that would happen on any of our 
family of apps, the same way that any merchants completing a 
transaction, we will offer many options, including, of course, 
the option for people to pay with credit, debit cards, and 
other wallets, as well as with their Calibra wallet.
    Chairman Crapo. All right. Thank you.
    Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    I would point out in response to Chairman Crapo's 
questions, you are the only one with--we talk about 
competition, but you are the only one with a reach of 2 billion 
people, so that is important to remember.
    Facebook has a long track record of abusing users' trust. 
You know that, Mr. Marcus. Until recently, you headed 
Facebook's messaging team as they were allowing--you were 
allowing other companies like Netflix and Spotify and the Royal 
Bank of Canada access and read Facebook users' private 
messages. So be clear about what went on at Facebook. Facebook 
told us they were keeping our data safe when they were really 
allowing other companies to sift through private messages. You 
had to shut down those programs after a huge backlash.
    Over and over, Facebook has said, ``Just trust us,'' and 
every time Americans trust you, they seem to get burned. 
Facebook told the FEC in 2012 that it would stop abusing our 
data, and then last week got a $5 billion, with a ``B''--five-
thousand million--fine for violating that agreement. As we 
know, you have even run psychological experiments on users.
    So sitting here today, Mr. Marcus, after all the times 
Facebook has abused the public's trust--and you know that--do 
you really think people should trust Facebook with their hard-
earned money? Yes or no.
    Mr. Marcus. Senator, you heard it directly from Mark--and I 
will reiterate this--that trust is primordial----
    Senator Brown. I did not hear it directly from Mark. I am 
hearing it from you.
    Mr. Marcus. Trust is primordial, and we have made mistakes 
in the past, and we have been working and are continuing to 
work really hard to get better, and we have invested in a 
number of programs, notably on privacy, election integrity, and 
a number of other issues. But I want to answer your question 
directly for Libra. The reason we designed Libra in such a way 
that Facebook will only be one among 100 different members of 
the Libra Association and will have no special privilege means 
that you will not have to trust Facebook. We understand----
    Senator Brown. Well, Mr. Marcus, you know better than that. 
You know that only Facebook has access to 2 billion people, and 
to say that you are just one of many is simply not true. After 
people's data and private messages have been stolen and sold, 
after you have let Russian bots try to throw the 2016 
election--with no contrition, I might add--after you have 
abetted genocide in foreign countries, you really think people 
should trust you with their bank accounts and our economy? I 
just think that is delusional.
    Let me ask a related question. If you think hardworking 
families should trust Facebook's monopoly money, I would like 
to see how much you and your company trust it. You get a 
paycheck in dollars, I assume. I assume you get some pretty 
good compensation in Facebook stock, too. Will you pledge today 
in this Committee that you and your team who are working on 
this project will accept 100 percent of your salary and other 
compensation in this Facebook currency?
    Mr. Marcus. Senator, Libra is not designed to compete with 
bank accounts or compete with those things----
    Senator Brown. That is not the question. The question is: 
Will you accept all of your compensation in this new currency 
that you want us to trust you so much?
    Mr. Marcus. Senator, Libra is not meant to compete with 
bank accounts. We will, for instance, not pay interest. It is 
like cash, like digital cash.
    Senator Brown. That is really avoiding the question. Do you 
trust your currency so much that you and your team are willing 
to see 100 percent of your compensation be paid to you in that 
currency? Which it could be if you decided it could.
    Mr. Marcus. Senator, if your question is whether I would 
trust all of my assets in Libra, the answer is yes, I would, 
because----
    Senator Brown. No, my question was----
    Mr. Marcus. ----and my pay.
    Senator Brown. ----do you trust this enough to make your 
compensation paid fully in your currency?
    Mr. Marcus. Senator, I would because it is backed one for 
one with a reserve----
    Senator Brown. You could have said yes at the beginning of 
the question then.
    Mr. Marcus. Senator, with respect, I wanted to clarify that 
we are not trying to compete with bank deposits or----
    Senator Brown. Let me finish with the last question. You 
said you are open to Facebook about your company creating--you 
have said that you are open to feedback about your company 
creating a new currency. I have told you I think this is a bad 
idea. The Republican Chairman of this Committee has raised 
concerns. The Democratic Chair Maxine Waters in the House has 
demanded you give up on this project. The Chairman of the 
Federal Reserve sat in front of this Committee at the Humphrey-
Hawkins hearing last week and voiced numerous and serious 
concerns. Even the President of the United States has told 
Facebook to back down. That is not to mention the many 
international leaders who have raised serious, serious alarm.
    My question is this: Is there anything, Mr. Marcus, that 
elected leaders and economic experts can say that will convince 
you and Facebook that it should not launch this currency?
    Mr. Marcus. Senator, we agree with all of the concerns, 
very legitimate concerns that were raised by Chairman Powell, 
Secretary Mnuchin, and many others. And this is why we released 
our white paper so much ahead of any public launch, because we 
wanted to ensure that we take the time to get this right, and 
getting this right means addressing these concerns in full and 
ensuring that there is proper regulatory oversight for this 
project. And we are fully committed to doing what it takes to 
get there.
    Senator Brown. But, Mr. Marcus, with all due respect, if 
all of us who have seen the collective amnesia of this Congress 
in terms of what happened 10 years ago, in my Zip code in 
Cleveland, 44105, where there were more foreclosures than any 
Zip code in the United States a decade ago, if all of us find 
this to be a bad idea, think you should not do this launch, are 
you still going to do it?
    Mr. Marcus. Senator, what I heard from Chairman Powell, 
from Secretary Mnuchin, and many others is that there were 
serious, legitimate concerns that arose from Libra, and I will 
commit again to do what it takes to address these concerns; and 
if those concerns are not addressed and if the regulatory 
oversight is not appropriate, then, you know, we will not 
launch until it is.
    Senator Brown. That speaks a lot, Mr. Chairman, to their 
accountability and their trustworthiness. Thank you.
    Chairman Crapo. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman. Thank you, Mr. 
Marcus, for joining us.
    Let me just say it strikes me as wildly premature for us to 
come to the conclusion that we have to act now to prevent what 
could be a very constructive innovation in financial services. 
I think there are tremendous potential benefits in blockchain 
technology and cryptocurrencies. I can imagine, I think it is 
clear they could help us lower payment transaction costs. They 
could facilitate access to capital. They provide pseudonymity. 
They could provide levels of security that other forms of 
currency have not. Limited pickup as a medium of exchange might 
be explained partly by the volatility of these 
cryptocurrencies, and here we have what strikes me as an 
interesting iteration maybe, including a mechanism to provide a 
diminished volatility, which is backing it with a basket of 
currencies.
    So I just think we should be exploring this and considering 
the benefits as well as the risks and take a prudent approach. 
But to announce in advance that we have to strangle this baby 
in the crib I think is wildly premature.
    Let me ask a question, Mr. Marcus, about the ultimate 
motive of this. It seems to many of us that if this were to 
unfold as you have described and Calibra and Libra were adopted 
widely, there would be very, very valuable data about payments. 
In your testimony, my understanding is you have said that it is 
your intention--this is for Calibra--never to share that data 
without consent. So is it the business model, is it the plan to 
at some point in the foreseeable future seek the consent of the 
participants so that you would be able to commercialize that 
data somehow?
    Mr. Marcus. Senator, no, this is not the intention at all. 
The plan, as far as Facebook is concerned, to monetize Calibra 
and this initiative is actually to enable the 90 million small 
businesses that are currently on the Facebook platform and the 
many users that are on the platform as well to engage in more 
commerce together; and if they engage in more commerce, there 
will be more advertising spend from those small businesses. 
That would be a first indirect effect of having Calibra and the 
Libra network be successful, and then over time, what we hope 
is that through the Calibra wallet we can offer more services 
in partnerships with existing banks and financial services 
companies to drive new revenue streams for the company.
    Senator Toomey. So the intent is never to even seek the 
consent of the consumer with regard to that payment data, 
consent to commercialize?
    Mr. Marcus. Senator, I cannot think of any reason right now 
for us to do this.
    Senator Toomey. My understanding is that the basket of 
currencies invested in very liquid, high-quality assets that is 
used as to provide the intrinsic value of this currency, there 
would be presumably income from that. We have got a lot of 
negative interest rates around the world, but let us assume 
that we have got more positive interest rates than negative. 
That generates a revenue stream, and I think from your 
testimony the intent is to use that to cover some various 
costs.
    But at some point that could become very, very substantial, 
and I saw a reference to paying out dividends to the founders, 
the original investors. But this is also described as a not-
for-profit. So it strikes me as odd for a not-for-profit to 
generate what could be huge income and then distribute it to 
the investors. That sounds like a for-profit.
    And so one possibility is you could pay dividends in Libra 
to reflect the value of the income from the underlying assets, 
but could you explain how paying potentially unlimited 
dividends to the investor is not a for-profit operation?
    Mr. Marcus. Yes, Senator. Thank you for your question.
    First, I want to address the fact that Libra does not pay 
interest because Libra is like cash and is mainly going to be 
used as a payment instrument. And as far as the interest and 
the not-for-profit question goes, the way that this is 
structured is that it will have some income that is actually 
targeted toward paying the operating costs of the association 
and potentially returning some return to all of the 
organizations that will invest in the ecosystem to make it 
happen. But the plan is not for this income to be, you know, 
unlimited and to be, you know, all of the income going back to 
investors. Obviously, we will need to find a way over time to 
create new pools of incentive that go back to people in 
businesses using the Libra network, and this is part of the 
conversation we are notably having on how to manage the reserve 
and the returns and how to have appropriate oversight on the 
reserve with this working group that the G7 organized with 
central banks, finance ministries, and the FSB. And I believe 
that the reserve will require very specific oversight and a 
regulatory framework in order to ensure proper management.
    Senator Toomey. Thank you, Mr. Chairman.
    Chairwoman Waters. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman and Ranking Member 
Brown. Thank you for being here today, David. I appreciate you 
being in front of the Committee.
    I have some concerns, a number of concerns, one of them 
being consumer security. In cryptocurrencies like bitcoin, 
transactions are final. That means if somebody gets hacked, if 
somebody steals bitcoin, there is not much I can do about it. 
On the other hand, if somebody steals funds from a bank account 
or makes fraudulent charges on a credit card, the consumer for 
the most part almost always is held whole by the institution. 
How will Libra handle theft?
    Senator Tester. Senator, I can speak for the Calibra 
wallet, and the Calibra wallet will offer consumer protection 
against fraud and account recovery the same way that the 
leading wallets today out there and financial services 
companies provide customer protection.
    Senator Tester. OK. So in a situation where a fraudulent 
charge has been made with my account, you are saying that 
Calibra will make the consumer whole, correct?
    Mr. Marcus. That is correct, Senator.
    Senator Tester. Is that immediate? Will that be immediate? 
And will it be without question? So what I am asking is: I pull 
out my driver's license and my credit card falls on the ground, 
that is really my fault. But when they take that credit card to 
Cleveland, Ohio, and buy hoverboards with it, the bank always 
makes it fine. OK? The question is--and it is immediate. Will 
it be immediate in your case?
    Mr. Marcus. Senator, we will do our best to resolve those 
types of issues and claims as fast as possible, and we are 
investing heavily in 24/7 live customer support when it comes 
to the Calibra wallet to ensure that we can resolve those 
issues for our customers.
    Senator Tester. I think it is critical that that is 
resolved before it goes live. So when I deposit money into a 
bank, I am very confident that I can withdraw it from that 
bank. OK? My grandfather was not, by the way, and that is why 
even on these homesteads that are around, every once in a while 
you will find a glass jar full of money, because they did not 
trust the banks. It was only when we got deposit insurance that 
the banks had the kind of faith.
    What kind of faith do we have in Libra?
    Mr. Marcus. Thank you for your question, Senator. Libra is 
actually going to be backed by a reserve, one for one, so it is 
not ever going to be a fractional reserve.
    Senator Tester. OK.
    Mr. Marcus. And as a result, it is designed to be stable 
and retain its value.
    Senator Tester. I got that. So in 2008, as the Ranking 
Member pointed out, there was a run on the banks. There were 
some big companies that went belly up, including 157 banks, 
Lehman Brothers, WAMU, Bear Stearns, and others. Nobody 
anticipated there would be a run like there was. Nobody.
    How can you assure us--and, by the way, I still felt 
confident that my money was safe in my bank. How can you make 
those assurances? How can you do it when we are talking about a 
for-profit entity--whether it is called nonprofit or not, it is 
a for-profit entity. You are not doing this just for the fun of 
it. How can we be assured that our money is going to be there?
    Mr. Marcus. Senator, when it comes to Libra, because the 
reserve is actually one for one and not fractional, the issue 
we have had and the events that you highlighted were because 
some of these institutions did not have the appropriate 
reserves.
    Senator Tester. OK.
    Mr. Marcus. And we also want the appropriate regulatory 
oversight to ensure that anyone will have the ability to 
understand how big the reserve is and how many Libra coins, if 
you will, are in circulation at any given point in time to rest 
assured that the value they hold is backed at any given point 
in time with the same amount in the reserve.
    Senator Tester. So when we met last week--and thanks for 
coming in. By the way, the reserve question has to be answered, 
and it has to be something, by the way, that is not up to you 
guys to determine what that reserve is, because when times get 
tough, stuff happens, OK? And so there has to be that kind of 
reliability there for that; otherwise, we are in no different 
situation as we were in in the 1930s, because you are a big 
outfit.
    There have been a lot of comments about Facebook today that 
was brought up about some of this stuff that has happened on 
Facebook that has not been meritorious--and I am being 
generous--and it is true. And it has to do with bad actors 
because, quite frankly, there are people on Facebook that are 
doing stuff all the time that have a different agenda than 
right and good and mom and dad and apple pie and Chevrolet. OK? 
How are you going to prevent bad actors from using the 
application? And the past performance with Facebook has been 
not that aggressive. Let the money come in, we will worry about 
it later. And it has had some pretty negative impacts on a lot 
of stuff worldwide. Tell me how you are going to prevent bad 
actors from using this. And then I will shut up.
    Mr. Marcus. Senator, when anyone will open a Calibra 
account--because you will need to open a separate account. You 
cannot actually just use your Facebook account to open a 
Calibra wallet. You will have to authenticate and upload your 
Government-issued ID. As a result, we will have real identity 
on top of the Calibra wallet, and we will have systems and a 
dedicated team to prevent fraudulent activity and, of course, 
to meet our requirements of anti- money-laundering and 
counterterrorism funding monitoring.
    Senator Tester. It is a huge issue, and I think it would 
benefit this effort if Facebook did a better job right now 
doing exactly what you said. Thank you for being here.
    Chairman Crapo. Senator Tillis.
    Senator Tillis. Thank you, Mr. Chairman. Mr. Marcus, thank 
you for being here.
    First off, I would like to associate myself with some of 
the comments of Senator Toomey. I think it is a good idea for 
us to explore this because, quite honestly, cryptocurrency now 
is still kind of a wild, wild West that is not very well 
regulated, and there are a number of examples that I am aware 
of where consumers have lost everything with their engagement 
with some of the better-known cryptocurrencies out there.
    I am trying to understand the distinction. You are going to 
have a transaction processing platform that I think several 
people have agreed to enter a consortium. I assume that that is 
with the intent of using the underlying platform. You are not 
creating something that is at the expense of credit card 
companies or other wallet platforms on the Internet. Is it a 
facilitator for those and take all comers, assuming that they 
are trusted payment platforms?
    Mr. Marcus. Yes, Senator, and I want to stress that both 
Visa and Mastercard are taking this journey with us, as well as 
PayPal and Mercado Pago and Coinbase and a number of other 
wallets. But I want to also stress that you do not have to 
become a member to accept Libra as a form of payment or to 
build services on top of the Libra network.
    Senator Tillis. Well, that is what I was trying to get at. 
There is a distinction between a currency, which would be a 
Libra, and the underlying infrastructure you are providing to 
facilitate payments. Is that correct?
    Mr. Marcus. That is correct, Senator.
    Senator Tillis. Now I want to get to something that I think 
you all have to--first off, what kind of capital investment are 
you all projecting? If you are hoping to launch it next year, I 
assume you have got a pretty exhaustive implementation plan in 
place. What kind of capital investment are you all looking at 
to put in the underlying infrastructure?
    Mr. Marcus. Senator, I think that is one of the reasons why 
Facebook is an appropriate sponsor as well. We have the 
resources to innovate, and we are ready to put those resources 
to build valuable tools for people, and that is what we are 
going to do here. We have not determined exactly how much we 
are going to invest, and this is a process that----
    Senator Tillis. So the consortium would be a part of the 
investment?
    Mr. Marcus. Yes, every member, Senator, will have an 
opportunity to invest and participate in funding the network.
    Senator Tillis. I think something that would be very 
helpful for this Committee and maybe other Members is to get 
really a briefing on the entire stack here. I think you have 
said repeatedly you are not a bank. You are not going to hold 
deposits. You cannot have a run in a traditional sense. I 
understand what you are doing with the reserve, I guess, for 
transactions and process. I think it would be very helpful for 
the Committee Members and staff to understand that, so a 
briefing of that type would be--what I have been able to study 
on the Internet is fairly limited in terms of really 
understanding the stack, and then understanding what parts of 
the stack probably should be subject to some sort of regulatory 
oversight.
    I do want to express a concern. We had a Committee hearing 
on Judiciary, I think it was just last week, talking about how 
social media platforms have been hijacked by transnational 
criminal organizations, by pedophiles, by sexual predators. I 
do not think that you ever implemented--or no social media 
platform, I hope, was implemented for that purpose. But people 
are smart and devious, and they hijack it. I hope that is not 
part of your implementation and you are looking at all the ways 
that your payment platform, like all the other ones, could be 
potentially exploited for criminal activity. That is another 
reason why I think a briefing on the fuller architecture, the 
implementation timeline, maybe your own suggestion of where 
regulatory oversight would be pretty important to making sure 
you are going to create a trusted platform. We need to get that 
kind of information to the Committee and to the Members who are 
interested in digging in.
    I believe that if--the United States can either follow some 
other jurisdiction on pursuing this, or we can lead, and I 
believe in the same way that we have the gold standard for the 
banking system in the United States, we have an opportunity to 
set an international standard that will ultimately provide 
greater consumer protections for a lot of the other upstart 
equivalent--not exactly equivalent architecturally to what you 
are planning on doing. So I think it is worth you all doing 
this. I do have concerns about privacy, about potential 
exploitation of the platform, but I believe the United States, 
our regulatory environment, and a consortium that is well 
funded is more likely to produce a gold standard, something 
that does drive down the cost of transactions, actually 
providing better value for people who have the least amount of 
money to pay the transaction fees that they are paying today. 
So I look forward to seeing this develop.
    Thank you.
    Mr. Marcus. Thank you, Senator.
    Chairman Crapo. Senator Warner.
    Senator Warner. Thank you, Mr. Chairman. Good to see you, 
Mr. Marcus.
    I am all for financial innovation and better payment 
methods. I am intrigued by blockchain and distributive ledger 
technology, but I share a lot of the concerns that my 
colleagues do up here, particularly with an enterprise as large 
as yours, 2 billion users.
    If we look back during the antitrust investigation of 
Microsoft during the 1990s, the Justice Department found that a 
key strategy that Microsoft used, which was internally dubbed 
``embrace, extend, extinguish,'' just that the strategy was to 
go out and find new technology and then either copy it or buy 
it up--I call it ``catch and kill.'' It has been a methodology 
that Facebook has used extraordinarily effectively, buying up 
or copying other emerging technologies that might be disruptive 
to your dominance.
    Now we move into blockchain, which, again, has the ability 
to be extraordinarily disruptive. Why shouldn't we view 
Facebook's efforts here with Libra and Calibra simply as 
another manifestation of the catch-and-kill approach?
    Mr. Marcus. Senator, I am glad you asked that question, 
because the way that we have developed the technology, the 
early technology for Libra, is that we have invested, we put 
our best engineering talent in building the code base, the 
technology for the Libra network. And then what we did is we 
open-sourced it, and as a result, it does not belong to us 
anymore. It is now belonging to the community, and they will 
help build the code, and we will relinquish our control over 
both the code base and the network through the process.
    Senator Warner. Let me follow up then because--will you 
commit that Facebook will not develop preferential incentives 
that unfairly tie Calibra, which is going to be your money-
making venture, to other Facebook products as a way from 
prohibiting Libra users to use wallets other than Calibra?
    Mr. Marcus. Senator, I would even go further, which is that 
not only have we started the technology and shared it in open 
source, but the network is actually completely----
    Senator Warner. No, that is not the question. The question 
is incentives within your existing products. You did not answer 
Chairman Crapo's question, where he said with your dominance 
how do you make sure that your already existing global 
platforms like WhatsApp and Messenger will actually support 
third-party wallets. Will you at least clarify your answer to 
Chairman Crapo's question and say Facebook will make sure that 
WhatsApp and Messenger will support third-party wallets?
    Mr. Marcus. Senator----
    Senator Warner. Yes or no.
    Mr. Marcus. Senator, I want to clarify because there is a 
new----
    Senator Warner. Not clarification. This is a fair--you did 
not answer Chairman Crapo. Please answer my question.
    Mr. Marcus. Senator, the network is interoperable, meaning 
that people who are using the Libra network from within 
WhatsApp will be able to send and receive from other wallets--
--
    Senator Warner. The other----
    Mr. Marcus. ----not Calibra wallets.
    Senator Warner. So if a user wishes to use--a Facebook user 
wishes to use a wallet other than Calibra, will you make it 
easy to allow export of their keys, their financial data, and 
other Calibra data--if somebody started as a Calibra wallet 
user and would decide I do not want Calibra anymore, I want to 
go to Nuco, will you make it easy for them to move their keys, 
their data, their financial information all over to that other 
third party?
    Mr. Marcus. Absolutely, Senator.
    Senator Warner. So right there you have agreed on data 
portability and potential interoperability in terms of the use 
of these wallets. So my hope will be you will have that same 
approach when I lay out my legislation for data portability and 
interoperability on existing platform use. So I hope your 
commitment on Calibra will extend to your current applications 
as well. Can I get a commitment there as well?
    Mr. Marcus. I cannot commit for other parts of the company, 
but----
    Senator Warner. I appreciate that you have been willing to 
work with us, but it would be really great if you would go 
ahead and make that same commitment on Facebook basic products, 
because if we want to bring in competition, you have got to 
have that data portability and interoperability. But at least 
on Calibra, you are on the record as making sure that you will 
put no barriers in place to moving from one wallet to another.
    Mr. Marcus. Senator, we believe that this is actually 
primordial for the Libra network, that consumers have the 
ability to move from wallet to wallet to ensure that there are 
good, competitive dynamics that work in favor of consumers. We 
really believe that.
    Senator Warner. And so, again, I will come back again to 
Chairman Crapo's question about your globally dominant products 
already in terms of WhatsApp and Messenger. They will support 
third-party wallets other than Calibra.
    Mr. Marcus. Senator, I want to clarify, which is----
    Senator Warner. Every time you start with, ``I want to 
clarify,'' it gives me a great level of pause. Chairman Crapo 
has asked the question. I have asked the question. It seems to 
me pretty simple. WhatsApp and Messenger, globally dominant 
products, will they support third-party wallets or will they 
have incentives that will push people to simply using the 
Facebook product Calibra?
    Mr. Marcus. So this is why I want to clarify, Senator, if I 
may, because it is a nuanced answer. If your question is 
whether we will embed other wallets inside of WhatsApp and 
Messenger, the answer is no. If you are asking whether other 
wallets will have full interoperability, meaning that you do 
not have to use the Calibra wallet inside of Messenger and 
WhatsApp to be able to send or receive money to people who are 
using the Calibra wallet inside of Messenger and WhatsApp, the 
answer is yes.
    Senator Warner. Embedding is different than putting 
preferential treatment and preferential areas--I did not get to 
the questions around third-party developers having some 
concerns about getting access. But, again, Mr. Chairman, I 
think some of your questions that you have asked is one of the 
reasons we are going to need to take a great deal of time to 
work this through. Thank you, Mr. Marcus.
    Chairman Crapo. Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman. Mr. Marcus, thanks 
very much for appearing here before us today.
    Before I begin my questions, I just want to take a moment 
to commend the South Dakota Division of Banking for their 
forward thinking and willingness to allow for innovation in the 
digital currency space. Another founding member of the Libra 
Association, Anchorage, just received permission from the 
Division of Banking to become a South Dakota-chartered trust 
company. Thanks to the business-friendly climate in my State, 
Anchorage, which is a Silicon Valley cryptovault company, has 
chosen to open its second headquarters in Sioux Falls, South 
Dakota. The significance of this extends far beyond the borders 
of South Dakota. Our Division of Banking should serve as a 
model for how Governments can study and learn about digital 
currencies while at the same time allowing pioneering companies 
like Anchorage to innovate and try out new products and 
services. So, once again, congratulations to Anchorage and 
welcome to South Dakota.
    I am curious. I have had an opportunity on several 
different occasions to travel to Africa and to watch what is 
going on within Africa and the challenges they have there with 
very small amounts of value within their own currencies, and 
yet on a day-to-day basis there are literally millions of 
people there that look to buy very small, incremental items on 
a day-to-day basis. They do not have any type of a product out 
there today really that works well that is internationally 
based.
    Can you talk a little bit about what you see in other 
countries, the direction they are going and what the 
opportunities are for this type of a platform to allow a very 
simple and inexpensive way to transact for values received or 
currencies or products, commodities, and exchange without a 
high cost of doing so? Just a thought in that regard. I have 
not really heard that discussed yet today.
    Mr. Marcus. I appreciate your question, Senator. The way 
that anyone in the world will have the ability to use Libra 
using the wallet of their choice will be to install a small app 
on a $40 Android device with a basic data plan, and from that 
point on have the ability to move from the cash economy to the 
digital economy and benefit from having the ability to transact 
not only domestically but internationally at very low or no 
cost and benefit from services that will be built on the Libra 
network by other companies as well. And as a result, we really 
hope--and this is our ambition--that we can lower the barriers 
for access to modern financial services and massively lower 
costs for the people who need it the most, and in the process 
potentially also lower access to capital because if suddenly 
you have a global platform that enables free or low-cost money 
movement, then access to capital should be cheaper and the 
barriers will be lower as well.
    Senator Rounds. See, I think you are going to have a lot of 
competition. I think there are going to be a lot of different 
organizations that understand that this is the wave of the 
future. And I think the questions have been fair with regard to 
the different applications that are out there and how they 
would fit on your platform and be allowed, and I think that is 
going to be an item of discussion for some time to come.
    But with it also comes kind of the regulatory layout that 
you work within. You have chosen to set this up in Switzerland. 
What did Switzerland offer that the United States did not? And 
what is it about our regulatory framework that puts us perhaps 
at a disadvantage?
    Mr. Marcus. Senator, the choice of Switzerland, again, is 
not to evade any responsibility or regulatory oversight. It was 
really because we believe that a global digitally native 
currency that will be used by people all around the world would 
benefit from being headquartered in an international place that 
is also the home of many respected international organizations, 
and that was where we came from.
    The reality, though, is if you look at the current 
composition of the Libra Association members, those are mostly 
American companies. Calibra is an American subsidiary of a 
large American company. It will be licensed and operate in the 
U.S. And I think that the beneficiaries in terms of companies 
of the Libra network will likely be American companies under 
the American jurisdiction and with proper regulatory oversight 
in the U.S.
    Senator Rounds. I think the proposal that you have has huge 
potential, and I think the challenges for the transaction of 
the exchange for services and so forth today still has lots of 
obstacles to be overcome, including that of security and 
privacy. But, nonetheless, we are going to look forward to 
observing and participating in this because I really do think 
it is the wave of the future, and as Senator Tillis said, we 
are either going to be responding to it, or we can be actively 
involved in learning from it.
    Thank you.
    Chairman Crapo. Senator Cortez Masto.
    Senator Cortez Masto. Mr. Marcus, thank you very much. We 
appreciate you being here and answering the questions. This is 
obviously very, very innovative for all of us, and it is 
exciting, but I do have a couple of questions to see if you 
have thought through some of the concerns I think many of us 
also have.
    One of them for me in particular, something I dealt with as 
Attorney General of the State of Nevada, is the issue of money 
laundering. I know there is clear regulatory oversight that we 
have right now to address the issue of money laundering. That 
comes in so many forms, but one of them is terrorist financing 
that supports--the money laundering supports in terrorist 
financing.
    So my question to you is: How will the Libra Association 
itself be ensuring that it is guarding against any type of 
money-laundering activity? Have you thought about that?
    Mr. Marcus. Yes, Senator, and this is something that I care 
about deeply personally, and the way we are thinking about 
protecting the integrity of the network from money laundering, 
criminal activity, terrorism funding is by not only moving a 
lot of cash transactions into the digital world--you know, cash 
transactions is where most crimes currently happen, and we 
believe that if a lot of transactions move to digital, it will 
be better. And the way that we are applying AML programs is 
that, as far as the Calibra wallet is concerned, we will have 
strong identity, because for every new Calibra account opened, 
you will have to upload a Government-issued ID and 
authenticate. And as a result, we will have AML programs on the 
Calibra wallet.
    As far as the Libra network is concerned, we will have an 
AML program as well. And despite the fact that the Libra 
Association will be based in Switzerland, it will register with 
FinCEN and as a result will have to comply with AML and KYC 
practices.
    Senator Cortez Masto. I am glad you just brought up FinCEN 
because that was my next question. Would the association itself 
fall under the Bank Secrecy Act jurisdiction?
    Mr. Marcus. Senator, the association will not actually 
touch consumers. It will process--it will just organize----
    Senator Cortez Masto. So who is going to be subject to the 
Bank Secrecy Act and FinCEN then? I guess that is my question.
    Mr. Marcus. So the Calibra wallet and all of the wallets 
that are operating under their jurisdiction will, of course, 
comply with BSA, will perform KYC and have AML programs. And we 
are engaged with Treasury on this to make sure that the setup 
of the network is not only not going to take a step back in 
terms of the efficacy of the AML and CTR programs--CFT 
programs, but improve the efficacy because of the way that we 
are implementing and configuring the network.
    Senator Cortez Masto. So you are currently talking right 
now with FinCEN to get sign-off on how you address money-
laundering issues?
    Mr. Marcus. We are, Senator.
    Senator Cortez Masto. OK. I appreciate you providing more 
transparency around that. And let me just say this is a new day 
and age when it comes to cash and carrying around a briefcase 
full of cash. Transnational criminals and terrorists do not do 
that anymore. And what you are creating right now is an 
opportunity for them to engage in continuing money laundering 
and criminal activity. So know that. That is one. To say that 
we are going to be complying with AML activities is one thing. 
I want to see the specifics of it, so I appreciate your 
willingness to talk with FinCEN and talk with us about how we 
address this issue.
    Another one that has come up, as I sit on the Banking 
Committee here, and we have talked about it several times, is 
sanctions laws. The head of policy and communication for Libra 
was recently on a podcast and was asked how Libra would react 
if a Government like the United States required that the Libra 
Association blacklist certain addresses in order to comply with 
sanctions laws, as is typical in what we do here. The response 
was, I quote, ``The association will not interact with any 
jurisdiction. It will instead leave that to the entities that 
provide an on and off ramp to Libra, the currency.''
    Can you clarify that? How are we supposed to address this 
issue when it comes to blacklisting and sanctions laws?
    Mr. Marcus. Senator, this is a question that we are also 
engaged with the Treasury Department on, and the one thing that 
we have committed is that we will respect the Travel Rule and 
as a result perform the right checks, and including OFAC 
checks. And this is definitely true for the Calibra wallet.
    I do not know in what context those comments were made, but 
I believe that it may be because the association itself is not 
running anything. It is just coordinating governance. But the 
actual service providers that are going to be regulated service 
providers will enforce Travel Rule, perform OFAC checks, and 
ensure that those who are subject will, of course, perform 
those functions.
    Senator Cortez Masto. Thank you. I notice my time is up. I 
have further questions. I will submit those for the record as 
well.
    Thank you.
    Mr. Marcus. Thank you, Senator.
    Chairman Crapo. Senator Kennedy.
    Senator Kennedy. Mr. Marcus, I am going to move kind of 
fast here today, so I apologize in advance if I interrupt you. 
We only have 5 minutes.
    I want to first agree with a lot of the comments that 
Senator Toomey made. We need to encourage innovation. But I 
want to explore today the underpinnings of Libra.
    Can we agree that a banker should be trustworthy?
    Mr. Marcus. Yes, Senator.
    Senator Kennedy. Can we agree that a banker should be 
honest?
    Mr. Marcus. Yes, Senator.
    Senator Kennedy. Can we agree that a banker should respect 
a customer's privacy?
    Mr. Marcus. Senator, yes, of course, but we are not going 
to engage in banking----
    Senator Kennedy. Can we agree that Facebook knew in the 
spring of 2016 that Russia was attempting through Facebook to 
disrupt the U.S. Presidential election?
    Mr. Marcus. Senator, with regards to those events, we 
definitely moved too slow, and we----
    Senator Kennedy. Isn't it true that your general counsel 
and your chief security officer knew in the spring of 2016? 
Isn't it true that Mr. Zuckerberg and your CFO, Ms. Sandberg, I 
believe, knew in December of 2016? Isn't it also true that you 
did not tell your board of directors--they did not tell the 
board of directors until 2017--until September 2017? Isn't that 
accurate?
    Mr. Marcus. Senator, we definitely moved too slow to 
recognize the activities that were happening on the platform, 
but since----
    Senator Kennedy. Excuse me for interrupting, but I have 
only got 5 minutes. In September 2017, when senior management 
told your board of directors, you also issued--Facebook also 
issued a statement. It said, yeah, the Russians have tried to 
disrupt the election through Facebook, but they only spent 
$100,000, and they only ran 3,000 ads. That was a lie, wasn't 
it?
    Mr. Marcus. I am sorry, Senator?
    Senator Kennedy. That was a lie, wasn't it?
    Mr. Marcus. I do not believe it was, but----
    Senator Kennedy. Well, later Facebook admitted that 
actually the Russian ads had reached 126 million people, didn't 
they?
    Mr. Marcus. Senator, I believe that the people who answered 
that question at the time answered to the best of their 
knowledge at the time.
    Senator Kennedy. Right. When Mr. Zuckerberg was conducting 
his listening tour across the whole country, the first half, I 
think, of 2017, when he was feeding cows in Wisconsin and 
having dinner with refugees in Minneapolis, he knew about the 
Russian involvement, didn't he?
    Mr. Marcus. I do not know, Senator.
    Senator Kennedy. OK. He did not say anything, did he?
    Mr. Marcus. I do not remember the timeline, Senator.
    Senator Kennedy. OK. In the spring of 2017, spring and 
summer, our Intelligence Committee in the U.S. Senate started 
investigating the Russian attempts to disrupt the election 
through Facebook. Facebook issued a statement saying there were 
no such attempts. That was a lie, wasn't it?
    Mr. Marcus. Senator, I cannot--I do not remember the 
timeline, and I believe that people have always answered 
truthfully with the information they had at the time.
    Senator Kennedy. OK. In June of 2018--let me fast forward a 
little bit--we found out that Facebook was sharing user data 
with device makers, a whole bunch of them, 40 of them--Amazon, 
Microsoft, Samsung. Facebook did not disclose that to the user, 
did it?
    Mr. Marcus. Senator, my understanding--and, again, it was 
not my responsibility or my team--is that this was designed to 
enable those phone manufacturers to build integration within 
the Facebook product to serve those consumers using these 
devices.
    Senator Kennedy. OK. Your algorithms are such that if I 
watch a video on a topic, I am immediately shown videos on more 
extreme versions of that topic. We call that ``stickiness.'' Is 
that correct?
    Mr. Marcus. This is not the way that the Facebook platform 
operates today, Senator.
    Senator Kennedy. But it did for a long time, right?
    Mr. Marcus. Senator, Mark really led through the----
    Senator Kennedy. Well, can we agree on this, that Facebook 
has now become the major news source for many, many people, 
probably the major news source. Is that true?
    Mr. Marcus. I do not believe it is, Senator. I believe that 
more and more people are interacting with other people on the 
platform----
    Senator Kennedy. Well, 60 percent of your users say they 
get their news off Facebook as their primary source.
    Isn't it true--I really want your opinion--that Facebook 
has chosen to advance a set of values in which truthful 
reporting has been displaced by flagrant displays of bullshit?
    Mr. Marcus. I do not know how to answer that question, 
Senator.
    Senator Kennedy. OK.
    [Laughter.]
    Senator Kennedy. Well, here is my last question, and I 
agree again with Senator Toomey. I have great respect for 
Facebook. But Facebook now wants to control the money supply. 
What could possibly go wrong?
    Mr. Marcus. Senator, we will not control either Libra, the 
currency, or the association. And we agree that no company 
should control such a network or digital currency.
    Senator Kennedy. I would like a second round, if we could, 
Mr. Chairman.
    Chairman Crapo. If we have time, I will be glad to do that 
for Senators who so wish.
    Senator Smith.
    Senator Smith. Thank you very much. Welcome.
    I have got a lot of questions about this. You will 
understand the level of skepticism that you see here, and I 
appreciate you being here to answer our questions.
    I want to try to understand a little bit better this 
association. So the Libra Association expects to have, you 
think, about 100 founding members who together you say will be 
making decisions about investment strategy and regulatory 
compliance and social impact goals. Who is in charge?
    Mr. Marcus. Senator, the way that the governance of the 
association works is that you will have this council of 100 or 
more members that will make decisions and will elect a board 
that will be between 5 to 19 members, and that board will then, 
of course, elect a managing director, and the association will 
have a staff to perform the governance function that it is 
supposed to look after.
    Senator Smith. You know, in the U.S. Senate, we also have 
100 members, but it is clear who is in charge. Mitch McConnell 
is in charge. And so I am trying to understand in this sort 
of----
    Senator Kennedy. I thought it was shared.
    [Laughter.]
    Senator Smith. Chair Crapo is in charge of this Committee.
    I am trying to understand. You describe sort of almost a 
consensus--will decisions be made on a consensus basis? I 
understand that there is some sort of a two-third majority, but 
help me understand how decisions get made.
    Mr. Marcus. Of course, Senator. The decisions are 
basically--the structure of the governance is one where there 
are certain things that should be really hard to change, and 
those are important things to the spirit of how the network is 
supposed to operate, the spirit in which the reserve is 
supposed to operate. And I believe that when it comes to the 
reserve, by the way, we will need appropriate regulatory 
oversight.
    Senator Smith. Would there be like a constitution or a body 
of rules that would be agreed to ahead of time that would guide 
the decision making?
    Mr. Marcus. Yes, Senator, and it will be made public.
    Senator Smith. And how do you parse out kind of minority 
rights versus majority rights on this board?
    Mr. Marcus. As it stands, the way that it is starting, 
every member, if we have 100 members, will have an equal voice 
at the council.
    Senator Smith. Well, what if there is a disagreement and 
there is--you know, is the minority then just automatically 
overwhelmed by the majority in this board?
    Mr. Marcus. It will depend on the type of decision. Not all 
decisions will need supermajority to reach a consensus, 
Senator.
    Senator Smith. So it seems to me possible in any board, in 
any group of humans, people develop coalitions, and it just 
seems to me that there is a big question about how, you know, 
every voice is going to be heard in this incredibly powerful 
association headquartered in Switzerland.
    Is this board like a corporate board in the sense--what if 
there was a conflict of interest that developed?
    Mr. Marcus. We hope that we will avoid conflicts of 
interest, of course, Senator, but, again, we have a lot of work 
to do between now and the launch, and this is why we shared our 
white paper early on, to get all of the feedback and the input 
and ensure that we can address all the concerns, get proper 
regulatory oversight, and part of that is also going to be 
governance of the association.
    Senator Smith. Well, I think these are really, really 
important questions, because we are imagining this association 
headquartered in Switzerland that would have amazing power over 
the financial health of this country, over my constituents, and 
over--you know, so I think these questions of accountability 
are extremely important.
    Let me switch topics a little bit. What is the long-term 
business opportunity for Facebook here?
    Mr. Marcus. Senator, two business opportunities. One is 
really the ability for the 90 million small businesses and the 
many users we have on the platform to transact with one 
another, so as a result, more commerce on the Facebook platform 
and our family of apps. And if there is more commerce, there 
will be more advertising revenue for Facebook. So that is one 
indirect effect of enabling----
    Senator Smith. More commercial activity on Facebook equals 
more money for Facebook, more money.
    Mr. Marcus. Yes, Senator. And the other part of it is if we 
earn people's trust with the Calibra wallet and they decide to 
use it over time, we can offer in partnerships with financial 
institutions and banks other services that will be new sources 
of revenue for the company.
    Senator Smith. So competing on wallet, you know, getting a 
bigger market share of wallets. But it seems to me--I know I am 
out of time, Mr. Chair, but it seems to me that what Facebook 
is really good at is figuring out how to monetize people's 
personal data, not only the data that Facebook gets directly 
but the ambient data that Facebook collects through all of the 
many, many millions of activities that we take every year. What 
Facebook is really good at is capitalizing literally on that 
data. And so I have to say I am not reassured by your statement 
that you cannot see any reason right now why there would not be 
data sharing between these platforms.
    I have some additional questions for the record, Mr. Chair.
    Thank you.
    Chairman Crapo. Thank you.
    Senator McSally.
    Senator McSally. Thank you, Mr. Chairman.
    Mr. Marcus, I do not trust Facebook, and it is because of 
the repeated violations of your users' privacy, repeated 
deceit, and I am not alone. As you know, in 2011 there was a 
consent decree with the Federal Trade Commission related to 
your privacy practices. So that is where it started there with 
investigative bodies, but it has not ended. Even after that 
consent decree, Facebook is under investigation again, and FTC 
has approved a fine for about $5 billion just recently because 
of your repeated violations of your users' information, for 
example, you know, without users' permission, sharing personal 
profile information with outside software developers, selling 
that off again; data breaches; allegations that you repeatedly 
change users' privacy settings without notice. The SEC, of 
course, is also investigating events surrounding the sale of 
personal information from Facebook. The New York State's Office 
of Attorney General has an investigation into unauthorized 
collection of 1.5 million Facebook users' email contact 
databases. On and on and on. There are allegations of bugs, oh, 
sorry, we did not mean to allow them to download photos, and it 
is one after another after another after another. So I do not 
trust you guys.
    So instead of cleaning up your house, now you are launching 
into another business model with Calibra here, and you have got 
documents that talk about your privacy commitment for Calibra. 
So in that privacy commitment, you say that you will not be 
sharing account information or financial data with Facebook or 
any third party without customer consent. So how do we know 
that this is not going to change? And how do we know you are 
actually going to do that based on your track record of failing 
and violating and deceiving in the past?
    Mr. Marcus. It is a totally fair question, Senator, and I 
want to answer it in two parts.
    The first is that, as you know, we have been working 
really, really hard on addressing the issues; some of them you 
have raised. We have invested incredible resources in election 
integrity and privacy. Mark has made it his top priority, and 
we will continue to do that until those issues are fully 
resolved and addressed to satisfaction.
    On the Libra side, we have designed this network in such a 
way that Facebook does not and will not control it or the 
currency, and that there will be plenty of competition. And I 
want to take a moment to explain why there will be a lot of 
competition.
    First, there is interoperability, so regardless of the 
wallet you choose, you will be able to pay across wallets, 
which is currently not possible.
    Senator McSally. I do not want to get into the technical 
stuff. I am talking about the trust issue. So you violated 
privacy in the past as a company. You continue to have issues. 
You continue to change even the privacy rules without informing 
users. Yet you are launching a new product, and you are 
claiming that their privacy is going to be protected. So how 
are users to know that that is also not going to change and 
they are not going to be violated? That is what I am getting 
at. The core issue here is trust.
    Mr. Marcus. And, Senator, the point is really that people 
can get all of the benefit from this network without using our 
wallet, and I know that we will have to earn people's trust for 
a very long period of time in order to get the benefit of them 
wanting to use the Calibra wallet instead of any of the other 
wallets they will have the choice of using.
    Senator McSally. So let me follow up also. I know Senator 
Toomey asked a question. Your privacy document says that 
Calibra will be transparent, offering customer choices and 
controls using clear, simple language and easy-to-find privacy 
controls that detail what data is collected, used, shared, and 
for what purposes. You are telling me--and I think you said 
this already, but can you clarify?--the user will not be able 
to have consent as to their data being collected?
    Mr. Marcus. I am sorry. I do not understand the question, 
Senator.
    Senator McSally. OK. For Calibra, you specifically say in 
your privacy document that there will be easy-to-understand 
controls on what is being collected. So will the user have 
consent for their data being collected when they are using 
Calibra?
    Mr. Marcus. Yes, Senator.
    Senator McSally. So then do they have to consent in order 
to use Calibra?
    Mr. Marcus. Yes, Senator.
    Senator McSally. OK. So that is really no choice, right? So 
in order to use it, your data has to be collected. There is no 
option to opt out.
    Mr. Marcus. Senator, if you want to use the Calibra wallet, 
you will have to, for instance, authenticate and upload a 
Government-issued ID. And if consumers do not want us to 
collect that Government-issued ID, for instance, at the very 
first step, then, of course, they will not be able to use the 
service, because we will be compliant to KYC regulation.
    Senator McSally. So what is the business model of Calibra 
then? You mentioned the interface with Facebook just recently, 
that the more people who are using it, the more, you know, 
people will stay on Facebook. And then you can just continue to 
collect their personal information and target them with ads and 
sell off their information. Is that the business model of 
Calibra? Or how are they going to make money?
    Mr. Marcus. With respect, Senator, that is not what I said. 
But what I said is----
    Senator McSally. But that is actually what happens.
    Mr. Marcus. I will focus on the specific question you 
asked, Senator, which is that we have 90 million businesses, 
many of them that grow thanks to the Facebook advertising 
platform. They are able to reach new consumers. They are able 
to hire. And we believe that if they now have the ability to 
sell to more constituents across the Facebook platform and more 
people have access to the services and products of those 90 
million businesses, then more commerce will happen on the 
Facebook platform.
    Senator McSally. A wonderful public good that you guys are 
committed to. I know I am way over time here, and that was 
extremely sarcastic. Thank you.
    [Laughter.]
    Chairman Crapo. Senator Sinema.
    Senator Sinema. Thank you, Chairman Crapo, and thank you to 
our witness for being here today.
    Mr. Marcus, Arizonans have heard a lot of promises from 
Facebook over the years about privacy. For example, Facebook 
promised, when it acquired WhatsApp, that it would not scrape 
our message data to deliver targeted ads. But 2 years later, 
Facebook broke its promise and monetized our personal message 
data.
    With real doubts about Facebook's commitment to privacy, 
Arizonans are rightfully skeptical about the proposed digital 
currency Libra. The goal of Libra is to reach the unbanked and 
underbanked, which is a noble goal. But it is important to 
remember that those who have not utilized a bank or credit card 
will be more susceptible to scammers and predatory practices.
    Your head of product, Kevin Weil, told TechCrunch on June 
18th that there are ``no plans for the Libra Association to 
take a role in actively vetting'' developers of wallets, 
exchanges, or other related apps. But failing to vet developers 
would expose Arizonans to scammers, which is unacceptable.
    Do you stand by Kevin's statement?
    Mr. Marcus. Senator, first I want to correct something, 
which is that WhatsApp is fully encrypted, so even Facebook 
does not have access to messages on WhatsApp. But to answer 
your question, which is a very important one, I would say two 
things.
    One is that while the Libra Association will not get in the 
way of developers developing things, we will need as an 
association to find the right approach to ensure that 
publishing services on the Libra network has controls. And the 
one thing I wanted to say as well is that financial literacy is 
really important, and that at the Libra Association there will 
be grant and investment made into financial literacy.
    And as far as the Calibra wallet is concerned, not only 
will we have consumer protections that will protect your 
constituents if they ever have a fraud issue, but we will make 
sure that there is appropriate education in the product from 
the get-go.
    Senator Sinema. Well, that was very helpful information, 
but that response does not actually address my concern because 
Libra's goal is to reach a population that studies show are 
especially vulnerable to financial fraud and abuse. Without 
more vetting processes for these developers, Arizonans will be 
more likely to be scammed using Libra, which can jeopardize 
their hard-earned savings and financial security.
    So while we are on the subject of scams, here is a 
hypothetical scenario for you. Let us say an unsavory app 
developer that is based on Pakistan utilizes an exchange that 
is based in Thailand to rip off an Arizonan who is using a 
wallet that was built in Spain. So they steal all of their 
Libra, and that, of course, is minted by an association based 
on Switzerland. So which law enforcement or governmental agency 
in which country does the Arizonan call to seek his or her 
legal and financial recourse in this situation?
    Mr. Marcus. That is an excellent question, Senator, and the 
answer to that is that your constituents will likely use an 
American, U.S.-based wallet provider that will have consumer 
protections and that will make your constituents whole if 
something bad happens to them.
    Senator Sinema. So in my scenario, this Arizonan was using 
a wallet that was built in Spain. Would they still have access 
to American recourse for legal and financial problems?
    Mr. Marcus. Senator, it will depend on the wallet consumer 
protection, the same way that today you have different consumer 
protections and services offered by different financial 
institutions and others. And I believe that it will be the role 
of the Libra Association to ensure that there is proper 
education so that consumers can make informed choices.
    Senator Sinema. I think the point here is that, despite 
having legal and technical background in this room, this is a 
difficult question to answer. You posited that they would 
likely be using an American wallet. But if they were using a 
wallet from another country, that complicates the answer. This 
is a real challenge, and Arizonans deserve answers on what 
rights they would have as consumers and how they would use 
them.
    I also have some national security concerns. Despite 
granting anonymity, traditional cryptocurrencies are not the 
first choice of drug cartels, terrorists, and human traffickers 
because cryptocurrencies are not very easy to use. But Libra is 
not a cryptocurrency. It is a digital currency that promises 
both anonymity and ease of use, which raises concerns about its 
potential exploitation for illicit purposes. I am concerned 
that drug cartels and human traffickers, major problems, of 
course, in Arizona and border regions, may try and use Libra to 
finance their operations along our southern border. Your 
testimony says that you will comply with the rules set by the 
Office of Foreign Assets Control with respect to financial 
sanctions. But if a drug cartel or one of its sanctioned 
persons attempts to complete a transaction using Libra, would 
you comply with OFAC policy or would you allow the drug cartel 
transaction to be added to the ledger?
    Mr. Marcus. Senator, first of all, Libra is not anonymous, 
so we will have an AML program, and as far as the Calibra 
wallet is concerned, we will have full KYC and AML programs. As 
a result, those types of activities will be very difficult to 
conduct on this network, and you have my commitment that we 
will take the time before launch to ensure that the network and 
the proper measures are taken to avoid this network to be used 
for other purposes than it was designed for.
    Senator Sinema. Thank you.
    Mr. Chair, my time has expired. This is just a proposal, 
but folks in my State are concerned, and we need better 
answers. So I look forward to working with you and the 
Committee on this. I yield back.
    Chairman Crapo. Thank you.
    Senator Cotton.
    Senator Cotton. Mr. Marcus, thank you for your appearance 
and your testimony. Your CEO in testimony before Congress 
referred to Silicon Valley as ``an extremely left-wing place.'' 
That is why so many center-right voices have concerns about 
censorship on platforms like Facebook, but also Twitter and 
Google and so forth. I worry about the possibility that a 
digital wallet and digital currency like Libra could extend 
that into the payments system. There is reason to worry about 
because Democratic Members of this Committee have made it a 
habit of contacting major financial institutions and 
encouraging them not to do business with, say, gun 
manufacturers or with Government contractors who serve ICE or 
the Customs and Border Patrol.
    What safeguards, if any, will Libra have to ensure that you 
treat on par people with views that may be disfavored in an 
extremely left-wing place like Silicon Valley?
    Mr. Marcus. I appreciate your question, Senator, and you 
are right that Silicon Valley tends to have a bias. But I want 
to reaffirm that Facebook is a technology company where ideas 
across the political spectrum are welcome and treated equally. 
And as far as the Calibra wallet is concerned, we wanted to 
ensure that people, as long as they have a legitimate use of 
the product, can do what they want with their money.
    Of course, there are some restrictions and regulated 
products, but my commitment to you is we will be thoughtful in 
writing those policies, and we will be happy to follow up with 
you when we get closer to finalizing those policies.
    Senator Cotton. That does not sound like much safeguard to 
me other than a commitment before you come under pressure from 
Democrats. Just wait until tomorrow until you go before the 
House Financial Services Committee. If you think the Democrats 
on this Committee have hounded banks, wait until you see what 
you are in for over there. I mean, how do we--so a federally 
licensed firearm dealer wants to sell firearms at a gun show, 
or maybe a neighbor wants to sell a shotgun to his neighbor, or 
a Christian baker wants to practice his faith when he bakes his 
cake, or someone wants to pay a subscription to, say, Breitbart 
instead of the New York Times, what confidence can people who 
have center-right views have that Libra is going to be 
available to them on an equal basis as those who want to shut 
down gun retailers or shut down oil pipelines or Government 
contractors who are working with Immigration and Customs 
Enforcement?
    Mr. Marcus. Senator, firearms, for instance, are a 
regulated product. They are already regulated and treated as 
such on the Facebook platform. And I know it is a complicated 
issue, and when it comes to writing this policy, again, I am 
committing that we will be very thoughtful.
    I have to say that, as far as I am concerned personally, I 
believe that we should only get in the way in very exceptional 
cases, and by being thoughtful of getting in the way of people 
doing what they want with their money as long as it is lawful. 
But we also need to be thoughtful in how we write those 
policies.
    Senator Cotton. Well, thank you for that commitment, and I 
do hope we have transparency, because I assure you, you will be 
getting letters from that side of the dais, to say nothing of 
the House Financial Services Committee Democrats, just like all 
the major banks on Wall Street have been getting those letters. 
And, for that matter, your own workforce is going to bring that 
kind of pressure to bear on you as well.
    Let us shift gears in the time I have left. We have heard a 
lot of talk about money laundering this morning. It is a big 
problem. I share the concerns we have heard this morning. Money 
laundering is typically done by individuals engaged in criminal 
activities like drug trafficking, human trafficking, and so 
forth.
    There is also the question of sanctions. One of the 
advantages of having the world's reserve currency is that we 
have the ability to impose extremely effective worldwide 
sanctions because most, almost all, transactions are dealt with 
in dollars worldwide. Could you talk a little bit about how 
Libra would have an impact on the United States dollar as 
reserve currency and, therefore, on the United States 
Government's ability to impose sanctions? This is different 
from money laundering about individuals. We are talking about 
sanctions on Nation States like, say, Iran that is developing 
its own cryptocurrency and cracking down on others specifically 
to try to avoid sanctions?
    Mr. Marcus. Senator, I am glad you brought this us because 
I believe that if we do not lead in this space, others will. 
And the same way that we will end up having two Internets and 
two different infrastructures, we will have two different 
financial systems and two different financial networks. And one 
will be out of reach of sanctions that are so effective in 
enforcing our foreign policy and preserving our national 
security. And this is why I believe that Libra is an 
alternative that consumers will have the ability to use with 
wallets that will de facto enforce the sanctions that are led 
by our national security apparatus and Treasury.
    So I actually believe that if we stay put, we are going to 
be in a situation in 10, 15 years where we are really going to 
have half of the world that is going to operate on, by the way, 
a blockchain-based technology that will be out of reach from 
our national security apparatus.
    Senator Cotton. All right. Thank you.
    Chairman Crapo. Senator Schatz.
    Senator Schatz. Thank you, Mr. Chairman. Mr. Marcus, thank 
you for being here.
    On cybersecurity, on foreign interference, on privacy, on 
extremism, on fake news, is it fair to say you are still 
working on solving those problems as a company?
    Mr. Marcus. Yes, Senator, we have a number of issues that 
we are hard at work solving.
    Senator Schatz. So you are working on solving those 
problems. They are not fixed yet. Correct?
    Mr. Marcus. Some of them are, and a lot deserve a lot more 
work.
    Senator Schatz. Which ones are fixed?
    Mr. Marcus. I would say that some of the issues that we 
have had in the past----
    Senator Schatz. Right. Cybersecurity, foreign interference, 
privacy, extremism, fake news: which ones of those have you 
fixed?
    Mr. Marcus. Well, you know, for instance, Senator, the 
issue that happened back in the day with Cambridge Analytica 
cannot----
    Senator Schatz. Right, not which ones have--hold on. Not 
which ones have you made significant progress. Have you fixed 
any of those?
    Mr. Marcus. Well, I would say that all of them will always 
require a great deal of work.
    Senator Schatz. So let us just pretend it is the two of us 
having a conversation. My question is this: What do you say to 
someone who says maybe before you do a new thing and an 
enormously important thing, you should go ahead and make sure 
you have got your own shop fixed? So what do you say to that?
    Mr. Marcus. Senator, I believe that the status quo is 
really a huge burden on so many people around the world when it 
comes to financial----
    Senator Schatz. Wait. Hold on. You are making an argument 
for cryptocurrency generally. You are making an argument for 
this proposition generally. The question I have is: Facebook 
has a lot of problems. You guys have had a rough couple of 
years. And so the question is: Why are you moving on to a new 
and challenging thing other than the grandiosity of Silicon 
Valley which causes you to get bored with your own thing and 
try to move into a new line of business? So the question is not 
would it be great to eliminate credit card fees. The question 
is not should the United States lead in this area. The question 
is: Why Facebook? And why before you have fixed your other 
stuff?
    Mr. Marcus. Senator, I believe it is important that we 
continue to innovate on behalf of the people we serve, and the 
same way that we have been able to bring communication prices 
down with our messaging app, because now anyone with a $40 
smartphone can actually communicate for free with the world, we 
want to continue innovating on behalf of the very people we 
serve, and we hope that we can do the same thing for them when 
it comes to access to modern financial services.
    Senator Schatz. Do you have a specialized expertise with 
anti- money-laundering sanctions, prudential regulations, 
protecting financial information, preventing discrimination and 
other violations of consumer financial laws?
    Mr. Marcus. Senator, I do, and my team does as well.
    Senator Schatz. No, I am sorry. Not you personally. Does 
Facebook have that?
    Mr. Marcus. Senator, through the team that I have 
assembled, yes, now it does.
    Senator Schatz. Within Facebook?
    Mr. Marcus. Senator, within----
    Senator Schatz. Or are you talking about the consortium?
    Mr. Marcus. Senator, within Calibra, which is the 
subsidiary that it created, it has the proper know-how to 
operate----
    Senator Schatz. So you have hired up for this?
    Mr. Marcus. Yes, Senator.
    Senator Schatz. OK. Does your consortium have bylaws?
    Mr. Marcus. Senator, the charter of the association is in 
the process of being ratified by its members, and it will be 
made public.
    Senator Schatz. So that is a no?
    Mr. Marcus. Senator, when we launched the website and white 
paper in June 2018, we have guidelines. But the reason that we 
did not want all the other members to sign an existing bylaw or 
charter is we wanted them to take part in writing it, because, 
again, we do not want to control the network, and we think it 
is important that those decisions are made collegially with the 
other cofounding members.
    Senator Schatz. So what I am hearing--and they are 
terrified to talk about this publicly--is that members of the 
consortium actually have lots of questions, too, similar to the 
questions that are being offered on 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. And so how 
do you address the bigger question, not just the one that I 
asked earlier about you not having fixed your own shop before 
you move into currency--which seems just on the face of it to 
be nuts. How do you answer the question about size and power 
and the idea that lots of people out there think Facebook is 
already too big and too powerful and now you are going to get 
into currency? So how do you address that question?
    Mr. Marcus. Senator, we answer that question with the very 
setup that we have at the Libra Association and the way that 
this network is not only governed, but the way that we will 
have to face tremendous competition on top of this network with 
other companies that already have a lot of existing financial 
accounts, that are already KYC, that are already operating, 
that have trust. So you have companies like PayPal and others 
that will, of course, collaborate but compete with us for----
    Senator Schatz. I guess you have not--and I appreciate 
this, but you really have not answered the most basic question 
of all, which is: Why in the world should Facebook, of all 
companies, given the last couple of years, do this?
    Mr. Marcus. Senator, because we have the ability and the 
means to innovate on behalf of the people we serve, and we 
should not stand back and wait to do it if we can help the very 
people that we want to serve. Because we have the resources and 
the engineering talent, I believe we should.
    Senator Schatz. Because of your size.
    Mr. Marcus. Senator, because of our resources and our 
engineering talent.
    Senator Schatz. Because you are so big that you should get 
bigger.
    Mr. Marcus. That is not the point I was making, Senator.
    Senator Schatz. Thank you.
    Chairman Crapo. Senator Menendez--excuse me, you are right. 
Senator Jones.
    Senator Jones. Thank you. Mr. Chairman, thank you.
    Mr. Marcus, I want to talk about quickly some of the money-
laundering issues that I have got real concerns about, and I 
understand that Calibra is committed to verify users and those 
kinds of things. But for money-laundering purposes, if you have 
got a worldwide issue and you have got partners all over the 
world, how are you going to get your partners to verify these 
third-party products? And how are we going to prevent this 
money laundering? I think that is a major concern. How are you 
going to deal with your partners?
    Mr. Marcus. Senator, first I want to commit that we will 
not launch until we have satisfied those concerns with Treasury 
and other regulators around the world and how the network is 
configured and it operates. But, more practically, the way that 
the network is going to operate is that all the on and off 
ramps will be regulated, and we will have proper KYC and AML. 
As a result, activities such as money laundering, terrorism 
funding will have an opportunity to be monitored, and the 
intention here is really not for the efficacy of these programs 
to take a step back. Quite the opposite. We believe that we can 
help improve the efficacy of these programs, and we will work 
hard to make that happen because this is something that I care 
deeply about.
    Senator Jones. Well, I appreciate that. I do have some 
concerns about that because, as Senator Brown said earlier, we 
have seen Facebook run into problems in their platform time and 
time again on any number of issues. And I think Senator Brown's 
comment was it is just another learning experience. But at some 
point, if things continue, and especially with a currency like 
this, if all of a sudden this operates and you continue to see 
all manner of criminal activity and money laundering, at some 
point an innovative prosecutor is going to look across the 
table and say, ``You, sir, are contributing to this. You are an 
aider and abettor.'' Are you prepared for that down the road? 
If you do not do your job and this currency is used to 
facilitate human trafficking, drugs, fraud, things like that, 
are you prepared for Facebook and all of your Calibra and Libra 
users to be looked at as criminal defendants?
    Mr. Marcus. Senator, we are prepared to take the amount of 
time that will be required to ensure that those things do not 
happen and that we improve on the efficacy of these programs. 
We really do not want this creation to be a tool for these 
types of activities, and this is why this time, before 
launching, we are taking so much time and sharing our plans 
early on and have started this long, consultative phase.
    Senator Jones. And I did not mean to imply by my question 
that you are intending to do that. I know that. But I also know 
there are unintended consequences, and if things do not go 
right, at some point somebody is going to have to step up. But 
thank you for that.
    The other thing I want to talk about briefly is taxes and 
how some of this will be taxed. As you know, the current IRS 
law treats digital currency as property, which means under 
current law every single transaction or purchase made with 
Libra will be a taxable event. The transaction will be taxable. 
So many businesses in the current cryptospace now help their 
customers comply with tax laws by submitting detailed lists of 
transactions to both the IRS and the consumer, similar to how 
stockbrokers might send both a customer and the IRS a 1099-B.
    So does Facebook plan on recording and reporting all Libra 
transactions directly to the IRS and to consumers to ensure 
that they fulfill their tax requirements?
    Mr. Marcus. Senator, this is an important issue, and the 
way that we are approaching this is twofold. One is Libra, 
unlike other digital currencies out there, will not be volatile 
to the dollar. So as a result, the variations in prices between 
the dollar and Libra will be very, very minimal. But as far as 
the Calibra wallet is concerned, we will, of course, provide 
all tools to consumers so that they can report their taxes 
without the hassle of having to record all transactions on 
their own.
    Senator Jones. Well, but that--I understand you are saying 
that you will provide that to the customer, but that you would 
not propose providing that to the Internal Revenue Service. Is 
that how I understand, that you are just putting the burden on 
the consumer and the customer to comply with Internal Revenue 
Service regulations?
    Mr. Marcus. Senator, my understanding of this matter is 
that this is the decision that is in the hands of the IRS and 
that today the IRS--it is my understanding that they require 
consumers to report. But we would be happy to work with the IRS 
to make it easier for consumers or to reach a de minimis 
determination for Libra and other digital currencies in order 
to avoid the burden for consumers.
    Senator Jones. All right. Well, I think from the money-
laundering aspect, criminal activity, and the Internal Revenue 
Service are the big things that you have got hurdles to 
overcome. It is going to take some time, I think, to get past 
all of that. But thank you. Thank you for your testimony and 
for being here.
    Thank you, Mr. Chairman.
    Chairman Crapo. All right. Now, Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Facebook's CEO Mark Zuckerberg once said that his model 
was, ``Move fast and break things''. Several of my colleagues 
have referred to it. I only have 5 minutes, which is not nearly 
enough time to list all the things that Facebook has broken. I 
have highlighted some of them on the poster behind me, and the 
underlying theme here, this is a company that does not think 
through the consequences of its actions. And with nearly 2.4 
billion active users, when Facebook breaks something, it has 
serious consequences.
    So I have been listening--in and out between the meetings I 
have had in my office--to some of your testimony, Mr. Marcus, 
and basically the theme of your response to many of my 
colleagues, particularly on data privacy, is, ``Trust us.'' 
Well, trust is something you earn, and Facebook certainly has 
not earned it.
    So it is not enough to say that you will keep the Calibra 
data separate. I would like to know how exactly will you keep 
Libra data separate from your social media data?
    Mr. Marcus. Senator, thank you for your question. I want to 
also say that, in the case of Libra, we are most definitely not 
moving fast, and I want to reiterate my commitment that we will 
not move to launch or to offer Libra as a currency on 
Facebook's platform before----
    Senator Menendez. Just answer my question right now. How 
specifically are you going to keep the data separate?
    Mr. Marcus. So the way that we keep the Calibra data 
separate from the rest of Facebook is that actually within our 
infrastructure we have separated the data from the rest of 
Facebook's infrastructure and data in order for it not to get 
commingled with the rest of the data.
    Senator Menendez. Even though in your user agreement you 
say that you are going to, may very well share aggregate data 
with Facebook?
    Mr. Marcus. Aggregate data that we may use on the Calibra 
wallet side, nonidentifiable data to understand how the----
    Senator Menendez. But that is the beginning of opening up 
the door. Let me ask you this: If there is a commingling of 
data, purposeful or not, can you commit to this Committee and 
the public that you will notify users and the proper 
authorities within 48 hours?
    Mr. Marcus. Senator, I commit that we will naturally notify 
users that would have been affected by this, but first and 
foremost, we want to make sure that it never happens.
    Senator Menendez. I know, but if it happens, I am saying 
whether purposeful or not--things seem to happen at Facebook--
will you commit to notify both the users and the public within 
48 hours of your finding of it?
    Mr. Marcus. Senator, I commit that we will inform users and 
the public if such a thing happens within a reasonable 
timeframe.
    Senator Menendez. OK. That could mean a whole bunch of 
things.
    Let me ask you this: I have been the author and architect 
of many of the sanctions regimes we have leveled against rogue 
regimes--Iran, Venezuela, Cuba, to mention some. Many of us are 
concerned about how those countries and how criminals can use 
Libra to evade U.S. sanctions from money-laundering laws.
    Last year, the Treasury Department for the first time 
identified and published digital currency addresses associated 
with two Iranian-based individuals who helped exchange bitcoin 
for Iranian cybercriminals that used ransomware to extort 
millions of U.S. dollars from over 200 victims.
    If Libra was used for a similar transaction, would the 
Libra Association, the group that validates Libra transactions, 
freeze the assets of such sanctioned individuals?
    Mr. Marcus. Senator, first, I really want to stress the 
fact that if we do not lead, others will. And as a result, the 
transactions that you highlighted and listed will happen on a 
network where we will have no jurisdiction and no reach and no 
ability to have any--exert any control for national security 
purposes.
    As far as Libra is concerned, naturally, because Libra, 
despite the fact that it will be headquartered, will be 
registered with FinCEN, will collaborate, will have an AML 
program, and will ensure that on and off ramps are properly 
regulated, and as a result, those types of activities should be 
extremely hard to----
    Senator Menendez. But my core question is: Having that 
individual identified to you, the type I just described, would 
you freeze the assets of such a sanctioned individual under 
your system?
    Mr. Marcus. Senator, the way that this would happen and the 
way that the system is currently contemplated, it would be the 
role of the big custodial wallets operating on top of the Libra 
network, like the Calibra wallet and many others, to block 
access for funds for those addresses, as well as all of the on 
and off ramps that would prevent those addresses to convert----
    Senator Menendez. Let me ask you one other question. I have 
a whole bunch of them, but I will submit them for the record. 
This does not assuage my concerns as it relates to the very 
sanctions that we have worked on a bipartisan basis to pass.
    So would the Libra Association--what would it do if U.S. 
regulators wanted to enforce sanctions on certain individuals 
but other global regulators did not? How would the association 
determine which set of rules to comply with?
    Mr. Marcus. Senator, that is a really good question and one 
that we are in active discussions with a number of regulators, 
including Treasury. And my understanding of this and the way 
that we are currently thinking about this is that actually the 
way to properly police and control the network is through, one, 
the on and off ramps; and, two, to all of the wallets that will 
be regulated.
    Senator Menendez. Well, I am going to take you at your word 
that you are not going to act before you have all these 
questions resolved because, if not, what Libra could be is the 
wild West of cryptocurrency where, you know, money laundering, 
criminals, and countries seeking to avoid U.S. sanctions could 
be their resolve. And we just cannot have it.
    Mr. Marcus. I agree, Senator.
    Chairman Crapo. Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman. Welcome, Mr. 
Marcus.
    You know, one of the benefits of going last is you get to 
hear your colleagues' comments, so I want to make a couple 
comments I had not planned to make otherwise.
    Number one, Senator Kennedy rightfully pointed out 
Facebook's failings in the face of Russian interference in the 
2016 elections. I know you are working hard to remedy it. I 
frankly wish the U.S. Congress was working to remedy it as 
well. We have a bill in this Committee, a bipartisan bill 
called the ``DETER Act'' that would say to Putin or anybody 
else that wants to interfere in our 2020 elections that they 
will pay a certain and very high price.
    So I hope, Mr. Chairman, that we will move on that. We have 
to get to the bottom of 2016, but, my goodness, we should be 
working on a bipartisan basis to protect our elections in 2020, 
and we have a means to do that.
    Second, I heard a hint of this whole idea that Facebook and 
other social media companies are conspiring against right-wing 
voices. In fact, 4 days ago, we had the President of the United 
States have what he called a ``social media summit'' at the 
White House where he summoned some of the most right-wing, 
extreme social media voices and peddled this idea that the 
President's own Twitter account was somehow being blocked and 
limited. And yet within the last 48 hours, we have seen what a 
grotesque lie that was. This is a President who just spewed 
forth all sorts of racist comments over the last 48 hours. And 
it does highlight the challenge social media companies have in 
trying to make sure that they monitor community standards to 
prevent incendiary comments that can cause harm or danger and 
at the same time allow freedom of voices on the Internet.
    So I hope we will get away from this nonsense that we often 
hear from the President and others about this kind of biased 
censorship, and I hope we will have more voices actually 
exercising their First Amendment rights to speak out against 
the President's racist comments.
    Third, real-time payments. I am looking forward and enjoyed 
this discussion here. Every time the Chairman of the Federal 
Reserve, Chairman Powell, has come before this Committee and 
others, I have asked him why it is the U.S. Government is so 
far behind our European partners and many others in real-time 
payments. The fact that we do not have a system in this country 
that can clear real-time payments is today costing millions of 
Americans billions of dollars, and they should accelerate their 
efforts and get it done. And I personally do not think we 
should hand that over to a consortium of the biggest banks in 
the country.
    So let us talk about the conversation here today 
specifically. I understand your point saying that whether you 
trust Facebook or do not trust Facebook, that is not a big 
issue with respect to the Libra Association. I have questions 
and concerns--and you have heard some today--about the Libra 
Association itself, because what is different from things like 
bitcoin--bitcoin, you know, the uncertainty around bitcoin, the 
uncertainty of its value, the wild fluctuations, in my view, 
mean it is not going to be put into widespread use; whereas, 
the whole goal here is to have billions of people around the 
world using this new coin, right? I mean, that is the goal, is 
it not?
    Mr. Marcus. It is really to help the very people who do not 
have access to current financial----
    Senator Van Hollen. But the idea is billions of people, and 
because this is now going to be tied to other currencies and 
supposedly be more stable, it will be in very widespread use. 
So there are huge concerns because this, in my view, obviously 
has lots of questions that need to be vetted. And the 
organization itself, the Libra Association--you say you do not 
have to trust Facebook, but you do have to trust the Libra 
Association. And they are doing something very different. They 
are creating a new currency that is intended to be used by 
billions of people, and I think there are lots of questions 
that you still need to answer regarding that structure. I think 
people will conjure up the James Bond movie and that 
organization, Spectre. And unless you are really clear about 
how this is going to be a transparent association and be 
accountable in all the ways that have been discussed today, 
then it is not a question of whether people trust Facebook or 
not. It is a question of whether people trust this 
international--this organization run by private companies. And 
my view is when you are talking about a world currency that is 
going to be potentially used by billions of people, I am not 
sure there is sufficient accountability that you could build 
into that system that would answer all the concerns. But I look 
forward to the continuing conversation.
    Mr. Marcus. Thank you, Senator.
    Senator Van Hollen. Thank you, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Kennedy has asked for a second round, and then 
Senator Brown and I will both go with another round of 
questioning, and I think that will be it. We may have another 
Senator or two show up.
    So, with that, Senator Kennedy.
    Senator Kennedy. Mr. Marcus, I want to follow up on Senator 
Cotton's concerns, and I think the basis for his concern is--we 
can agree on this, I think--that Facebook is not really a 
company anymore. It is a country. I mean, you have got 2.2 
billion people that use it. I do not see anything in the 
documents that I have seen that would prevent the members of 
Calibra, once Libra is prevalent throughout the world, saying, 
you know, we do not believe in abortion rights, and we have the 
transaction data of all these people, so we are just going to 
say if you believe in abortion rights, you cannot use Libra--or 
vice versa. And you could make that assessment on the basis of 
any person's position on socioeconomic issues. I think you need 
to address that.
    Let me ask you a question about, again, there is a big 
issue in trust here. In May a couple years ago, I think it was 
2016, there was an article that appeared that quoted news 
curators at Facebook. They were in charge of the trending news 
section. You know what I am talking about?
    Mr. Marcus. Yes, Senator.
    Senator Kennedy. Right. I do not think you have it anymore. 
But they testified that they had been instructed by the 
management of Facebook to suppress news stories of interest to 
conservative readers, even if they met the qualifications of 
trending, and they stated that they were told to suppress news 
stories about CPAC, Mitt Romney, Rand Paul, Lois Lerner, Scott 
Walker, Chris Kyle, Ted Cruz, articles from Newsmax, articles 
from the Washington Examiner. And one of the curators even kept 
a log. Is that true?
    Mr. Marcus. Senator, I was not part of that team, and I am 
not aware of how it functioned, but that product does not exist 
anymore.
    Senator Kennedy. OK. Well, the news curators also told that 
they were instructed to include in the trending news section 
articles from certain publications, whether they were true or 
not, and two of those publications were CNN and New York Times. 
Is that true?
    Mr. Marcus. Senator, again, I was not involved, and this 
was not my product team, and it might have happened even prior 
to my time.
    I do want to say, though, that Facebook really is a 
technology platform that is neutral when it comes to----
    Senator Kennedy. I am familiar with Facebook. Let me ask 
this one other question. The news curators said they were told 
by management not to ever put in an article in the trending 
news section about Facebook. Is that true?
    Mr. Marcus. Again, Senator, this was not my team, and I am 
not aware.
    Senator Kennedy. OK. Is there any data that Facebook has on 
its customers, if you will, that, on principle, Facebook would 
not monetize?
    Mr. Marcus. Well, Senator, the way that the data is used on 
Facebook when it comes to monetization is enabling better ads, 
to serve better ads to people that are personalized----
    Senator Kennedy. I get that. I am sorry to interrupt you, 
but I get that. But is there any data that, on principle, 
Facebook would say, ``We are not going to make money on this, 
this crosses the line''? Have you ever thought about that?
    Mr. Marcus. Senator, it is not about making money, but as 
far as Calibra is concerned, the----
    Senator Kennedy. It is not about making money?
    Mr. Marcus. Senator, we do not typically look at data in a 
way that is to make money, it is just to improve the service, 
including improving the quality of the ads that----
    Senator Kennedy. Let me stop you now, Mr. Marcus. You are 
telling me that money is a secondary concern at Facebook? Don't 
you have shareholders?
    Mr. Marcus. Senator, we do, but I believe that it is 
important that we, first and foremost, serve our customers, and 
the way we have done it with messaging apps, notably, without 
monetizing them yet, is a testament to what we can do to lower 
costs for people when we have the----
    Senator Kennedy. All right. Last question. I have got 19 
seconds here. I have got to ask this, if this is true. Do you 
know these people: Sheryl Sandberg, Elliot Schrage, or Monica 
Bickert?
    Mr. Marcus. I do, Senator.
    Senator Kennedy. OK. Is it true that Mr. Zuckerberg told 
them to meet several times and consider shutting down then-
Candidate Trump's Facebook website in 2016 because Mr. 
Zuckerberg disagreed with his views on immigration? Is that 
true?
    Mr. Marcus. Senator, I am not aware.
    Senator Kennedy. You just do not know?
    Mr. Marcus. I do not know, Senator. It would surprise me, 
but I am not aware.
    Senator Kennedy. OK. Last question, I promise. I have seen 
this description before, and I want your thoughts on it. If you 
and I interface on Facebook, there are really not just two 
participants. It is you, it is me, and it is Facebook. Is that 
an accurate description, that nothing is private?
    Mr. Marcus. Except on messaging platforms, notably on 
WhatsApp that is fully into and encrypted. In this case, it 
would be just the two of us, Senator.
    Senator Kennedy. OK. And this really is my last one. If 
Libra catches on and let us say 200 million people are using 
it, somebody is going to have the data on all of the financial 
transactions that those 200 million people have consummated, 
which is going to indicate what they are buying, what they are 
not buying, what their likes are, where they like to shop, just 
a treasure trove of information. You are telling me that nobody 
in Calibra is going to attempt to monetize that?
    Mr. Marcus. Senator, when it comes to the Libra 
Association, they will not have any personal identifiable data, 
and as a result, they will have no way to----
    Senator Kennedy. Somebody will have the data. Who will have 
the data?
    Mr. Marcus. The wallets that will provide the services will 
have the data for their own wallets, and I can speak to the----
    Senator Kennedy. So you are telling me nobody is going to 
monetize that data?
    Mr. Marcus. As far as the Calibra wallets, we do not intend 
to----
    Senator Kennedy. But isn't it the case that at some point 
those consumers are going to be sent an email saying, ``Do you 
care if we share your data? And the details are right here. 
Click on this, and it is going to refer you to a 10-page, 
single-spaced disclaimer written by the lawyers in which you 
could hide a dead body and nobody would ever find it''? And 
they are going to start doing it. Isn't that what is going to 
happen?
    Mr. Marcus. No, Senator.
    Senator Kennedy. OK. Thanks, Mr. Chairman.
    Chairman Crapo. Thank you.
    Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. And, Mr. Marcus, 
thank you for sitting here through this.
    I normally do not respond to uber-partisan comments from 
colleagues, but I just wanted to just ask the Republican 
Committee staff to let Senator Cotton know that every letter to 
Facebook from this Committee, from any of us on this Committee, 
has come--or at least from the Committee, have been jointly 
signed by Senator Crapo and me. I think that is important to 
know.
    As you see, Mr. Marcus, as is clear from this hearing, the 
distrust of Facebook is a pretty universal feeling here. You 
heard Senator Kennedy say it. You heard Senator McSally. You 
heard on the Democratic side Senators Smith and Van Hollen and 
Schatz and me and others. So that is an issue you need to deal 
with. And I want to just read back what you said to me about 
trust. You said, ``Senator, you heard it directly from Mark--
and I will reiterate this--that trust is primordial.'' And I 
responded, ``I did not hear it from Mark.'' And you said, 
``Trust is primordial . . . we have made mistakes in the past, 
and we have been working,'' and so on. So I know what the word 
``trust'' means. I know what the word ``primordial'' means. 
What the hell does that mean, that trust is primordial? 
Apparently you said--I mean, you said, and apparently Mark 
Zuckerberg said, although we found no record that he said it, 
but I believe you if you said he said it. But what does it 
mean?
    Mr. Marcus. Senator, it means that we need to continually--
we need to continue to do better in serving the customers, the 
users we are serving, and we will do what it takes to earn 
their trust. And that is definitely the case as well for Libra 
and the Calibra wallet.
    Senator Brown. And this is the same Mark Zuckerberg that 
once calls people who trust him with their data ``dumb'' and 
the next word starting with an ``F'' I cannot say in this 
Committee. This is the same Mark Zuckerberg who said that--I 
can even read what he says: ``I have over 4,000 emails, 
pictures, addresses. People just submit it. I do not know why 
they trust me,'' and then he said ``dumb'' and a profanity.
    And then I hear you quoting him, and then you saying it 
yourself, that trust is primordial. And the definition of 
primordial is ``from the beginning of time.'' And your biggest 
problem is that people do not trust you. So what am I to take 
from this?
    Mr. Marcus. That we need to continue working very hard to 
ensure that we are deserving of trust.
    Senator Brown. But why would you lead with ``trust is 
primordial''? It is so much in your DNA that you could always 
trust us, but then just lay out one after another times that 
you deceived, undermined, betrayed that trust. Again, Senator 
Schatz said over and over, why, with all of your problems, 
should we trust you on something as important as a worldwide 
currency and the damage that can come from it?
    Mr. Marcus. Senator, this is why we have set up Libra the 
way we have, which is that we will not control it, and we will 
be one among 100 different participants that will govern over 
the network and the currency. And as a result, we will have to 
earn people's trust if we want them to use our products and 
services on top of the Libra network because they will have 
plenty of choice with established companies that have a lot of 
trust.
    Senator Brown. You trust us to believe that statement when 
you say 1 of 100, but you are the only one that has access to 2 
billion people, and, you know, the George Orwell--some people 
are created more equal than others. Why should we trust you 
when you keep talking about all the competition, there are 100 
players, but nobody is like you as the preeminent player?
    Mr. Marcus. Senator, I do want to address this because I 
believe that there might be some misunderstanding on how the 
people on the Facebook wallet, the Calibra wallet, will have to 
onboard. We will not have the ability to onboard all people 
using our products automatically, naturally. We will not even 
use Facebook log-in. People will have to onboard, create a new 
account with Calibra, upload their Government-issued ID, and as 
a result, there is going to be a lot of friction, and we will 
have to make very strong commitments so that people trust us, 
and we will have to honor those commitments for a very long 
period of time to earn people's trust because, while we do 
that, you will have other wallets that already have a number of 
customers that they can enable Libra for immediately, and we 
are not in that position. And as a result, we put ourselves in 
a position where we will have to work very hard to earn 
people's trust to use our products and services.
    Senator Brown. Pretty hard to trust when there is so little 
contrition, responding to Senator Kennedy about the 2016 
election, or what you have done to the media in this country, 
to journalism, and what you have done, according to the United 
Nations in Myanmar. Pretty hard for us to trust you with a 
worldwide currency that you are setting up in Switzerland.
    Mr. Marcus. Senator, I believe that the status quo is not 
working for so many people that it is time for new progress to 
happen in financial services for those barriers, for so many 
people that are left behind to be lower and for costs for so 
many people to be also lower. And that is why we are deciding 
to take the lead on this and then relinquish this lead.
    Senator Brown. Mr. Chairman, I wish we could trust 
Facebook. It is pretty clear there is almost nobody on this 
Committee that does. Thank you.
    Chairman Crapo. Thank you, Senator Brown.
    I will ask my final round of questions right now.
    Mr. Marcus, I have stated in a number of our previous 
hearings that ensuring that individuals have real control over 
their data is critical, and the United States does not have, in 
my opinion, adequate assurances in its law. I talked about that 
with you in my first round of questions.
    I am personally convinced that we need to--if we do not--
well, we have a sectoral approach, as I indicated, and I think 
we need to have a more comprehensive, broad-based approach, at 
least for the basic rights. Europe in the GDPR does have such a 
law, the GDPR. That guarantees individuals with the right to 
information about the access to their personal data, which I 
believe means they should have access--they should be notified 
when their data is being collected, what data is being 
collected, and given rights right at that point to opt out or 
in, and there should be corresponding responsibilities.
    Does Libra and its associated third-party developers like 
Calibra, do they anticipate being captured under GDPR at this 
point in time?
    Mr. Marcus. Chairman, it will really depend on the 
jurisdiction of different wallets, but as far as the Calibra 
wallet is concerned, we will definitely have the highest 
standards when it comes to privacy. And as soon as the privacy 
policies and commitments are written, you have my commitment 
that we will share those with you.
    Chairman Crapo. All right. Thank you. And let me get into 
that a little bit in the last part of my questions here. As I 
understand it, using the blockchain technology results in a 
limited amount of personal private data actually being 
collected. You have indicated that a person would have to 
provide their Government-issued ID, and then I assume--and 
please correct me or help me understand this--from that point 
Calibra would have their ID. They would know the basic set of 
facts that is on their Government ID. And I assume that ID or 
that information is connected to some kind of a code data or 
something that is used in the blockchain. Is that correct?
    Mr. Marcus. No, Senator. Actually, the blockchain will not 
include personally identifiable data.
    Chairman Crapo. But would Calibra have the ability to 
connect a blockchain to the user of that blockchain?
    Mr. Marcus. Senator, it will depend on whether the 
transaction has been initiated from a Calibra customer or not.
    Chairman Crapo. OK. And if it was initiated by a Calibra 
customer, would Calibra then--Calibra would then know the 
identity of the person using or engaging in that transaction in 
that blockchain?
    Mr. Marcus. Yes, Senator, because they would be using our 
product.
    Chairman Crapo. And what else would Calibra know in terms 
of--what other data would Calibra be able to use if it wanted 
to?
    Mr. Marcus. Senator, the mindset in which we are 
establishing the product and the privacy of the product is that 
it will only collect the information that is required to offer 
the service, but also to keep accounts safe, which is, of 
course, really important when it comes to money, and especially 
because we will have strong customer protection programs. So we 
will need to protect accounts and data. Relevant data is 
actually quite helpful in protecting consumers' accounts.
    Chairman Crapo. So tell me what some of that relevant data 
is. Let us say it was a retail purchase. Does that mean that 
the item purchased is a part of that data?
    Mr. Marcus. Senator, that would really depend, and I do not 
believe that we need that information, for instance, either for 
the purposes of securing accounts or other purposes.
    Chairman Crapo. So I have been told that the blockchain 
technology actually allows an enhancement of privacy 
protection. Do you believe that is the case, that the use of 
blockchain technology actually reduces the potential for the 
abuse of collecting data on individuals?
    Mr. Marcus. Senator, yes, typically it enables people to 
use software that they can run on their own, and as a result, 
they can be their own sovereign, if you will, of the data that 
is used. And then it is a question of choice for consumers. On 
one side they can have consumer protections, and on the other 
they can be self-sovereign. But there are opportunities with 
blockchain technology to enable people to own their own data.
    Chairman Crapo. So in comparison, leaving the Libra 
proposal out of the question now and just looking at the 
technology issue of blockchain technology versus, security, the 
current transactional technology that we use for credit card 
transactions or bank account transactions, check transactions 
and what have you, if we were to see a move globally into use 
of blockchain technology for currency transactions, would that 
be--would that represent an opportunity to enhance personal 
privacy?
    Mr. Marcus. Senator, it can be, if implemented the right 
way, yes.
    Chairman Crapo. All right. I am going to want to learn a 
lot more about that. Maybe you could give me some of your 
information on that.
    All right. Before we gavel to a close, I want to reiterate 
my belief that it is critically important that policymakers and 
regulators understand the rules of the road as this project 
continues to develop. To the extent that gaps within the 
existing U.S. authority become apparent, it is worth examining 
whether new or clarifying legislation is warranted to ensure 
that U.S. regulators are not unfairly being relegated to the 
sidelines in assessment and oversight of this project and 
others like it.
    That concludes the questioning for today's hearing. For 
Senators who wish to submit questions for the record, those 
questions are due to the Committee by Tuesday, July 23rd. Mr. 
Marcus, we ask that you respond to those questions as promptly 
as you can. And, again, thank you for being here.
    Mr. Marcus. Thank you, Chairman.
    Chairman Crapo. This hearing is adjourned.
    [Whereupon, at 12:20 p.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
               PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
    Today we will receive testimony from David Marcus, Head of Calibra 
at Facebook.
    On May 9, Senator Brown and I sent a letter to Facebook shortly 
after it was reported that the company was recruiting financial 
institutions and online merchants to help launch a cryptocurrency-based 
payments system using its social network.
    Our letter asked Facebook for more information about how the system 
would work, its access to and use of consumer financial information, 
and Facebook's access to and use of information on individuals or 
groups of individuals in credit, insurance, employment, or housing. I 
appreciate Facebook's response last week.
    Shortly after the letter was sent, Facebook formally announced its 
intention to launch the payments system, Libra, and issued a white 
paper providing some information about the project.
    Since then, U.S. and global regulators have taken notice, including 
the Federal Reserve, U.K.'s Financial Conduct Authority, Financial 
Stability Board, G7, and others.
    Last week during the Federal Reserve's Semiannual Monetary Policy 
Report to Congress, Chairman Powell raised concerns about the 
cryptocurrency's potential for inciting money laundering and financial 
instability problems, and also expressed concern over customers' 
privacy.
    Yesterday, Secretary Mnuchin stated the Treasury Department has 
``very serious concerns that Libra could be misused by money launderers 
and terrorist financiers.''
    The Bank of England Governor Mark Carney said, ``Libra, if it 
achieves its ambitions, would be systemically important. As such it 
would have to meet the highest standards of prudential regulation and 
consumer protection. It must address issues ranging from anti- money 
laundering to data protection to operational resilience.''
    Concerns include, but are in no way limited to: how the payment 
system will work, how it will be managed, and how Libra, the Libra 
Association, Calibra, and Facebook will all interact; what consumer 
protections will apply, and potential implications for consumers with 
respect to financial loss from fraud or the project's failure; how 
individuals' data will be protected, and how individuals' privacy will 
be preserved; how the Libra ecosystem interacts with the Bank Secrecy 
Act and other existing anti- money-laundering regulations; and ways 
that Libra could threaten financial stability and the steps that could 
be taken preemptively to mitigate those risks.
    Despite the uncertainties, Facebook's stated goals for the payments 
systems are commendable.
    According to the World Bank, 1.7 billion adults remain unbanked, 
but two-thirds of them own a mobile phone or otherwise have access to 
the internet.
    If done right, Facebook's efforts to leverage existing and evolving 
technology and make innovative improvements to traditional and 
nontraditional payments systems could deliver material benefits, such 
as expanding access to the financial system for the underbanked, and 
providing cheaper and faster payments.
    Still, Libra is based on a relatively new and continually evolving 
technology in which it is not entirely clear how existing laws and 
regulations apply.
    I am particularly interested in its implications for the protection 
and privacy of individuals' data.
    Facebook has massive reach and influence within society with over 2 
billion active monthly users and access to vast amounts of personal 
information, including that which is received directly from users and 
information that can be derived from their behavior, both on and off 
Facebook.
    Libra and Calibra will only expand this reach by increasing 
commerce on the Facebook platforms.
    This raises several questions.
    The Banking Committee has held hearings on data privacy, including 
as it pertains to the European Union's General Data Protection 
Regulation, data brokers, and the Fair Credit Reporting Act.
    Given the significant amount of user information already held by 
the largest social media platforms and the prospect of gaining even 
more financial information, Congress needs to act to give individuals 
real control over their data.
    Europe has already, by imposing obligations on companies and 
establishing rights for individuals with respect to their data.
    We need to establish similar obligations for data collectors, 
brokers, and users, and implement an enforcement system to ensure the 
collection process is not abused, and that data is appropriately 
protected.
    Individuals are the rightful owners of their data. They should be 
granted a certain set of privacy rights, and the ability to protect 
those rights through informed consent, including full disclosure of the 
data that is being gathered and how it is being used.
    Regulations should be clear and understandable for both collectors 
and consumers, and should not punish those who opt out of collection 
practices.
    Individuals should also have the ability to review their data, 
correct inaccuracies, and have ample opportunity to opt out of it being 
shared or sold for marketing and other purposes.
    Chairman Powell also said last week that ``The privacy rules that 
we apply to banks, we have no authority to apply to Facebook or to 
Libra.'' He added that we may even need to create a new regulator to 
address such issues.
    As we determine next steps, what is clear is the importance that 
financial innovation happen here in America. In this way, the Libra 
announcement has heightened the need for policymakers and regulators to 
establish clear rules of the road.
    During this hearing, I look forward to hearing more about 
Facebook's project, steps it plans to take and has taken with 
regulators to ensure compliance with all laws and regulations, and how 
it intends to ensure individuals' privacy is maintained and information 
is protected.
                                 ______
                                 
              PREPARED STATEMENT OF SENATOR SHERROD BROWN
    Facebook is dangerous.
    Now, Facebook might not intend to be dangerous--but they certainly 
don't respect the power of the technologies they are playing with. Like 
a toddler who has gotten his hands on a book of matches, Facebook has 
burned down the house over and over, and called every arson a learning 
experience.
    Facebook has two competing missions--make the world more open and 
connected, and make a lot of money. And as Facebook attempts to serve 
both of those missions, they wreak havoc on the rest of us.
    Look at its version of disrupting the newspaper industry. Facebook 
has made it easier to share what you're reading with friends. But at 
the same time, Facebook has redirected most of the media industry's 
profits away from actual journalists and into its own coffers--and they 
have done it without the benefit of recreating the local news desk, 
without conducting the hard-nosed journalism that keeps politicians 
honest, and without meeting even the most basic journalistic standards.
    This kind of ``creative disruption'' that doesn't actually create 
anything is just disruption.
    Or look at the impact Facebook's profit motive has had on the way 
it connects people. Facebook and other tech companies will tell you 
that the internet just holds up a mirror to society, and reflects what 
is already there. But that's not true.
    To be profitable, Facebook has juiced its algorithm to hold up a 
magnifying glass to society rather than a mirror--kind of like the way 
I learned in Boy Scouts to use a magnifying glass to burn a hole in a 
piece of wood--concentrating our focus on the most divisive issues, 
pushing the most controversial opinions to the top of our news feeds--
usually those are posts that play on people's fears and worst impulses, 
but they may not be based on any sort of fact.
    Facebook does all it can to manipulate its billions of users so it 
can direct our eyes toward more ads and turn an even bigger profit.
    This is no exaggeration: Facebook tested whether it could 
manipulate our emotions. The corporation ran a psychological experiment 
on more than half-a-million users to see if it could manipulate our 
moods. Turns out it can.
    And that emotional manipulation has led to horrifying results.
    I don't have to tell you what amplifying our divisions has done to 
discourse in this country--not just between political parties. I'd bet 
half the people in this room have had to block an old high school 
classmate or even a family member on Facebook.
    Or look around the world. A U.N. report detailed how Facebook was 
used to spread propaganda in Myanmar that led to genocide. In the first 
month of violence, more than 600 members of the Rohingya people were 
killed--and more than 700,000 refugees had to flee the country.
    I don't think for a moment that Facebook created hate, but we know 
that their competing missions of connecting people and turning a profit 
created an algorithm and a business model that intesified it.
    It's hard to remember a world without Facebook, and it's hard to 
remember a time before we had to tell our kids ``be careful what you do 
on the internet, because it never goes away.''
    Today, we expect everyone to know that what happens online has 
consequences offline. It's just common sense.
    That's why it's so hard to for us to understand why Facebook--the 
company that ushered in this revolution--doesn't seem to comprehend 
that its actions have real world consequences. And they don't seem to 
understand why their intention to run their own currency out of a Swiss 
bank account, the topic of today's hearing, has been met with so much 
opposition.
    Facebook's CEO Mark Zuckerberg has said that Facebook might be more 
like a Government than a company. But no one elected Mark Zuckerberg. 
And what kind of dystopian Government wants to turn families and 
friends against each other rather than bring people together? Well, 
maybe I shouldn't answer that.
    Facebook has demonstrated, through scandal after scandal, that it 
does not deserve our trust, and that it should be treated like the 
profit-seeking corporation it is, just like any other company.
    He and his executives have proven over and over that they don't 
understand governing or accountability.
    They're not running a Government, they're running a for-profit 
laboratory. No Facebook executives have been harmed by Facebook's 
experiments. But look at what has happened everywhere that Facebook has 
run its social experiment on us.
    Their motto has been ``Move fast and break things''. And they 
certainly have.
    They moved fast and broke our political discourse, they broke 
journalism, they helped incite a genocide, and they're undermining our 
democracy. Now Facebook is asking people to trust them with their hard-
earned paychecks. It takes a breathtaking amount of arrogance to look 
at that track record and think, you know what we really ought to do 
next? Let's run our own bank and our own for-profit version of the 
Federal Reserve for the world.
    I understand that given the financial crisis and given the massive 
inequality and unfairness to workers in our economy, it's tempting to 
think anyone could do a better job than the Wall Street megabanks.
    But the last thing we need is to concentrate even more power in 
huge corporations. Look at Facebook's record. We would be crazy to give 
them a chance to experiment with people's bank accounts, and to use 
powerful tools they don't understand, like monetary policy, to 
jeopardize hardworking Americans' ability to provide for their 
families. This is a recipe for more corporate power over markets and 
consumers, and fewer and fewer protections for ordinary people.
    Thank you, Mr. Chairman, for holding this hearing.
                                 ______
                                 
                 PREPARED STATEMENT OF DAVID A. MARCUS
                       Head of Calibra, Facebook
                             July 16, 2019
Introduction
    Chairman Crapo, Ranking Member Brown, 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. Throughout my career, I have led businesses in 
regulated industries such as telecommunications and 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.
    I appreciate the opportunity to speak with you today about the 
vision for Libra. Libra is about developing a safe, secure, and low-
cost way for people to move money efficiently around the world. We 
believe that Libra can make real progress toward building a more 
inclusive financial infrastructure. The journey to get there will be a 
long one, and we recognize that ours has just begun.
    Chairman Powell has made clear that the process for reviewing Libra 
needs to be patient and thorough, rather than a sprint to 
implementation. We strongly agree. That was the spirit with which we 
published the white paper introducing the Libra project. The time 
between now and launch is designed to be an open process and subject to 
regulatory oversight and review. In fact, I expect that this will be 
the broadest, most extensive, and most careful prelaunch oversight by 
regulators and central banks in FinTech's history. We know we need to 
take the time to get this right. And I want to be clear: Facebook will 
not offer the Libra digital currency until we have fully addressed 
regulatory concerns and received appropriate approvals.
    Before I go any further, I want to take a moment to acknowledge the 
27 other companies that have joined us on this journey--including 
companies in the payments, technology, telecommunications, blockchain, 
and venture capital industries, as well as nonprofits. We are pleased 
to have each of these organizations as partners, and we look forward to 
working with them and others to make Libra a reality.
    We approach all of these efforts with humility and a commitment to 
engage with experts in law, finance, economics, security, compliance, 
and blockchain technology, as well as with the regulators and 
policymakers who oversee the stability and security of our financial 
systems. But we also know how important it is that we begin this 
journey now. Since publishing our white paper on Libra, I have heard 
from people all around the world, excited by the possibilities that 
Libra offers. The status quo is not working for many; it is too 
expensive for people around the world to use and transfer their money. 
We believe Libra can offer a more efficient, low-cost, and secure 
alternative.
    I am excited about the potential that Libra holds, and I am proud 
that Facebook has initiated this effort here in the United States. I 
believe that if America does not lead innovation in the digital 
currency and payments area, others will. If we fail to act, we could 
soon see a digital currency controlled by others whose values are 
dramatically different. I believe that Libra can drive positive change 
for the many people who would benefit from it. I also believe that it 
can provide an opportunity for leadership consistent with our shared 
values.
The Structure and Management of Libra
    I first want to discuss the vision for Libra, the Libra Reserve, 
and the Libra Association, and why executing that vision, in 
collaboration with Governments, multilateral organizations, and 
industry, can, in time, help deliver a giant leap forward toward a 
lower-cost, more accessible, and more connected global financial 
system.
    Libra is designed to be a digitally native currency that can be 
used around the world. Libra brings together attributes of the world's 
best currencies: stability, low inflation, wide usability, and 
fungibility. Technology innovations have given people tools to connect 
and communicate. But while people can send each other texts, videos, 
and photos, in many cases they cannot easily move value between one 
another. Economic empowerment is one of Facebook's core values, and the 
90 million businesses communicating with their customers on the 
Facebook platform can attest to that. We have done a lot to democratize 
free, unlimited communications for billions of people. We want to help 
do the same for digital currency and financial services, but with one 
key difference: We will relinquish control over the network and 
currency we have helped create.
    Libra is a payment tool, not an investment. People will not buy it 
to hold like they would a stock or a bond, expecting it to pay income 
or increase in value. Instead, Libra is like cash. People will use it 
to send money to family members in other countries, for example, or to 
make purchases.
The Libra Reserve: Libra's Financial Infrastructure
    Unlike existing stable coins--digital currencies designed to 
minimize volatility by being ``pegged'' to a single asset--Libra will 
not have a fixed value in any single real-world currency. Instead, 
Libra will be fully backed on a one-to-one basis through the Libra 
Reserve, which will hold a basket of currencies in safe assets such as 
cash bank deposits and highly liquid, short-term Government securities. 
These currencies will include the U.S. dollar, the British pound, the 
euro, and the Japanese yen. This approach will minimize exposure to 
fluctuations from a single region, providing further stability for 
people around the world who could rely on Libra for their daily 
financial needs.
    The assets in the Libra Reserve will be held by a geographically 
distributed network of regulated custodians with investment-grade 
credit ratings to provide high auditability, as well as transparency, 
security, and a decentralization of the assets. These custodians are 
well-versed in safekeeping billions and even trillions of dollars worth 
of assets. Because Libra will be backed by the Reserve, anyone using 
Libra should have a high degree of confidence that they will be able to 
sell it for local fiat currency based on an exchange rate, just like 
exchanging one currency for another when traveling.
Monetary Policy
    The currencies represented in the Libra Reserve will be subject to 
their respective Government's monetary policies--policies those 
Governments will continue to control. The Libra Association, which will 
manage the Reserve, has no intention of competing with any sovereign 
currencies or entering the monetary policy arena. It will work with the 
Federal Reserve and other central banks to make sure Libra does not 
compete with sovereign currencies or interfere with monetary policy. 
Monetary policy is properly the province of central banks.
The Partners and Governance of the Libra Association
    Overseeing the Libra Blockchain and the Libra Reserve will be a 
significant undertaking and responsibility; no single organization can, 
or should, be solely responsible for it. We believe a cooperative 
approach is both warranted and necessary, and we are therefore working 
to develop the Libra Association: an independent membership-based 
organization.
    The initial group of organizations that will work together on 
finalizing the association's charter and become ``Founding Members'' 
upon its completion are, by industry:

    Payments: Mastercard, Mercado Pago, PayPal, PayU (Naspers' 
        FinTech arm), Stripe, Visa

    Technology and marketplaces: Booking Holdings, eBay, 
        Facebook/Calibra, Farfetch, Lyft, Spotify, Uber

    Telecommunications: Iliad, Vodafone

    Blockchain services: Anchorage, Bison Trails, Coinbase, 
        Xapo

    Venture Capital: Andreessen Horowitz, Breakthrough 
        Initiatives, Ribbit Capital, Thrive Capital, Union Square 
        Ventures

    Nonprofit and multilateral organizations, and academic 
        institutions: Creative Destruction Lab, Kiva, Mercy Corps, 
        Women's World Banking

    Each of the Libra Association members--a diverse and global group 
of companies, not-for-profits, NGOs, multilateral organizations, and 
academic institutions--will be represented on the Libra Association 
Council. Through the Council, the Association will be responsible for 
the governance of the Libra Blockchain. It will oversee the evolution 
of the blockchain's protocol and network and will continue to evaluate 
new techniques that enhance privacy in the blockchain while taking into 
account concerns of practicality, scalability, and regulatory impact. 
It will also serve as the governing body through which the Libra 
Reserve is managed. All decisions will be made democratically and 
transparently. To ensure the Association includes a diverse membership, 
the Association will work to remove as many financial barriers as 
possible so that a significant number of nonprofit and multilateral 
organizations, social impact partners, and universities can join.
    Facebook teams have led the creation of the Libra Association and 
the Libra Blockchain and will maintain a leadership role through 2019. 
Once the Libra network launches, however, Facebook and its affiliates 
will have the same privileges, commitments, and financial obligations 
as any other founding member of the Association. We hope to have 
approximately 100 such members before the Libra Blockchain launches. As 
one member among many, Facebook's role in governance of the Association 
will be equal to that of its peers. Facebook will have only one vote 
and will not be in a position to control the wholly independent 
organization.
Implications for Commerce and Libra Users and Consumers
Regulatory Oversight and Financial Stability
    The Libra Association is committed to working with policymakers and 
regulators to achieve a safe, transparent, and consumer-friendly 
implementation of Libra. The Association recognizes that blockchain is 
an emerging technology, and that policymakers must determine how this 
technology will fit into the regulatory landscape.
    Regulatory frameworks for digital assets are beginning to emerge 
nationally and internationally. The Libra Association will continue to 
work with regulators and policymakers to ensure that it complies with 
all applicable legal and regulatory requirements.
    Over the past year, Federal regulators have repeatedly emphasized 
their commitment to fostering innovation. This is true as a general 
matter, as one can see with the Treasury Department's report on FinTech 
and Innovation. But it is also true in the use of novel technologies to 
support compliance with anti- money-laundering (AML), combating the 
financing of terrorism (CFT), and sanctions regulations. The U.S. 
Treasury Department's Financial Crimes Enforcement Network (FinCEN), 
the Federal Reserve, the Federal Deposit Insurance Corporation, and the 
National Credit Union Association have come together to emphasize the 
important role that new technologies can play in helping companies 
large and small meet their AML/CFT and sanctions compliance 
obligations. The Libra Association is committed to taking up this 
charge, and devoting its considerable technical expertise to this task.
    To be clear, the Libra Association expects that it will be 
licensed, regulated, and subject to supervisory oversight. Because the 
Association is headquartered in Geneva, it will be supervised by the 
Swiss Financial Markets Supervisory Authority (FINMA). We have had 
preliminary discussions with FINMA and expect to engage with them on an 
appropriate regulatory framework for the Libra Association. The 
Association also intends to register with FinCEN as a money services 
business.
Anti- Money Laundering, the Bank Secrecy Act, and Other Law Enforcement 
        and National Security Concerns
    The Libra Association is similarly committed to supporting efforts 
by regulators, central banks, and lawmakers to ensure that Libra 
contributes to the fight against money laundering, terrorism financing, 
and more. A network that helps move more paper cash transactions--where 
many illicit activities happen--to a digital network that features 
regulated on- and off-ramps with proper know-your-customer (KYC) 
practices, combined with the ability for law enforcement and regulators 
to conduct their own analysis of on-chain activity, will present an 
opportunity to increase the efficacy of financial crimes monitoring and 
enforcement. The Libra Association will continue to engage proactively 
and openly with all relevant stakeholders on these key issues. Libra 
should improve detection and enforcement, not set them back.
    The Libra Association will also maintain policies and procedures 
with respect to AML and the Bank Secrecy Act, combating the financing 
of terrorism, and other national security-related laws, with which its 
members will be required to comply if they choose to provide financial 
services on the Libra network.
Protecting the Privacy and Security of Personal Information
    Protecting consumers and ensuring people's privacy is one of the 
Libra Association's top priorities. The Association is committed to 
working with regulators as they explore the application of relevant 
laws to distributed ledger technology.
    Privacy on the Libra Blockchain will be similar to existing 
blockchains; transactions include only the sender and receiver's public 
addresses, the transaction amount, and the timestamp. No other 
information will be visible. The Association will not separately hold 
any personal data on people who use the blockchain, no matter how it 
otherwise could be collected, and will not run any infrastructure. As a 
result, the Association cannot, and will not, monetize data on the 
blockchain. For the purposes of data and privacy protections, the Swiss 
Federal Data Protection and Information Commissioner (FDPIC) will be 
the Libra Association's privacy regulator.
The Structure and Management of Calibra
    Because the Libra Blockchain will exist as an open-source 
ecosystem, businesses and developers around the world are free to build 
competitive services on top of it. And Facebook intends to be one of 
the many businesses that will do so. To that end, we recently announced 
the formation of Calibra, a Facebook subsidiary whose goal is to 
provide financial services using the Libra Blockchain. The first 
product Calibra intends to introduce is a digital wallet for Libra that 
will be available in Messenger, WhatsApp, and as a standalone app. The 
Calibra wallet will let users send Libra to almost anyone with a 
smartphone, similar to how they might send a text message, and at low-
to-no cost. We expect that the Calibra wallet will ultimately be one of 
many services, and one of many digital wallets, available to consumers 
on the Libra network.
    We do not expect Calibra to make money at the outset, and Calibra 
customers' account and financial information will not be shared with 
Facebook, Inc., and as a result cannot be used for ad targeting. Our 
first goal is to create utility and adoption, enabling people around 
the world--especially the unbanked and underbanked--to take part in the 
financial ecosystem.
    But we expect that the Calibra wallet will be immediately 
beneficial to Facebook more broadly because it will allow many of the 
90 million small- and medium-sized businesses that use the Facebook 
platform to transact more directly with Facebook's many users, which we 
hope will result in consumers and businesses using Facebook more. That 
increased usage is likely to yield greater advertising revenue for 
Facebook.
Implications for Consumers and Users of the Calibra Wallet
Regulatory Oversight and Financial Stability
    Companies offering services on the Libra Blockchain will need to be 
fully compliant with the laws and regulations in the jurisdictions in 
which they operate, and that includes the Calibra wallet. One of the 
reasons that Calibra was established as a Facebook subsidiary was 
because it will be providing financial services, and it will be 
regulated accordingly. The Calibra wallet will comply with FinCEN's 
rules for its AML/CFT program and the rules set by the Office of 
Foreign Assets Control (OFAC) with respect to financial sanctions. 
State financial regulators will regulate Calibra as a money 
transmitter, and the Federal Trade Commission and the Consumer 
Financial Protection Bureau will monitor for consumer protection and 
data privacy and security issues. Calibra has filed for State money 
transmitter licenses in the U.S. and it is also registered with FinCEN 
as a money services business.
Anti- Money Laundering, the Bank Secrecy Act, and Other Law Enforcement 
        and National Security Concerns
    Similarly, Calibra will comply with the Bank Secrecy Act and will 
incorporate KYC and AML/CFT methodologies used around the world, 
including those focused on customer identification and verification, 
and risk-based customer due diligence, while developing and applying 
technologies such as advanced machine learning to enhance transaction 
monitoring, and suspicious activity reporting. Calibra's efforts will 
be commensurate with its risk profile based on several factors, such as 
Calibra's product features, customer profiles, geographies, and 
transaction volumes.
Protecting the Privacy and Security of Personal Information
    Calibra is also being designed with a strong commitment to 
protecting customer privacy. Calibra believes that customers hold 
rights to their data and should have simple, understandable, and 
accessible data-management controls. Calibra will not share individual 
customer data with the Libra Association, no matter how it might be 
collected, nor will Calibra receive other personally identifiable user 
data from the Libra Association. And, except in limited circumstances, 
such as preventing fraud or criminal activity and complying with the 
law, Calibra will not share customers' account information or financial 
data with Facebook unless people agree to permit such sharing. Calibra 
customer account information and financial data will not be used to 
improve ad targeting on the Facebook, Inc., family of products.
Conclusion
    The goal for Libra is straightforward: A digital currency built on 
a secure and stable open-source blockchain, backed by a reserve of real 
assets, and governed by an independent association. We want to create 
more access to better, cheaper, and open financial services--no matter 
who you are, where you live, what you do, or how much you have. We 
recognize that the road to reaching that goal will belong, and it will 
not be achieved in isolation. That is why we have begun publicizing the 
vision for Libra and why we have been discussing, and will continue to 
discuss, how best to achieve that goal with businesses, nonprofit and 
multilateral organizations, and academic institutions from around the 
world, as well as with policymakers, central banks, and regulators. We 
recognize the authority of financial regulators and support their 
oversight of this project.
    Thank you for having me here today. I look forward to answering 
your questions.
        RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN CRAPO
                      FROM DAVID A. MARCUS

Q.1. Question on Regulatory Oversight: Your testimony states 
that Calibra has registered with the U.S. Treasury Department's 
Financial Crimes Enforcement Network (FinCEN) and the Libra 
Association intends to as well. Please confirm which entities 
will register with FinCEN.

A.1. Calibra, a Facebook subsidiary, has registered with FinCEN 
as a money services business. We understand that the Libra 
Association also intends to register with FinCEN as a money 
services business.

Q.2. Questions on Libra Governance: Will Facebook and/or the 
Libra Association directly require companies that offer 
services on the Libra Blockchain to comply with the Bank 
Secrecy Act and incorporate know-your-customer and anti- money-
laundering and counterterrorism financing methodologies? Please 
answer for both U.S. and non-U.S. companies, as well as for 
custodial wallets and noncustodial wallets.

A.2. We understand that the Libra Association intends to 
register with FinCEN as a money services business and, as such, 
will be subject to the Bank Secrecy Act's anti- money-
laundering (AML) requirements. In addition, we understand the 
Libra Association intends to require that each member of the 
Association comply with AML guidelines that the Libra 
Association expects to establish, along with all applicable 
legal and regulatory obligations, including those relating to 
AML, to which the member is subject based upon the member's 
activities and the jurisdictions in which it operates. Entities 
that are not Libra Association members that provide services 
for Libra users, such as digital wallet services, may be 
subject to AML and other laws depending upon the jurisdictions 
in which they are located and operate.
    In recognition of the importance of this issue, we 
understand the Libra Association intends to work with 
regulators to address, before launch, any regulatory concerns 
related to the Association's AML requirements.

Q.3. Kevin Weil, Calibra's Vice President of Product, recently 
said that `` . . . there are no plans for the Libra Association 
to take a role in actively vetting developers.'' During the 
hearing, you told Senator Sinema that the Libra Association 
will ``not get in the way of developers developing things'' but 
that it will ``need to find the right approach to ensure that 
publishing services on the Libra network has controls.''
    What will these controls entail?
    Will the Libra Association commit to ensuring robust audits 
of developers on the Libra Blockchain to ensure they are 
complying with all applicable laws and regulations?

A.3. The Libra Blockchain will be an open platform, which means 
that developers and businesses can build financial services 
products on top of it, creating a more thriving global 
ecosystem. This will allow businesses large and small to add 
value through their services, which can be accessed by anyone 
in the world. The idea is to create a level playing field so 
that people and small- and micro-businesses around the world 
have equal access to a lower cost, global payment tool and 
financial infrastructure. Because the Libra Blockchain will be 
an open ecosystem, businesses will be able to create 
competitive services that result in market pressures keeping 
fees low. That open ecosystem will also allow curation, 
recommendation, and verification services to emerge that will 
help consumers sort through available options.
    When Libra is first launched, we expect that developers 
will be able to use a limited number of applications focused on 
facilitating payments through the Libra Network. These could be 
merchant apps (e.g., the ability to receive payments as a 
business using Libra) or wallets (the ability to store, spend, 
and send money on the Libra Blockchain). As the network evolves 
and becomes mature, the Libra Blockchain will be able to 
support additional use cases and applications.
    We understand the Libra Association is evaluating whether 
it would qualify as an ``administrator'' of a virtual currency 
as described in FinCEN guidance, but in any case, it intends to 
register with FinCEN as a money services business and will be 
subject to regulation as such. In addition, we understand that 
the Libra Association intends to require that each member of 
the Association comply with policies that the Libra Association 
expects to establish, along with all applicable legal and 
regulatory obligations to which the member is subject based 
upon the member's activities and the jurisdictions in which it 
operates. Entities, including developers that are not Libra 
Association members, but provide services for Libra users, may 
be subject to laws and requirements depending upon the 
jurisdictions in which they are located and operate.
    Each wallet on the Blockchain will determine its own 
policies in compliance with its local jurisdiction. Calibra 
will protect consumers by, among other things, investing in 
financial literacy and focusing on providing education. The 
Calibra wallet will be designed with education in the product 
experience itself--so along the way, consumers will understand 
what they are doing and what Libra can do for them. Our 
understanding is that the Libra Association will also fund 
social impact programs with partners that are focused on 
financial literacy around the world.
    As far as the Calibra wallet is concerned, it will also 
provide strong consumer protections, including fraud 
protection, customer support, and password recovery. When using 
the Calibra wallet, automated tools will proactively monitor 
activity to detect fraudulent behavior. If fraudulent activity 
is suspected, Calibra will either deny the activity in real-
time or ask for additional information before the activity can 
be completed. The Calibra wallet will have additional layers of 
authentication so people can trust their money will stay safe 
even if they lose their phone or password. And in the rare 
event of unauthorized access to a Calibra wallet, the user will 
be given a refund. Calibra will also offer dedicated customer 
support, ensuring that people will receive timely assistance, 
whether it be answering questions related to their account, or 
responding to reports of illicit activity. Like other custodial 
wallets, Calibra will manage the public and private keys of its 
customers. This means that people will have recourse if they 
lose their password and will not have to worry about 
permanently losing access to their funds if they lose their 
phone.

Q.4. Will the Libra Association make public the levels of 
investments of each Founding Member?

A.4. The Libra Association is still in the process of formation 
and we understand that it has not yet determined whether the 
investments made by Initial Members will be made public. 
Regardless of a Member's investment level, we understand that 
the voting powers of Initial Members will be capped to avoid 
concentration of power. Additionally, the Association expects 
to work with members that are nonprofits, multilaterals, social 
impact partners, and universities to allocate a meaningful 
percentage of capital raised toward social impact grant-making 
in support of financial inclusion that would provide a 
mechanism for funding the hard costs related to running a node 
for such members to ensure that such organizations are also 
represented in the Association.

Q.5. Once Libra has launched, will the Libra Association repay 
Facebook, Inc., for its investments in the development of the 
network?

A.5. To the extent that Facebook has made loans or provided 
other funding to the Libra Association in the course of its 
early stage efforts to develop Libra, these funds may be repaid 
to Facebook. Once the Association completes its fundraising, we 
expect that it will achieve financial independence.
    Facebook has also devoted significant resources to Libra 
over the past year. It does not expect to be repaid by the 
Libra Association for all of those resources.

Q.6. Questions on Data Privacy: What data privacy and consumer 
protections will apply to users of Libra within the U.S.?

A.6. Protecting and ensuring the privacy of those using the 
Libra Network is a top priority, and we understand the Libra 
Association is committed to working with regulators as they 
explore the application of privacy and data protection laws. 
Facebook anticipates that Calibra will be subject to U.S. 
privacy laws, as well as global laws like GDPR.
    Facebook and the Libra Association recognize that 
regulators will be keen to engage with those building services 
to be offered in their jurisdictions. And the Libra Association 
is committed to working with authorities to shape a regulatory 
environment that encourages technological innovation while 
maintaining high standards of consumer protection.
    People who use Calibra will benefit from strong consumer 
protections, including automated fraud detection, convenient 
in-app reporting of issues, and dedicated customer service. In 
addition, Calibra is being designed with a strong commitment to 
protecting customer privacy. We believe that customers hold 
rights to their data and should have simple, understandable, 
and accessible data-management controls. To that end, Calibra 
will provide its customers with disclosure that describes how 
customers may purchase and sell Libra coins, including through 
Calibra, and market and other risks associated with holding and 
using Calibra coins.

Q.7. What data privacy and consumer protections will apply to 
users of Libra outside the U.S.?

A.7. Please see the response to Question 6.

Q.8. You recently told the Banking Committee that Facebook, 
Inc., collects data from transactions that occur on-platform 
and use it for advertising and personalization.
    Please list and describe all personal data Facebook, Inc., 
currently collects from on-platform transactions.

A.8. When an individual uses a Facebook product for purchases 
or other financial transactions (such as making a purchase in a 
game or making a donation), we collect information about the 
purchase or transaction. This includes information about the 
merchant; payment information, such as the user's credit or 
debit card number and other card information; other account and 
authentication information; and billing, shipping, and contact 
details.

Q.9. What type of personal data will Facebook, Inc., collect 
for on-platform transactions that use the Calibra wallet? For 
example, if a transaction occurs on Facebook using the Calibra 
wallet, what personal data will Facebook (the platform) 
collect?

A.9. Facebook created Calibra as a regulated subsidiary in part 
to ensure separation between social and financial data and to 
build and operate services on its behalf on top of the Libra 
Network. And except in limited circumstances that are described 
below, Calibra will not share customers' account information or 
financial data with Facebook.
    Those limited circumstances where data might be shared 
between Calibra and Facebook include when data sharing is used 
to prevent fraud or criminal activity, as well as when users 
choose to share their data. As a Facebook subsidiary, Calibra 
may be legally obligated to share certain data with Facebook so 
the company can meet its regulatory requirements. This could 
consist of aggregated payment numbers for financial and tax 
reporting, or information necessary to comply with the law.
    The limited user information that Calibra does collect and 
store will be subject to strong security and access controls. 
User payment credentials, such as a debit card number, will not 
be accessible by Facebook or its affiliates. User transaction 
activity will be private and will never be posted to Facebook, 
unless users themselves choose to share it.
    Similar to other commerce platforms, there may be times 
when Facebook, acting in its capacity as a merchant or 
platform, will independently have access to information about 
completed transactions that take place on Facebook's commerce 
platform (e.g., purchase made, merchant, transaction amount, 
date, time). This may include transactions completed via 
Calibra with Libra as the exchanged currency, though this would 
not involve a special transfer of information from Calibra to 
Facebook. In those situations, Facebook's independent access to 
transaction information will be the same as for other 
transactions on the Facebook platform completed using other 
payment methods like credit cards.

Q.10. Outside the information necessary to complete a 
transaction, what type of personal data will Calibra collect on 
its users whether or not the transaction occurs on Facebook, 
Inc.?

A.10. To sign up for a Calibra wallet account, users will need 
to provide their phone number, first name, last name, date of 
birth, address, and a form of Government-issued identification 
(e.g., a license, passport, or ID card) during registration. 
This information is necessary to ensure that Calibra complies 
with KYC, AML, and other regulatory requirements applicable to 
it under U.S. and other law. We will have strong controls in 
place to ensure that data is only accessed by authorized 
individuals to fulfill necessary responsibilities, including 
those related to AML, CFT, and sanctions requirements, and to 
protect users against fraud. The limited user information that 
Calibra does collect and store will be subject to strong 
security and access controls.

Q.11. Questions on Libra-Enabled Commerce: Will Facebook, Inc., 
require its advertising clients and/or company partners to use, 
accept, and/or promote Libra? Please answer separately for 
Facebook, Inc.'s family of services and Calibra.

A.11. No. While Facebook does plan to accept Libra for ads, we 
will continue to enable businesses to pay for ads using the 
payment methods we currently accept.

Q.12. How will Facebook, Inc., incentivize each of the 
following to use, accept and/or promote Libra? Please answer 
separately for Facebook, Inc.'s family of services and Calibra.

  1.  Advertising clients

  2  Company partners

  3.  Individuals/potential users

A.12. While Facebook expects to accept Libra as payment for its 
advertising services, it has not yet determined if or how it 
will incentivize its advertising customers to use Libra.
    We understand that the Libra Association will offer 
incentives, with the goals of accelerating the utility and 
adoption of Libra by encouraging businesses and people to 
participate in the ecosystem and ensuring the growth and health 
of the ecosystem.
    First, many members of the Libra Association will be 
incentivized to join as members (and, as applicable, operate 
nodes on the Libra Blockchain) by the potential to profit from 
their financial investment in the Libra Association if the 
Libra digital currency gains widespread adoption. Other members 
of the Libra Association, such as NGOs, will be incentivized to 
join the Libra Association as a way to further their mission of 
providing financial or other services to those most in need of 
such services. Some members may be incentivized by a 
combination of these motivations.
    Second, Designated Dealers will be incentivized to make 
markets in Libra coins by the potential to earn arbitrage 
profits. Exchanges will be incentivized to list Libra coins for 
trading by the potential to receive fees with respect to 
transactions in those coins, in the same way that exchange 
operators today receive fees for transactions in other 
tradeable assets.
    Third, businesses offering services in the Libra ecosystem, 
such as Facebook's subsidiary Calibra, will be incentivized to 
do so by the potential to earn a profit on the provision of 
those services, consistent with their business models. Others 
who choose to provide services in the Libra ecosystem, such as 
NGOs and academic institutions, may be motivated by the 
potential to leverage the Libra Network to provide accessible 
and inclusive financial services to additional groups of 
individuals.
    Fourth, assuming that service providers on the Libra 
Network offer services that are attractive to and useful for 
consumers, retail users of Libra coins will be incentivized to 
use Libra coins to make payments and send money to others. The 
current payments system is too expensive and too slow. The 
potential of a cheaper and faster payments solution is expected 
to be attractive to many.
    These incentives are distinct from how Facebook, Inc.'s 
family of services will treat Libra payments made by 
advertising customers.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                      FROM DAVID A. MARCUS

Q.1. Please provide to the Committee any chartering, 
organizing, or incorporating documents related to the Libra 
Association and a list of persons or organizations that have 
agreed to such documents.

A.1. The initial group of 28 organizations (Initial Members) 
are still working together on finalizing the Association's 
charter. Before Libra is launched, we expect that the Libra 
Association will grow to around 100 geographically distributed 
and diverse members, serving as initial validator nodes on the 
Libra Blockchain. In the meantime, the Libra website outlines 
in detail the proposed specifics regarding the Libra 
Association's responsibilities, roles, and governance 
mechanisms. This outline will serve as a basis for discussion 
among the Association's members as they develop the charter and 
bylaws. For more information, please see https://libra.org/en-
US/association-council-principles/#overview.
    The Libra website also contains information regarding the 
membership criteria necessary for a business, social impact 
partner, or academic institution to become a member. For more 
information, please see https://libra.org/en-US/becoming-
founding-member/#joining-libra-association.

Q.2. Please provide to the Committee any documents detailing 
the agreements related to Libra investment tokens.

A.2. We understand the Libra Association may raise money by 
offering Libra Investment Tokens to various sources, including: 
(1) Initial Members and (2) members who join the Libra 
Association after the initial launch. Our understanding is that 
purchase of Libra Investment Tokens may be a condition to 
membership in the Libra Association, other than for nonprofits, 
NGOs, and academic institutions. These latter institutions may 
not be required to purchase or hold Libra Investment Tokens.
    We understand the terms and agreements related to Libra 
Investment Tokens have yet to be finalized. Our current 
expectation is that the Libra Investment Token will entitle 
holders to a formula return (as-yet undefined) based on the 
interest income produced on assets held in the Libra Reserve. 
We understand that funds paid for Libra Investment Tokens will 
be used to develop the Libra ecosystem, including developments 
related to the Libra coin. Holders of Libra Investment Tokens 
will not benefit from any financial guarantee that their 
investment will be successful and will be subject to risk of 
loss of their investment if the Libra coin and the Libra 
Association are not commercially successful. Indeed, the Libra 
Investment Token is a speculative instrument being offered only 
to sophisticated investors who understand the risks of the 
investment. No financial guarantee or right of redemption will 
be provided to investors in the Libra Investment Token.

Q.3. You testified to the Committee that Libra is a ``payment 
tool,'' and in your July 8, 2019, response to our letter, you 
stated:

        The reality is that financial transactions today take 
        too long and cost too much. The fees associated with 
        moving money are high, and those that can afford it 
        least are being charged the most.

    If Facebook's new payment tool is designed to upset the 
status quo of the payments market, why did Facebook seek the 
participation of two of the largest payment incumbents, Visa 
and Mastercard, in setting up a competing payments platform?

A.3. The goal of Libra is to provide a faster, lower-cost 
payment solution that is available to everyone, especially 
those who have historically been underserved by existing 
payments and other financial services solutions. Because Libra 
wallets, including Calibra, will benefit from many of the 
positive characteristics of blockchain technology, like low 
transaction fees and instant payments, we hope that they will 
enable more people and businesses to take part in the global 
economy.
    Building a global digital payment tool is a tremendous 
undertaking that no single company could--or should--do alone. 
The Libra Association is designed to not be controlled by any 
single stakeholder; instead, it will involve a group of 
trusted, geographically diverse companies, including Mastercard 
and Visa, NGOs, academic institutions, and organizations. This 
structure is meant to ensure that the network is not driven by 
the interests of a single company--or subject to a single point 
of failure. We believe that the participation of Visa and 
Mastercard in the Libra Association will help to accelerate the 
acceptance of Libra within current merchant networks--an 
important part of creating more general acceptance for Libra 
globally. And while we hope that companies like Visa and 
Mastercard will build and offer services on the Libra Network, 
the open nature of the ecosystem means that any other company 
that wishes to offer a competitive service can do so as well.

Q.4. Setting aside the possibility that Facebook may have a 
Libra wallet that competes with Visa or Mastercard's Libra 
wallets, will the Libra ecosystem be designed to compete 
directly with Visa and Mastercard payments?

A.4. The Libra Blockchain will be an open ecosystem, which will 
allow businesses to create competitive services on the Libra 
Network. Any company will be free to build a wallet on the 
network. These wallets will provide choice and competition that 
will benefit consumers. The Calibra wallet will also be 
interoperable with other apps and financial service providers 
that offer complementary services, such that, even if one end 
of a transaction uses the Calibra wallet, the other end does 
not need to do the same.
    We will continue to partner with financial services 
companies like Visa and Mastercard across our family of apps--
and this includes Calibra. Other service providers are also 
free to build their own Libra wallets. Additionally, our 
current plan is to continue to offer person-to-person payments 
in Messenger for people in the U.S. WhatsApp is committed to 
working with partners to offer WhatsApp payments in a number of 
countries as well. This provides people with a vast array of 
options to use the payments services they prefer.

Q.5. Please provide to the Committee any agreements, contracts, 
affiliations or joint ventures Facebook has with Visa or 
Mastercard separate from their participation in the Libra 
initiative.

A.5. Facebook's policy is not to make public contracts or other 
agreements between private parties. Such agreements typically 
include sensitive business information that must be treated 
confidentially in order to prevent competitive harm and ensure 
the integrity of contractual relationships.

Q.6. Please also explain in detail whether Facebook will enter 
into any agreements with Visa or Mastercard related to the 
Calibra wallet or other Calibra financial services, including 
any exclusivity agreements related to credit card processing.

A.6. Please see the response to Question 5.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                      FROM DAVID A. MARCUS

Q.1. What revenue streams will Facebook, through its subsidiary 
Calibra or otherwise, envision earning from Libra?

A.1. The goal for Calibra is to charge very little or nothing 
for person-to-person transactions, and, accordingly, we do not 
expect Calibra to generate significant revenues at the outset. 
Our first goal is to create utility and adoption, enabling 
people around the world--especially the unbanked and 
underbanked--to take part in the financial ecosystem.
    We do expect that the Calibra wallet will be immediately 
beneficial to Facebook because it will allow many of the 90 
million small- and medium-sized businesses that use the 
Facebook platform to transact more directly with Facebook's 
many users, which we hope will result in consumers and 
businesses using Facebook more. That increased usage is likely 
to yield greater advertising revenue for Facebook. 
Additionally, if we earn people's trust with the Calibra wallet 
over time, we will also be in a position to start offering more 
financial services, generating other revenue streams for the 
company.
    Moreover, Facebook introduced Libra because it aligns with 
our mission. Bringing the world closer together involves giving 
people tools to connect and communicate, including by easily 
moving value between one another. Economic empowerment is one 
of our core values, and the 90 million businesses on the 
Facebook platform can attest to that. We have done a lot to 
democratize free, unlimited communications for billions of 
people. We want to help do the same thing for digital money and 
financial services, with one key difference: we will relinquish 
control over the very network and currency we have helped 
create.
    It bears repeating that Facebook will not control the Libra 
Network, the currency, or the Reserve backing it, nor will it 
have any special responsibility over the network. Facebook 
expects to be only one among over a hundred members of the 
Libra Association by launch. We will not have any special 
rights or privileges. Even more importantly, users will not 
have to use the Calibra wallet to get the benefit of Libra; 
people will have many ways in which to use Libra and access the 
network.
    Those limited circumstances where data might be shared 
between Calibra and Facebook include when data sharing is used 
to prevent fraud or criminal activity, as well as when users 
opt-in to share their data. As a Facebook subsidiary, Calibra 
may be legally obligated to share certain data with Facebook so 
the company can meet its regulatory requirements. This could 
consist of aggregated payment numbers for financial and tax 
reporting or information necessary to comply with the law. The 
limited user information that Calibra does collect and store 
will be subject to strong security and access controls. User 
payment credentials, such as a debit card number, will not be 
accessible by Facebook or its affiliates. User transaction 
activity is private and will never be posted to Facebook, 
unless users themselves choose to share it.
    Similar to other commerce platforms, there may be times 
when Facebook, acting in its capacity as a merchant or 
platform, will independently have access to information about 
completed transactions that take place on Facebook's commerce 
platform (e.g., purchase made, merchant, transaction amount, 
date, time). This may include transactions completed via 
Calibra with Libra as the exchanged currency, though this would 
not involve a special transfer of information from Calibra to 
Facebook. In those situations, Facebook's independent access to 
transaction information will be the same as for other 
transactions on the Facebook platform completed using other 
payment methods like credit cards.

Q.2. Will Facebook collect or receive preferential access to 
user's financial data by owning Calibra or by being a (the 
leading) member of the Libra Association?

A.2. No. Data on the Libra Blockchain, which includes 
transaction information listed only by public blockchain 
addresses, will be pseudonymous and will be equally visible to 
everyone.
    Facebook created Calibra as a regulated subsidiary in part 
to ensure separation between social and financial data and to 
build and operate services on its behalf on top of the Libra 
Network. And except in limited circumstances that are described 
below, Calibra will not share customers' account information or 
financial data with Facebook.
    For more information on the limited circumstances where 
data might be shared between Calibra and Facebook, please see 
the response to Question 1.

Q.3. Will the Libra Association's governance meetings be open 
to the public? Will they take written questions or comments 
from Libra users?

A.3. We understand the Libra Association is committed to 
providing Libra users with the opportunity to ask questions 
about and comment upon the Libra coin and the operations of the 
Libra Association. We understand that the exact nature of these 
processes will be agreed upon by the members of the Libra 
Association.

Q.4. Will the Libra Association invite Government bodies (e.g., 
central banks of underdeveloped Nations where Libra may 
displace national currencies) to join as members?

A.4. At this time, we understand that the Libra Association 
intends to limit membership to certain types of organizations 
and will work with its Initial Members to create a set of 
sector-specific evaluation criteria for organizations that wish 
to join. We do not expect central banks or other Government 
bodies to become members of the Libra Association, but we 
expect that membership criteria for the Libra Association will 
continue to evolve, as determined by the Libra Association and 
its members. More generally, oversight and feedback from 
Government bodies, including those from countries with less 
developed banking and monetary systems, as well as the G7 
Working Group on stable coins, will be crucial to a successful 
launch of Libra. The Libra Association does not intend to offer 
the Libra digital currency in any jurisdiction until it has 
addressed applicable regulatory concerns, including concerns 
about Libra's interaction with national currencies, and 
received appropriate approvals. And even if Government bodies 
from underdeveloped Nations do not themselves become members of 
the Libra Association, nongovernmental organizations active in 
and attentive to the interests of those in underdeveloped 
Nations are expected to join.

Q.5. Will the Libra Association permit individuals or entities 
to ``pool'' memberships? If a consortium of NGOs, for example, 
raised funds to purchase a membership, could they join the 
Libra Association as a full voting member? How does the Libra 
Association intend to receive and incorporate input from 
communities it will influence and affect?

A.5. As discussed in the response to Question 4, we understand 
the Libra Association will work with its Initial Members to 
create a set of sector-specific criteria for organizations that 
wish to join. A consortium of NGOs meeting those criteria 
applicable to NGOs may be eligible to apply. Additionally, we 
understand the Association intends to identify social impact 
partners aligned with its mission of financial inclusion and 
will work with them to establish a Social Impact Advisory Board 
and a social impact program. The Libra Association expects that 
input from member NGOs will be a valuable source of information 
from the communities it will influence and affect. Individuals 
are not expected to be admitted as members of the Libra 
Association.

Q.6. Will the Libra Association incorporate the views of Libra 
users in governance? Put another way, will the product users 
(the unbanked who stand to be affected by Libra's focus on 
social impact) have a voice in how Libra operates?

A.6. Please see the responses to Questions 3, 4, and 5.

Q.7. Why exclude Libra users from any financial benefit of the 
system? Since they will be paying fees to exchange local fiat 
into Libra and those fees are being used to purchase ``stable'' 
assets like T-bills and other Government securities, how can 
the unbanked share in the financial upside that is now only 
available to Libra Investment Token Holders? Perhaps through 
some direct subsidy?

A.7. The Libra ecosystem is expected to enable users of Libra 
to send and receive money in a way that is easier, less costly, 
faster, and safer than the status quo. Investments made by 
members of the Libra Association will fund the development of 
this ecosystem, and though a portion of the return on the Libra 
Reserve will accrue to the benefit of those member-investors, 
the overall benefits of the Libra ecosystem in terms of easier, 
less costly, faster, and safer payments will ultimately accrue 
to the benefit of Libra users.

Q.8. Coindesk recently published a number of earnings estimates 
for Libra Investment Token holders based on the Libra token 
achieving different levels of adoption. One model estimates 
that if Libra achieves adoption equal to 10 percent of the U.S. 
M1 money supply, Libra would generate--after deducting the 
assumed $1 billion in annual operational expenses--nearly $7 
billion of interest per year, with a yearly return on 
investment (ROI) for the Libra Governance token holders of 
688.51 percent.
    Given the wealth that will be created by a successful Libra 
platform, why not use earnings from user deposits to lower 
costs for users to buy into Libra?

A.8. We are not in a position to comment on Coindesk's 
projections, which are speculative. We know that the current 
payments system imposes high costs on everyday users, and this 
problem is a key motivation for Libra. We understand that for 
Libra to be useful, it will need to offer a lower-cost solution 
than is available today. We expect improved technology and 
competition to dramatically reduce the fees associated with 
payments made through services offered on the Libra Network, 
including fees paid in connection with the purchase, storage, 
sale, and transfer of Libra coins.

Q.9. What are the first target markets for Libra? Is the 
Association considering only economically underdeveloped 
countries?

A.9. We understand the Association is considering as markets 
both ``underdeveloped'' and ``developed'' countries. While we 
believe that Libra can offer widespread utility, it will 
provide the most immediate value to people and merchants who 
regularly make or receive cross-border payments and people with 
limited or no access to financial services, such as the 
unbanked or the underbanked. We hope Libra will provide more 
people with more options for financial services than they may 
have access to today. While the Association will make the final 
decision, we understand that it will not determine where Libra 
are distributed and used, and will not interface with 
customers. Libra will be distributed by exchanges, wallet 
services, and other trading platforms. We expect that the 
Association will prioritize local partnerships in markets that 
are remittance corridors to further facilitate local adoption.

Q.10. What efforts has Facebook and/or the Libra Association 
undertaken to engage regulators in underdeveloped Nations where 
Libra may have its largest social impact? Why did Facebook not 
consult with the relevant finance ministries where it expects 
Libra to have its greatest and immediate impact?

A.10. Members of Libra's development team have met and continue 
to meet with central banks around the world, including central 
banks in those countries where Libra may have the largest 
social impact. During those meetings, the development team has 
explained that the currencies represented in the Libra Reserve 
will be subject to their respective Governments' monetary 
policies. We understand the Libra Association, which will 
manage the Reserve, has no intention of competing with any 
sovereign currencies or entering the monetary policy arena. We 
expect it will work with the Federal Reserve and other central 
banks to make sure Libra does not compete with sovereign 
currencies or interfere with monetary policy. Monetary policy 
is properly the province of central banks.

Q.11. Would not the unbanked be better off being banked with 
regulated banks than using Libra? At least with a bank account, 
users would be able to earn interest on their deposits, have 
legal protections such as FDIC insurance on the value of their 
deposits, and be able to withdraw funds within 24 hours. What 
are the comparable guarantees or protections with Libra?

A.11. We are launching Libra in part because the unbanked lack 
access to traditional, regulated banks. Our vision is to create 
a simple digital currency and financial infrastructure that 
empowers people around the world. By creating a decentralized 
currency and an open platform for developers and businesses, 
large and small, to create accessible and inclusive financial 
services, this vision can become a reality. A digital currency 
powered by blockchain technology offers specific advantages 
over traditional financial services, and an open-source 
blockchain will enable businesses and developers around the 
world to build services that meet the needs of their 
communities. Payment mechanisms such as the Calibra wallet will 
give users an option to use Libra as a medium of exchange to 
send remittances and make payments more easily and at a lower 
cost than they can with existing payment systems and services.
    Libra will be fully backed on a one-to-one basis through 
the Libra Reserve, which will hold a fungible pool of bank 
deposits and highly liquid, very short-term Government 
securities. These assets are expected to be denominated in the 
U.S. dollar, the British pound sterling, the euro, the Japanese 
yen, and the Singapore dollar. Because Libra will be fully 
backed and we expect that the Libra Association will encourage 
a diverse ecosystem of exchanges, individuals holding Libra 
digital coins can have a high degree of assurance that they can 
sell them for local fiat currency based on an exchange rate at 
a narrow spread below the value of the Reserve, similar to 
exchanging one currency for another when traveling. The assets 
in the Libra Reserve will be held by a geographically 
distributed network of bank custodians with investment-grade 
credit rating to provide both security and decentralization of 
the assets.
    Calibra will be a regulated money services business. It 
will be required at all times to hold Libra coin equal to or 
greater than 100 percent of the coins owned by customers. 
Further, Calibra will provide stronger protections than many 
other cryptocurrency wallets today, including know-your-
customer compliance, consumer and fraud protection, customer 
support, and password recovery. When using Calibra, automated 
tools will proactively monitor activity to detect fraudulent 
behavior. If fraudulent activity is suspected, Calibra will 
either deny the activity in real-time or ask for additional 
information before the activity can be completed. The Calibra 
wallet will include additional layers of authentication so that 
users can trust their money will stay safe even if they lose 
their phone or password. And in the rare event of unauthorized 
transactions in a user's Calibra wallet, that user will be 
given a refund. Calibra will also offer dedicated customer 
support, ensuring that people will receive timely assistance, 
whether it be answering questions related to their account, or 
responding to reports of illicit activity. Like other custodial 
wallets, Calibra will manage the public and private keys of its 
customers. This means that people will have recourse if they 
lose their password and will not have to worry about 
permanently losing access to their funds.
    In terms of security, we are utilizing systems that have 
been certified for PCI compliance and are implementing security 
measures that are compliant with data protection regulations. 
Moving forward, we will continue to take active steps to ensure 
we are meeting expectations to secure traditional financial 
instruments and will continuously evolve our security posture 
to meet an ever-changing threat landscape.
    Of course, using Libra is a choice, and individuals with 
access to traditional banks will always have the option of 
keeping their funds in a bank if they do not believe that Libra 
is best for them.

Q.12. Libra's white paper describes the Libra reserve as 
``[Libra] buyer of last resort'' should Libra's ``authorized 
resellers'' want to sell back Libra for its underlying assets.
    Based on this description, does Facebook intend the Libra 
Association to operate akin to the Federal Reserve, even though 
the Association does not set monetary policy?

A.12. The Libra Association is not designed to operate akin to 
the Federal Reserve or any other central bank. We understand 
the Libra Association will be the ``buyer of last resort'' for 
Libra coins because it will be the only entity capable of 
repurchasing Libra coins in return for their value in U.S. 
dollars or some other currency (i.e., ``burning'' them, meaning 
repurchasing them for cash and permanently taking them out of 
circulation). Only Designated Dealers, not retail users of 
Libra coins, will have the contractual right to return Libra 
coins to the Libra Association for repurchase in exchange for 
U.S. dollars or some other currency equal to the then-current 
value of the assets (established by third-party price 
providers) held in the Libra Reserve corresponding to those 
Libra coins. Retail users of Libra coins will buy and sell 
Libra coins for their own account on third-party trading 
platforms or from intermediaries acting as dealers and market 
makers. If and when a Designated Dealer places an order to sell 
Libra coins, we understand the Association will fulfill this 
order by selling assets or transferring cash from the Reserve, 
not by lending or borrowing funds from third parties.

Q.13. To use Libra, will users be required to use the Calibra 
wallet? Or does the Libra Association anticipate making grants 
to startups looking to build improved wallets for Libra, or 
incorporate Libra as a token for existing wallets?

A.13. No. Users will not be required to use the Calibra wallet 
to take advantage of all that Libra has to offer. The Libra 
Blockchain will be an open ecosystem, which will allow 
businesses to create competitive services on the Libra Network. 
Any company will be free to build a wallet on the network. 
These wallets will provide choice and competition, which will 
benefit consumers. The Calibra wallet will also be 
interoperable with other apps and financial service providers 
that offer complementary services. And the Calibra wallet will 
support data portability, so that users who wish to move from 
the Calibra wallet to another service provider will be able to 
transfer their data with ease.

Q.14. Why is Libra its own unit of account? Would this not 
erode local purchasing power and harm the financially 
vulnerable who take on exchange rate risk between Libra and the 
local currency in which goods, services and wages are priced 
in?

A.14. The Libra Association was established with the mission of 
creating a lower cost, more accessible payment tool built on 
the Libra Blockchain that will facilitate a more connected 
global payments system. For many, the current payments system 
is too expensive, too slow, or in some cases, completely 
inaccessible. If successful, Libra would help address some of 
these issues, costs, and barriers.
    Libra's comparative advantage will be in cross-border 
transactions that already involve multiple currencies and 
exposure to foreign exchange risk. Moreover, Libra is designed 
to exist alongside existing currencies. A key objective is to 
provide people around the world with access to a low-volatility 
cryptocurrency that can serve as a low-friction medium of 
exchange on an international basis from day one and can support 
new digitally native use cases such as micropayments. The Libra 
Reserve will play a vital role in supporting value 
preservation, building trust, and protecting the resources 
users, merchants, and developers bring to the network.
    For countries that have capital controls in place, we 
expect regulators in those countries will apply them to wallets 
that enable Libra as they see fit, since on- and off-ramps will 
be regulated. And we understand that the Association plans to 
work with central banks to identify issues that may relate to 
those central banks' ability to perform monetary policy. Libra 
is meant to exist alongside local currencies, and therefore we 
would expect that Libra would not be a replacement for local 
currencies as a unit of account. Instead, Libra is meant to 
serve primarily as a means of payment. Moreover, Libra coins, 
digital wallets, and other mechanisms designed to make 
remittances or payments over the Libra Network will need to 
reduce the overall cost of such transactions, including any 
exchange rate costs, in order to be successful. We expect that 
any costs of using Libra, such as exchange rate fees, will be 
offset by lower transaction fees and other benefits relative to 
existing payment options.

Q.15. Will the Libra Association provide quarterly (or real 
time) audits of the available reserves?

A.15. We expect the Libra Reserve to be subject to rigorous 
supervisory oversight, internal and external audit, and public 
reporting requirements. First, we anticipate that the Libra 
Association will be subject to an appropriate regulatory 
framework, which we expect will involve supervision by FINMA, 
and that its regulators will subject the Libra Reserve to 
rigorous supervisory oversight. Second, we expect that the 
Libra Association will regularly publish unaudited information 
on the composition of the Libra Reserve. Third, we understand 
that the Libra Association will establish and maintain an 
appropriate risk management framework for the Libra Reserve, 
which will include periodic internal audits or reviews, and 
external audits. Finally, the Libra Association is expected to 
publish information from these audits and reviews on a regular 
basis, subject to applicable law, in order to demonstrate that 
all Libra coins in circulation are fully matched by cash and 
cash equivalents in the Libra Reserve.

Q.16. Please walk us through the steps for how the Libra 
Association will be ``decentralized'' and how Libra which will 
always run on a permissioned network ever be a decentralized, 
permissionless currency?

A.16. We understand the Libra Association's governing council 
will be responsible for developing and adopting a technical 
plan for the Libra Network node operation to become 
permissionless. We expect that the Libra Blockchain will 
transition to a permissionless structure only if applicable 
regulatory requirements will be met and any transition plans 
are expected to be reviewed by governing regulatory 
authorities. We understand that the Libra Association does not 
expect this step to take place within the next 5 years, and in 
any case will seek to transition to a permissionless blockchain 
only if and when it is confident that it has systems in place 
to address applicable AML and sanctions requirements as well as 
other applicable law.
                                ------                                


         RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                      FROM DAVID A. MARCUS

Q.1. If Libra gains mass adoption, it could pose a threat to 
United States sovereignty because it could harm the integrity 
of its monetary system and the ability to maintain a primary 
currency. In your testimony, you state that the Libra 
Association has ``no intention of competing with any sovereign 
currencies or entering the monetary policy arena.''
    Have you considered all the implications that Libra would 
have for national sovereignty?

A.1. Our goal is for Libra to exist alongside existing 
currencies, and we do not believe that the existence of Libra 
coins will pose any threat to U.S. sovereignty--similar to how 
payments technology and networks have not posed a threat in the 
past.
    The Federal Reserve will maintain control over the U.S. 
monetary system, including U.S. interest rates, the supply of 
U.S. dollars, and the other aspects of U.S. monetary policy. We 
expect that U.S. dollars withdrawn from the U.S. banking system 
in order to invest in Libra coins will be redeposited in the 
U.S. banking system in the form of the U.S. Treasuries in the 
Libra Reserve.
    Libra is not designed to replace the U.S. dollar or any 
other currency, but to extend their functionality by allowing 
for cheaper and faster payments. It is designed to be a 
complement to local fiat currencies, not a substitute. It 
complements them by allowing for cross-border payments at a low 
cost.

Q.2. What is to prevent the Libra Association from unilaterally 
altering its stated intention not to interfere with monetary 
policy and national Government control of the money supply?

A.2. The currencies represented in the Libra Reserve will 
continue to be subject to their respective Governments' 
monetary policies. We expect that certain changes to the Libra 
Reserve could also be subject to regulatory requirements that 
are being considered by a G7 Working Group and other 
regulators. We understand the Libra Association, which will 
manage the Reserve, has no intention of competing with any 
sovereign currencies or entering the monetary policy arena. It 
will work with the Federal Reserve and other central banks 
responsible for monetary policy to make sure Libra does not 
compete with sovereign currencies or interfere with monetary 
policy. Monetary policy is properly the province of central 
banks. And we expect FINMA and the G7 central banks to insist 
on a regulatory framework for the Libra Association that will 
ensure that the Association cannot interfere with monetary 
policy.

Q.3. We have seen how Kremlin and Kremlin-linked actors are 
exploiting cryptocurrencies to carry out malign influence 
operations. For instance, the Special Counsel charged Russian 
military intelligence agents who hacked into the Democratic 
National Committee and weaponized the stolen information with 
conspiracy to launder money. The indictment specifically cited 
how the Russian agents used bitcoin in the furtherance of their 
scheme, stating that ``the use of bitcoin allowed the 
Conspirators to avoid direct relationships with traditional 
financial institutions, allowing them to evade greater scrutiny 
of their identities and sources of funds.'' It has also been 
reported in the media that cryptocurrencies are utilized for 
other illicit purposes such as money laundering, sanctions 
evasion, and support for terrorism.
    What safeguards will you put in place to ensure that Libra 
does not provide similar anonymity to those that seek to use 
your cryptocurrency to finance their malign influence 
operations against the United States, our allies, and our 
partners?
    How will you ensure that Libra will not be utilized to 
interfere in our elections, launder money, or evade sanctions?
    How will you facilitate cooperation with law enforcement to 
counter illicit activity?

A.3. Facebook and the Libra Association are committed to 
working with policymakers and regulators to achieve a safe, 
transparent, and consumer-friendly implementation of Libra. We 
recognize that blockchain is an emerging technology, and that 
policymakers must determine how this technology will fit into 
the regulatory landscape. We understand that the Association 
also intends to register with FinCEN as a money services 
business.
    Facebook and the Libra Association are similarly committed 
to supporting efforts by regulators, central banks, and 
lawmakers to ensure that Libra contributes to the fight against 
money-laundering, terrorism financing, and more. A network that 
helps move more paper cash transactions--where many illicit 
activities happen--to a digital network that includes, for 
relevant parties, on- and off-ramps with proper know-your-
customer practices, combined with the ability for law 
enforcement and regulators to conduct their own analysis of on-
chain activity, will present an opportunity to increase the 
efficacy of financial crimes monitoring and enforcement. We 
understand the Libra Association plans to continue to engage 
proactively and openly with all relevant stakeholders on these 
key issues. Libra should improve detection and enforcement 
capabilities, not set them back.
    Our understanding is that the Libra Association will 
consult with vendors who have expertise in identifying illicit 
activity on public blockchains. It will also maintain 
guidelines with respect to anti- money-laundering, combating 
the financing of terrorism, and other applicable national 
security-related laws, with which we understand its members 
will be required to comply. These service providers will 
include payment services and marketplaces that are already 
trusted today by millions of people to complete their 
transactions safely, and that have major investments in people 
and technology to fight fraud and prevent illicit activity.
    The Libra Association and Calibra are committed to working 
with law enforcement. In the event that illicit activity does 
take place on the Libra Blockchain or by Calibra's customers, 
law enforcement can subpoena details on accounts and 
transactions from specific wallet operators or other relevant 
service providers and, in appropriate circumstances, may be 
able to obtain court orders or administrative orders requiring 
a wallet operator to freeze or move Libra coins. Law 
enforcement agencies will also be able to access the Libra 
Blockchain ledger directly and conduct their own analysis.

Q.4. In a July 3 note you posted to Facebook, you stated the 
following:

        Facebook created a subsidiary--Calibra--that will 
        operate a wallet service on top of the Libra Network, 
        and while Facebook, Inc., owns and controls Calibra, it 
        won't see financial data from Calibra.

    In the same post, you also wrote:

        If Libra is successful, Facebook will first benefit 
        from it by enabling more commerce across its family of 
        apps. More commerce means ads will be more effective, 
        and advertisers will buy more of them to grow their 
        businesses. Additionally, if we earn people's trust 
        with the Calibra wallet over time, we will also be in a 
        position to start offering more financial services, and 
        generate other revenue streams for the company.

    If Libra facilitates more commerce across Facebook's family 
of apps, how is it that Facebook won't see financial data from 
Calibra and other entities providing Libra digital wallet 
services?
    Facebook already wields considerable commercial power by 
leveraging our social media data through the sale of ads. With 
Calibra, Facebook could have access to even more of our 
financial data, which would make Facebook's ads more effective 
and permit Facebook to offer more financial services. Why 
should Facebook be permitted to wield even more power than it 
already possesses?

A.4. The benefit that Facebook derives from Calibra is not 
based on access to Calibra financial data. Calibra will enable 
the 90 million small- and medium-sized businesses on the 
Facebook platform to engage in more commerce with Facebook's 
users. If they engage in more commerce, there will be more 
advertising spend from those businesses. That would be a first 
indirect effect of having Calibra and the Libra Network be 
successful. Over time, we hope that through the Calibra wallet 
we can offer more services and partnerships with existing banks 
and financial services companies to drive new revenue streams 
for the company.
    Indeed, Calibra is being designed with a strong commitment 
to protecting customer privacy. Calibra believes that customers 
hold rights to their data and should have simple, 
understandable, and accessible data-management controls.
    Facebook created Calibra as a regulated subsidiary in part 
to ensure separation between social and financial data and to 
build and operate services on its behalf on top of the Libra 
Network. And, except in limited circumstances that are 
described below, Calibra will not share customers' account 
information or financial data with Facebook.
    Those limited circumstances where data might be shared 
between Calibra and Facebook include when data sharing is used 
to prevent fraud or criminal activity, as well as when users 
choose to share their data. As a Facebook subsidiary, Calibra 
may be legally obligated to share certain data with Facebook so 
the company can meet its regulatory requirements. This could 
consist of aggregated payment numbers for financial and tax 
reporting or information necessary to comply with the law.
    The limited user information that Calibra does collect and 
store will be subject to strong security and access controls. 
User payment credentials, such as a debit card number, will not 
be accessible by Facebook or its affiliates. And user 
transaction activity is private and will never be posted to 
Facebook, unless users themselves choose to share it.
    Similar to other commerce platforms, there may be times 
when Facebook, acting in its capacity as a merchant or 
platform, will independently have access to information about 
completed transactions that take place on Facebook's commerce 
platform (e.g., purchase made, merchant, transaction amount, 
date, time). This may include transactions completed via 
Calibra with Libra as the exchanged currency, though this would 
not involve a special transfer of information from Calibra to 
Facebook. In those situations, Facebook's independent access to 
transaction information will be the same as for other 
transactions on the Facebook platform completed using other 
payment methods like credit cards.

Q.5. In a July 3 note you posted to Facebook, you wrote the 
following about Libra:

        [I]f this is not done right, it could definitely 
        present systemic risks no one wants.

    Please describe with specificity the two worst systemic 
risks?
    If despite your best efforts, these systemic risks are 
realized, how will you or any other senior executive at 
Facebook or Calibra take personal responsibility for these 
failures?

A.5. First, it is important to reiterate our commitment to 
taking the time to get this right. We understand the Libra 
Association will not offer the Libra digital currency in any 
jurisdiction until we have fully addressed applicable 
regulatory concerns--including concerns about potential 
systemic risks--and have received appropriate approvals in that 
jurisdiction.
    Two of the most significant systemic risks that a payment 
token could pose, if not structured properly, would be those 
stemming from (i) a fractional reserve, wherein the payment 
tokens in circulation are not fully backed by corresponding 
assets in the reserve, and (ii) a liquidity mismatch, wherein 
the assets in the reserve are not limited to cash and cash 
equivalents, but instead include illiquid or other risky 
assets.
    The Libra digital currency will be structured to address 
these systemic risks by requiring all the Libra coins in 
circulation to be fully backed by corresponding assets in the 
Libra Reserve, and to limit the assets in the Libra Reserve to 
cash and cash equivalents in the form of very short-term 
Government securities. And we expect FINMA and the G7 central 
banks to insist on a regulatory framework for the Libra 
Association that will impose controls on the investments in the 
Libra Reserve to prevent the Libra Reserve from being invested 
in risky assets.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR MENENDEZ FROM DAVID A. MARCUS

Q.1. Mr. Marcus, as I raised with you in the hearing, it is my 
understanding that if the Libra Association was made aware of a 
sanctioned individual and that individual's digital currency 
address, it would have the technical ability to stop 
transactions to or from that address, regardless of the wallet 
and ``on- or off-ramp'' that individual used.
    Is it true that the Libra Association would have the 
technical ability to stop such transactions?

A.1. The Libra Association is committed to ensuring that the 
Libra Network complies with applicable laws and regulations, 
including applicable anti- money-laundering (AML) requirements 
and sanctions laws and regulations. To this end, we expect that 
the Libra Association and its members will explore what 
technical and contractual options are available and may be 
appropriate to ensure that appropriate measures are taken to 
comply with sanctions and AML requirements, including blocking 
or restricting transactions to a blockchain address of a 
sanctioned individual.
    Speaking for Calibra, Calibra will take steps at multiple 
levels to prevent and detect possible sanctions-related 
activity by scanning users of the Calibra wallet against issued 
sanctions lists and country and regional sanctions programs--
including those administered by the U.S. Department of the 
Treasury's Office of Foreign Assets Control (OFAC)--and 
blocking prospective and current users when appropriate. 
Calibra will also implement automated geo-blocking controls to 
prevent users from accessing the Calibra wallet or transacting 
from specified locations.
    Similarly, Calibra has registered with FinCEN as a money 
services business, and as such will comply with relevant FinCEN 
regulations and guidance. Additionally, Calibra will 
incorporate know-your-customer and anti- money-laundering/
combating-the-financing-of-terrorism methodologies used around 
the world, including those focused on customer identification 
and verification, as well as risk-based customer due diligence. 
Calibra will achieve this, in part, by developing and applying 
technologies such as advanced machine learning to enhance 
transaction monitoring and suspicious activity reporting. 
Calibra's efforts will be commensurate with the risks posed by 
several factors such as Calibra's product features, customer 
profiles, geographies, and transaction volumes.

Q.2. Will you, as a founding member of the Libra Association, 
commit to stopping such transactions to provide an added layer 
of security in the event that a sanctioned actor attempts to 
use a wallet or ``on- or off-ramp'' based in a jurisdiction 
that does not comply with U.S. sanctions law?

A.2. Please see the response to Question 1.

Q.3. As Libra transitions to a permissionless blockchain, how 
are you going to ensure that Libra isn't used by illicit actors 
in the same way they've tried to use Bitcoin and other 
cryptocurrencies?

A.3. The Libra Association is committed to complying with 
applicable laws and is evaluating appropriate steps to 
safeguard the Libra Network from abuse by criminal actors. We 
understand the Libra Association's governing council will be 
responsible for developing and adopting a technical plan for 
the Libra Network to become permissionless. The Libra 
Blockchain will transition to a permissionless structure only 
if applicable regulatory requirements will be met. Any 
transition plans are expected to be discussed with governing 
regulatory authorities. We understand that the Libra 
Association does not expect this step to take place within the 
next 5 years.

Q.4. In your testimony, you stated that Calibra would develop 
and apply technologies such as advanced machine learning to 
``enhance transaction monitoring and suspicious activity 
reporting''. Will you commit to testing these systems before 
Libra launches to ensure that they are at least as capable as 
our current banking system of stopping illicit financing and 
share those results with this Committee, FinCEN, and other 
regulators?

A.4. We understand that the Libra Association will not offer 
the Libra digital currency in any jurisdiction until it has 
fully addressed regulatory concerns and received appropriate 
approvals in that jurisdiction. Calibra is registered as a 
money services business (MSB) with FinCEN and, per FinCEN 
guidance, MSBs must develop an anti- money-laundering program 
that is ``reasonably designed to prevent the money services 
business from being used to facilitate money laundering and the 
financing of terrorist activities.'' 31 CFR 1022.210(a). To 
meet this requirement, MSBs must ``[p]rovide education and/or 
training of appropriate personnel concerning their 
responsibilities under the program, including training in the 
detection of suspicious transactions to the extent that the 
money services business is required to report such transactions 
under'' the BSA. Id. 1022.210(d)(3). As a registered MSB, 
Calibra will ensure that its AML program meets these 
requirements.

Q.5. In your testimony you stated that Libra will help build a 
more ``inclusive financial infrastructure.'' The Libra white 
paper also points to Libra as a potential solution for the 
underbanked and the unbanked. In the U.S., 16.9 percent of 
black households and 14 percent of Hispanic households were 
unbanked in 2017. Furthermore, 30.4 percent of black households 
and 28.9 percent of Hispanic households were underbanked in 
2017.
    Does Facebook or Calibra intend to help consumers obtain 
proper Government identification and any other documentation 
they might need to comply with Know Your Customer rules so 
underbanked people can access Libra?
    If not, how will Calibra verify that the consumer is who 
they say they are?

A.5. We recognize that a lack of traditional means of 
identification is sometimes a key barrier to serving the 
underbanked, and we understand that other organizations 
building for Libra are exploring ways in which services could 
be provided to these individuals in compliance with applicable 
law. This may include, for example, the Libra Association 
providing grant funding to organizations that assist people in 
underrepresented communities in obtaining Government 
identification as a path to access to financial services, 
whether through the Libra Network or otherwise.

Q.6. Facebook is not just a social network anymore. It is also 
one of the largest venues for online advertising, shopping, 
gaming, and more. And that means Facebook holds tremendous 
power to dictate how people pay for those services. Facebook 
could offer users discounted rates if they pay in Libra, and 
thereby stimulate adoption of the currency, fuel its ad 
services, harvest more user data, and increase reliance on the 
platform as a whole.
    Given Facebook's troubled history with manipulative ads and 
abuse of consumer data, will Facebook commit to not incentivize 
the use of Libra by offering customers discounted rates for 
advertising or other services if they pay in Libra?

A.6. Facebook has not yet determined if or how it will 
incentivize its advertising customers to use Libra. We are 
building Calibra with strong privacy safeguards in place and 
will be responsive to our community's feedback to ensure we are 
continuing to be respectful of their preferences. Calibra is 
committed to protecting privacy, and it is being designed 
accordingly.

Q.7. According to a July 22, 2019, article in the Washington 
Post ``A wave of fakes purporting to sell or represent 
Facebook's not-yet-available Libra currency have swept onto the 
social-media giant's platforms''.
    What proactive steps is Facebook taking to ensure that 
these accounts are promptly removed without relying on user 
reporting?
    If an individual falls prey to a fraudulent account, what 
remedies will Facebook offer to the user?

A.7. Before they are published on Facebook, ads go through an 
ad review process. Additionally, Facebook removes ads and Pages 
that violate our policies when we become aware of them, and we 
are constantly working to improve detection of scams on our 
platforms.
    Two of our core advertising principles stem from our belief 
that ads should be safe, and that we build for people first. 
Misleading or deceptive ads have no place on Facebook. We want 
people to continue to discover and learn about new products and 
services through Facebook ads without fear of scams or 
deception. We are committed to preventing misleading 
advertising on our platforms, especially in the area of 
financial products and services. That is why ads may not 
promote cryptocurrency trading or related products and services 
without prior written permission. This policy is part of an 
ongoing effort to improve the integrity and security of our 
ads, and to make it harder for scammers to profit from a 
presence on Facebook.
    Authenticity matters, for Pages as well as ads, because 
people need to trust that the content they are seeing is valid 
and they need to trust the connections they make. Our 
technology helps us take action against millions of attempts to 
create fake accounts every day, and detect and remove millions 
more, often within minutes of creation. When it comes to 
abusive fake accounts, our goal is simple: find and remove as 
many as we can while removing as few authentic accounts as 
possible. We do this in three distinct ways and include data in 
the Community Standards Enforcement Report to provide as full a 
picture as possible of our efforts:

  1.  Blocking accounts from being created: The best way to 
        fight fake accounts is to stop them from getting onto 
        Facebook in the first place. We have built technology 
        that can detect and block accounts before they are 
        created. Our systems look for a number of different 
        signals that indicate if accounts are created in mass 
        from one location. A simple example is blocking certain 
        IP addresses altogether so that they cannot access our 
        systems and thus cannot create accounts.

  2.  Removing accounts when they sign-up: Our advanced 
        detection systems also look for potential fake accounts 
        as soon as they sign-up, by spotting signs of malicious 
        behavior. These systems use a combination of signals 
        such as patterns of using suspicious email addresses, 
        suspicious actions, or signals previously associated 
        with other fake accounts we have removed. Most of the 
        accounts we currently remove are blocked within minutes 
        of their creation before they can do any harm.

  3.  Removing accounts already on Facebook: For accounts that 
        make it onto the platform, we give these accounts the 
        benefit of the doubt until they exhibit signs of 
        malicious activity. We find these accounts when our 
        detection systems identify such behavior or if people 
        using Facebook report them to us. We use a number of 
        signals about how the account was created and how the 
        account is being used to determine whether it has a 
        high probability of being fake and disable those that 
        are.

    With respect to the Calibra digital wallet, Calibra will 
offer strong consumer protections and intends to comply with 
applicable consumer protection regulations, including 
responsibilities arising out of its State money transmission 
licenses. Calibra's consumer protection efforts will include 
automated fraud detection, in-app reporting, and dedicated 
customer service. In the rare event of unauthorized 
transactions of Libra coins stored in the Calibra wallet, 
Calibra will offer full refunds.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                      FROM DAVID A. MARCUS

Q.1. In both the Senate Banking Committee hearing on July 16th 
and the House Financial Services Committee hearing on July 17th 
you repeatedly stated that Facebook would not launch Libra 
unless and until the concerns of regulators were addressed. 
Subsequently, it has been reported that Facebook would consider 
launching Libra outside the U.S., even if the concerns of 
regulators had not been addressed. This appears to contradict 
your testimony in multiple instances:

        Senator Brown: My question is this: Is there anything, 
        Mr. Marcus, that elected leaders and economic experts 
        can say that will convince you and Facebook that it 
        should not launch this currency?

        Mr. Marcus: Senator, we agree with all of the concerns, 
        very legitimate concerns that were raised by Chairman 
        Powell, Secretary Mnuchin, and many others. And . . . 
        getting this right means addressing these concerns in 
        full and ensuring that there is proper regulatory 
        oversight for this project. And we are fully committed 
        to doing what it takes to get there.

        Senator Brown: But, Mr. Marcus, with all due respect, 
        if all of us who have seen the collective amnesia of 
        this Congress in terms of what happened 10 years ago, 
        if all of us find this to be a bad idea, think you 
        should not do this launch, are you still going to do 
        it?

        Mr. Marcus: . . . I will commit again to do what it 
        takes to address these concerns; and if those concerns 
        are not addressed and if the regulatory oversight is 
        not appropriate, then, you know, we will not launch 
        until it is.

                                ------                                


        Senator Jones: Mr. Marcus, I want to talk about quickly 
        some of the money-laundering issues that I have got 
        real concerns about, and I understand that Calibra is 
        committed to verify users and those kinds of things. 
        But for money-laundering purposes, if you have got a 
        worldwide issue and you have got partners all over the 
        world, how are you going to get your partners to verify 
        these third-party products? And how are we going to 
        prevent this money laundering? I think that is a major 
        concern. How are you going to deal with your partners?

        Mr. Marcus. Senator, first I want to commit that we 
        will not launch until we have satisfied those concerns 
        with Treasury and other regulators around the world and 
        how the network is configured and it operates.

                                ------                                


        Representative Maloney: And I take it that it's 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 not 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].

                                ------                                


        Representative Velazquez: Would you commit yourself to 
        not launch Libra before all the concerns from the 
        Federal Reserve and all of 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's right to 
        . . .

                                ------                                


        Chairwoman Waters: Thank you. A point of clarification. 
        Mr. Marcus did you commit to the moratorium to Ms. 
        Velazquez?

        Mr. Marcus: Chairwoman, I committed to waiting . . . .

        Chairwoman Waters: Excuse me, I just need a yes or no.

        Mr. Marcus: Chairwoman, I just want to be precise. I 
        committed to waiting for us to have all the appropriate 
        regulatory approvals and address all concerns before we 
        move forward.

                                ------                                


        Representative Davidson: last I would say do you plan 
        to launch this outside the of the United States if you 
        can't get regulatory certainty in the United States?

        Mr. Marcus: Congressman, I'm glad you asked the 
        question and we will not actually proceed until we get 
        all of the concerns address and the proper regulatory 
        oversight here.

    In light of your testimony, how should we interpret 
statements by a Facebook spokesperson that Facebook would 
potentially launch Libra outside the U.S. even if regulators in 
the U.S. still have concerns?

A.1. As David Marcus stated recently before members of 
Congress, we are fully committed to working with regulators 
here and around the world. Facebook will comply with the 
regulatory requirements of all U.S. regulators. And we 
understand that the Libra Association will not offer the Libra 
digital currency in any jurisdiction until it has fully 
addressed regulatory concerns and received appropriate 
approvals in that jurisdiction.

Q.2. The security and integrity of our financial system rests 
on an important interplay between Federal law, State law, and 
State tort law that ensures not only the soundness of the 
entire system, but also protects everyday American consumers. 
In testimony before the House Financial Services Committee, you 
acknowledged that Section 230 of the Communications Decency Act 
does not apply to financial services products like Libra and 
Calibra.
    Will Facebook commit to not invoking Section 230 in any 
civil or criminal suit brought by a State Attorney General, 
State agency, or private plaintiff in connection with any 
alleged civil or criminal violation by Facebook relating to 
Libra or Calibra?

A.2. Section 230 of the Communications Decency Act provides 
that ``no provider or user of an interactive computer service 
shall be treated as the publisher or speaker of any information 
provided by another information content provider.'' Outside of 
certain specific exceptions, this means that online platforms 
that host content posted by others are generally not liable for 
the speech of their users, and indeed, Section 230 explicitly 
provides that a platform that chooses to moderate content on 
its service based on its own standards does not incur liability 
on the basis of that decision. Specifically, 47 U.S.C. 
230(c)(2) provides, in relevant part, that ``[n]o provider or 
user of an interactive computer service shall be held liable on 
account of . . . any action voluntarily taken in good faith to 
restrict access to or availability of material that the 
provider or user considers to be obscene, lewd, lascivious, 
filthy, excessively violent, harassing, or otherwise 
objectionable, whether or not such material is constitutionally 
protected.''
    Through the Calibra wallet, users will have the ability to 
transfer funds to other Calibra users or others on the Libra 
Network, including people using other wallets. Because Section 
230 does not apply to payments, we do not expect Section 230 to 
apply to such transfers of funds.

Q.3. Facebook's global dominance of the mobile messaging market 
will enable Facebook to quickly gain market share in the mobile 
payments space, particularly with Facebook integrating Calibra 
into WhatsApp and Facebook Messenger (and barring the 
integration of 3rd party wallets into those dominant apps). 
Facebook's success across the developing world has in large 
part been propelled by agreements it has reached with 
telecommunications carriers worldwide to exempt and otherwise 
prioritize Facebook traffic from the otherwise stringent data 
caps users typically face. Given Facebook's expressed desire to 
expand into the payments and financial services markets in 
developing countries--potentially deploying Libra abroad even 
if it is barred from doing so in the United States--it is 
critically important to understand which markets hold the 
greatest prospect of rapid adoption of Facebook financial 
products. Zero-rating arrangements have the intent, and effect, 
of driving widespread consumer adoption of products subject to 
zero-rating or paid prioritization. Given that Libra will be 
backed by both the dollar and dollar-denominated securities--
and will therefore pose financial instability risks to the U.S. 
market even if it is not launched here--it is vital for 
Congress to understand which countries are poised to adopt 
Libra (and Calibra).
    Please list each country in which Facebook maintains, or 
plans to employ, a zero-rating or paid prioritization 
relationship with at least one telecommunications provider.

A.3. Facebook is a popular service, but it is by no means 
dominant. In fact, Facebook faces intense competition for all 
of the products and services that we provide. To name a few 
examples, Twitter, Snapchat, Apple iMessage, Pinterest, Skype, 
Telegram, Viber, and YouTube offer photo and video sharing, 
messaging, advertising, and other services that compete with 
Facebook. Moreover, data is not exclusive or finite. Companies 
in every industry can and do collect data and use it to develop 
and improve their services. There is nothing to stop our 
competitors from collecting similar (if not identical) data, or 
collecting substitutable data and using it in innovative ways.
    For most people who are not online, the biggest challenges 
to connecting are affordability of the internet, and awareness 
of how internet services are valuable to them. Through 
Facebook's Free Basics offering, users are offered access to 
basic online services without data charges. In collaboration 
with mobile operators, Free Basics allows people to experience 
the relevance and benefits of being online for free, and acts 
as an on-ramp to the broader internet, with services such as 
news, health information, local jobs, communications tools, 
education resources, and local Government information. Any 
mobile operator can participate, and Free Basics is open to any 
service that meets the program's technical criteria, which are 
openly published.
    More broadly, it should not be assumed simply because 
Facebook has a large user base for its Facebook platform that 
any specific percentage of that user base will decide to use 
the Calibra wallet. People will have to create new accounts 
with Calibra to use Calibra's services; they will not be able 
to use their Facebook accounts. And before potential Calibra 
users will be able to use Calibra's services, they will need to 
provide Government-issued identification so they can be 
identified and verified based on Calibra's know-your-customer 
program. In comparison, other potential wallets, including 
other existing payment providers, already have large user bases 
that have completed the know-your-customer process and 
therefore can immediately offer services to their users. 
Additionally, the Calibra wallet will support data portability, 
so that users who wish to move from the Calibra wallet to 
another service provider will be able to transfer their data 
with ease.

Q.4. FinCEN advisories make very clear that a ``financial 
institution's leadership is responsible for performance in all 
areas of the institution including compliance with the BSA 
[Bank Secrecy Act].'' FinCEN stipulates that an institution's 
leaders should also receive ``periodic BSA/AML training.'' 
Given the global dependence on Facebook communications 
products, any financial products offered by Facebook will be 
used extensively--including by criminal actors. Indeed, the use 
of WhatsApp by transnational criminal organizations, including 
Mexican drug cartels, has been widely reported.
    Has your company's most senior leadership received anti- 
money laundering (AML) and know-your-customer (KYC) training 
consistent with FinCEN regulations and guidance?

A.4. Calibra has registered with FinCEN as a money services 
business, and as such, intends to comply with all FinCEN 
regulations and guidance, including with respect to AML 
training.

Q.5. Facebook speaks very eloquently about the goals of Libra 
in expanding access to banking services but Libra--and 
Calibra--have enormous value to Facebook. Indeed, Facebook has 
announced that its largest apps--Facebook Messenger and 
WhatsApp--will have Calibra Wallet integrations from the start. 
Messenger and WhatsApp are the two most dominant messaging apps 
globally--one or the other is the most dominant messenger app 
in every country in the world except China, Japan and a handful 
of others. Facebook has announced a closer integration of these 
messaging apps in an effort to strengthen its competitive 
position.
    Please explain in detail how the integration will proceed. 
For example, will it be implemented in stages? What is the 
timeline for each stage? What level of interoperability will 
exist among the Facebook messaging platforms when each stage is 
complete?

A.5. As discussed in the response to Question 3, Facebook is by 
no means dominant.
    We are still early in the process of developing the Calibra 
wallet, and along the way we will consult with a wide range of 
external experts to ensure that we can deliver a product that 
is safe, private, and easy to use for everyone. Our goal is to 
make it easy for people to use Calibra to send money, whether 
they are using a Calibra wallet or another Libra wallet. 
Indeed, interoperability is a bedrock principle of the Libra 
Network, and as a result, though Calibra will be integrated 
into Messenger and WhatsApp, Calibra users will be able to send 
and receive payments to other Libra holders, even if those 
Libra holders use other wallets.
    Calibra will also be available as a standalone app, such 
that Calibra users do not have to have Facebook, Messenger, or 
WhatsApp accounts to use Calibra. Anyone--including existing 
Messenger, WhatsApp and Facebook users--who wishes to use the 
Calibra wallet will have to create an account with Calibra and 
provide additional information, such as Government-issued 
identification.

Q.6. Post-integration, what new abilities will Facebook have to 
push products such as Libra to users across its various 
messaging platforms? Will the integration also give Facebook 
the power to engage in other cross-platform marketing, outside 
its messaging layer?

A.6. Calibra is opt-in, and people who use the Facebook family 
of apps will be able to choose whether to use Calibra in the 
same way that they can choose whether to use other payments 
products. While people using WhatsApp and Messenger will be 
free to use the Calibra wallet to store and make payments with 
Libra, they are also free to use Libra through other wallets 
built on the Libra Blockchain. And the Calibra wallet will 
support data portability, so that users who wish to move from 
the Calibra wallet to another service provider will be able to 
transfer their data with ease.

Q.7. Facebook has made repeated attempts to enter the Chinese 
market, with direct engagement between Facebook's CEO and Xi 
Jinping a matter of public record. On the other side of the 
ledger, China has aggressively pushed foreign Governments to 
include the renminbi in their foreign reserve holdings--
something the Chinese are pursuing to promote greater foreign 
reliance on, and domestic stability for, the renminbi. A core 
feature of Libra is that the company will maintain a basket of 
foreign currencies.
    Facebook claims it has no ``current'' plans to enter China; 
will Facebook commit to not adding--and to oppose any efforts 
by other Libra members to add--the renminbi to the foreign 
currency?

A.7. The Libra Association, not Facebook, will determine which 
currencies will be reflected in the Libra Reserve from time to 
time. The initial currency basket is expected to be composed of 
the U.S. dollar, euro, Japanese yen, British pound sterling, 
and Singapore dollar. We expect the Libra Association to be 
subject to an appropriate regulatory framework, including 
direct oversight by FINMA and indirect oversight by various 
other regulatory bodies, including the Federal Reserve and the 
other G7 central banks. Any decision whether to add a new 
currency to the Libra Reserve would be made based on all the 
facts and circumstances at the time, including any direct or 
indirect regulatory restrictions.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                      FROM DAVID A. MARCUS

Q.1. Facebook has a record of making assurances during splashy 
announcements and then subsequently quietly reneging on those 
commitments deep in the fine print of user agreements. The 
press release announcing Libra and Calibra includes a 
disclaimer that ``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,'' 
seemingly foreshadowing a similar future reversal of course.
    Please provide a copy of your written testimony and 
transcript of your testimony today indicating which 
representations you made to the Senate Banking Committee ``may 
differ materially from actual results'' and which Senators can 
rely upon.

A.1. Consistent with applicable law and common practice when 
making forward-looking statements, Facebook provided standard 
cautionary language in our press release intended to notify 
investors that the statements being made were based on 
information and expectations at the time made and that certain 
risks and uncertainties could cause actual results to be 
different in the future. That we have done so in no way 
indicates any intention or desire to back away from or 
otherwise alter the commitments that we have made to Congress 
and applicable regulators with respect to Libra. This is true 
both as a general matter and specifically with respect to 
statements made in the course of Mr. Marcus' appearance before 
the Senate Banking Committee, during which he testified 
truthfully, based on the information known to him at the time.

Q.2. The white paper that Facebook released along with its 
announcement made certain representations about how Libra would 
be governed, including that the Libra Association would be 
``independent,'' but said that ``the initial group of 
organizations will work together on finalizing the 
association's charter'' suggesting that no agreement 
operationalizing those commitments has yet been reached. Does 
Facebook see the final association charters as ``factor or 
uncertaint[y] . . . beyond its control,'' which would let you 
renege on the commitments you made to Congress?

A.2. We expect that the Libra Association will be governed by 
the Libra Association Council, which will be comprised of a 
representative from each member of the Association. The Initial 
Members, including Calibra, are collaborating to develop and 
adopt a comprehensive set of governing documents for the 
Association. We expect that the Libra Association will make 
decisions democratically and transparently. Regarding our 
commitments to Congress, Facebook will not offer services for 
the Libra digital currency in any jurisdiction until we have 
fully addressed applicable regulatory concerns and received 
appropriate approvals in that jurisdiction.

Q.3. The Federal Trade Commission recently announced a $5 
billion settlement with Facebook over privacy violations 
stemming from a 2011 Consent Order. Facebook has also faced a 
series of public privacy mishaps in recent years, establishing 
a long record of failures in protecting user data. Facebook 
claims that it will protect financial data that it obtains 
through Calibra, and that this data will not be shared with 
Facebook or any third party without consumer consent.
    Facebook's press release states that ``aside from limited 
cases,'' Calibra will not share information with Facebook. 
Please describe the ``limited cases'' in which the company will 
or may share data with others.

A.3. Facebook created Calibra as a regulated subsidiary in part 
to ensure separation between social and financial data and to 
build and operate services on its behalf on top of the Libra 
Network. And, except in limited circumstances that are 
described below, Calibra will not share customers' account 
information or financial data with Facebook.
    Those limited circumstances where data might be shared 
between Calibra and Facebook include when data sharing is used 
to prevent fraud or criminal activity, as well as when users 
choose to share their data. As a Facebook subsidiary, Calibra 
may be legally obligated to share certain data with Facebook so 
the company can meet its regulatory requirements. This could 
consist of aggregated payment numbers for financial and tax 
reporting or information necessary to comply with the law.
    The limited user information that Calibra does collect and 
store will be subject to strong security and access controls. 
User payment credentials, such as a debit card number, will not 
be accessible by Facebook or its affiliates. And user 
transaction activity is private and will never be posted to 
Facebook, unless users themselves choose to share it.
    Similar to other commerce platforms, there may be times 
when Facebook, acting in its capacity as a merchant or 
platform, will independently have access to information about 
completed transactions that take place on Facebook's commerce 
platform (e.g., purchase made, merchant, transaction amount, 
date, time). This may include transactions completed via 
Calibra with Libra as the exchanged currency, though this would 
not involve a special transfer of information from Calibra to 
Facebook. In those situations, Facebook's independent access to 
transaction information will be the same as for other 
transactions on the Facebook platform completed using other 
payment methods like credit cards.

Q.4. In those cases, will the company alert users to this 
sharing?

A.4. Calibra will describe its data sharing practices in its 
data policy, and where appropriate, in customer notices.

Q.5. The press release also states that no data will be shared 
``without customer consent.''
    Will this consent be opt-in? If so, please describe the 
process for obtaining customer consent to share personal 
financial information with Facebook and other third parties.

A.5. As we have explained, the limited circumstances where data 
might be shared between Calibra and Facebook include when data 
sharing is used to prevent fraud or criminal activity, or when 
users choose to share their data. Calibra has not designed or 
built these experiences yet. As a Facebook subsidiary, Calibra 
may be legally obligated to share certain data with Facebook so 
the company can meet its regulatory requirements. This could 
consist of aggregated payment numbers for financial and tax 
reporting or information necessary to comply with the law.

Q.6. The release states that data ``will not be used to improve 
ad targeting on the Facebook family of products.'' Will the 
data be used for ad targeting on the Calibra wallet?

A.6. The Calibra wallet has no plans to show ads, including in 
its standalone app, and Calibra will not make money to begin 
with. Our first goal is to create utility and adoption, and 
enable people around the world--especially the unbanked and 
underbanked--to take part in the financial ecosystem. This will 
be the first in a suite of financial products we hope to create 
on the Libra Blockchain. Once we drive adoption and scale, we 
will explore ways to monetize.

Q.7. Please describe all cybersecurity measures your company 
plans to take to protect sensitive financial and other data of 
Calibra users.

A.7. Calibra will take a combination of technical steps to keep 
user information secure, including data partitioning, 
encryption, and strong access controls. User transaction 
activity is private and will never be posted to Facebook, 
unless users themselves choose to share it. For example, some 
people who send cross-border payments may decide to screenshot 
their transactions and share them with a friend or family 
member. User payment credentials, such as a debit card number, 
will not be accessible by Facebook or its affiliates.
    We are utilizing systems that have been certified for PCI 
compliance and are implementing security measures that are 
compliant with data protection regulations. Moving forward, we 
will continue to take active steps to ensure we are meeting 
expectations to secure traditional financial instruments and 
will continuously evolve our security posture to meet an ever-
changing threat landscape. For Calibra itself, we are also 
going to be subject to cybersecurity regulations that apply to 
other financial services companies, such as Section 200.16 and 
Part 500 of the New York Department of Financial Services' 
Codes, Rules, and Regulations, and will aim for additional 
certifications.
    We will also take significant measures to keep people's 
Libra safe, including using cold-storage, which is air-gapped 
and offline, as well as a small percentage of coin in hot 
wallets for daily transactions. We will have physical security 
controls (including cameras, vaults, and biometrics) as well as 
cryptographic controls (such as multisignatures requiring a 
quorum of approvers, and the use of hardware security modules 
(HSMs)) to prevent any malicious activity.

Q.8. A patchwork of Federal and State data privacy and 
cybersecurity laws, standards, and best practices apply to 
different products and industries. Please describe all relevant 
privacy and security frameworks that will govern Libra and 
Calibra.

A.8. Protecting consumers and ensuring people's privacy is a 
top priority for both the Libra Association and for Calibra. 
Facebook anticipates that Calibra will be subject to U.S. 
privacy laws, as well as global laws like GDPR.
    From the inception of the Libra Blockchain design and 
continuing through the ongoing development process, ensuring 
user privacy has been, and will continue to be, a core 
principle at the center of the Libra Blockchain network. We 
understand that the Libra Blockchain development process 
incorporates, and will continue to incorporate, a ``privacy-by-
design'' approach, such that privacy considerations are taken 
into account and integrated during the development process. 
Indeed, one of the reasons the design principles underpinning 
the Libra Blockchain effort were disclosed far in advance of 
launch was to incorporate feedback and comments from privacy 
regulators and other relevant stakeholders. We understand the 
Association takes its responsibility in this regard very 
seriously, and already has an internal privacy working group 
focused on these issues.
    We recognize that regulators charged with consumer 
protection and privacy will be keen to engage with those 
building services to be offered in their jurisdictions. We 
understand the Libra Association is committed to working with 
authorities to shape a regulatory environment that encourages 
technological innovation while maintaining the highest 
standards of consumer protection and privacy.
    Calibra is also being designed with a strong commitment to 
protecting customer privacy.
    In terms of security, please see the response to Question 7 
for details on the cybersecurity measures Calibra intends to 
take.

Q.9. The House Subcommittee on Antitrust, Commercial, and 
Administrative Law launched an antitrust investigation into 
online platforms, including Facebook. Facebook amassed power in 
part by collecting data on its users and leveraging that data 
to corner the market on online advertising. Through its 
dominance in the digital advertising market, Facebook is able 
to exercise power over vendors and digital advertisers.
    How does Facebook plan to either incentivize or require 
vendors to accept Libra?

A.9. Facebook is a popular service, but it is by no means 
dominant. In fact, Facebook faces intense competition for all 
of the products and services that we provide. To name a few 
examples, Twitter, Snapchat, Apple iMessage, Pinterest, Skype, 
Telegram, Viber, and YouTube offer photo and video sharing, 
messaging, advertising, and other services that compete with 
Facebook. Moreover, data is not exclusive or finite. Companies 
in every industry can and do collect data and use it to develop 
and improve their services. There is nothing to stop our 
competitors from collecting similar (if not identical) data, or 
collecting substitutable data and using it in innovative ways.
    Facebook does not plan to require vendors to use Libra. 
Facebook has not yet determined if or how it will incentivize 
vendors to use Libra.

Q.10. If Libra becomes more widespread, does Facebook have 
plans to leverage its position on as a Member of the Board to 
extract concessions or increase prices on vendors? Does the 
company have safeguards in place to ensure this does not 
happen?

A.10. The Libra Blockchain will be an open blockchain; 
developers, businesses, and nonprofits of all sizes and from 
all around the globe will be free to build on the blockchain. 
That level playing field provides people and small- and micro-
businesses around the world equal access to a simple global 
currency and financial infrastructure. And as a result, Calibra 
will have to compete with many other providers. If Calibra were 
to try to somehow leverage its position to raise prices--which 
it will not--other service providers could undercut Calibra by 
offering cheaper services on the same Libra Blockchain.
    While Facebook does plan to accept Libra for ads (and hopes 
we will be able to pass benefits on to advertisers), we will 
continue to enable businesses to pay for ads using the payment 
methods we currently accept. Facebook, through its subsidiary 
Calibra, will have equal voting rights to other members of the 
Association, and will not have a guaranteed position on the 
Board of the Association.

Q.11. The Board of Libra, the member association that will 
manage the new cryptocurrency, is made up of massive companies 
that already hold substantial market power, including Uber, 
PayPal, and Vodafone.
    If the currency becomes more widespread, will Libra allow 
member associations to provide special discounts and services 
to consumers, not available to be offered by nonmember 
associations, which will allow these companies to leverage 
their paid membership in Libra to increase their respective 
market dominance?

A.11. While the Association will make the final decision, we 
understand that the Libra Association will offer incentives, 
with the goals of accelerating the utility and adoption of 
Libra by encouraging businesses and people to participate in 
the ecosystem and ensuring the growth and health of the 
ecosystem.
    We understand that Libra Association members may be 
eligible to receive incentives in exchange for onboarding new 
users of Libra coins and for facilitating the use of Libra 
coins in transactions. These incentives may include:

    New User (Onboarding). The Libra Association may 
        distribute incentives to eligible wallets for each 
        person who onboards and completes the wallet's 
        regulated know-your-customer screening process.

    New User (Retention). Additionally, if a person 
        meets activity criteria set by the Association for a 
        certain period 1 year after onboarding, the wallet may 
        be able to claim another reward.

    Transaction Volume. For every transaction processed 
        using Libra, merchants may receive a percentage of the 
        transaction back.

    We believe that Libra will be a positive force for 
competition. Since the Libra Blockchain will be an open 
ecosystem, businesses will be able to create competitive 
services that will lead to market pressure to keep fees low 
(both within Libra and in competing payment methods) and to 
continue to create new and innovative services.

Q.12. Facebook has stated that the Calibra Wallet app will link 
to companies that provide certain services, such as digital 
currency exchanges. Coinbase, a digital currency exchange based 
in San Francisco, is a member of the Board of Libra. Will 
Calibra favor or promote Coinbase when presenting users with 
exchange options on the wallet app?

A.12. We are working to make Calibra interoperable with other 
apps and financial service providers that offer complementary 
services. While Calibra is still exploring different 
partnerships, including with exchanges and other market 
participants that offer Libra services with exchanges, we will 
look to partner with companies that offer the best services for 
Calibra users while prioritizing reliability and security. We 
will not favor service providers merely because they are also 
Libra Association members.

Q.13. Will Libra, Facebook, or Calibra promote any other 
services through the wallet app or other means, and if so, what 
are those services?

A.13. Please see the response to Question 12.

Q.14. In a press release announcing the launch of Libra, 
Facebook wrote, ``[f]or many people around the world, even 
basic financial services are still out of reach: almost half of 
the adults in the world don't have an active bank account and 
those numbers are worse in developing countries and even worse 
for women, the cost of that exclusion is high--approximately 70 
percent of small businesses in developing countries lack access 
to credit . . . .'' It presented Libra as an answer to that 
challenge.
    Nineteen percent of Americans and 55 percent of people in 
emerging economies don't have smartphones and the numbers are 
worse for older, poorer, and less well-educated consumer. How 
will Libra reach these consumers?

A.14. The Libra Association was established with the mission of 
creating a lower cost, more accessible payment tool built on 
the Libra Blockchain that will facilitate a more connected 
global payments system. For many, the current payments system 
is too expensive, too slow, or, in some cases, completely 
inaccessible. If successful, Libra would help address some of 
these issues, costs, and barriers. And, because the Libra 
Blockchain will exist as an open-source ecosystem, businesses 
and developers will be free to build competitive services using 
it. Ongoing competition among Libra service providers is 
expected to keep fees low, reduce frictions and expand 
accessibility for those seeking access to payment systems, and 
deliver new payment solutions to users across the globe.
    Additionally, while Calibra will not have an immediate 
solution for individuals who do not own a smartphone, we expect 
that developers may build Libra wallets that work over SMS, or 
use technologies that work on nonsmartphones in emerging 
markets. We expect that developers will be able to build 
desktop-based apps for those with access to an internet cafe. 
In the meantime, we will continue to evaluate additional ways 
to offer Calibra's services to reach those individuals. For the 
large percentage of people without bank accounts who do have 
smartphones, we plan to start by supporting the Messenger and 
WhatsApp communities, i.e., people with smartphones who are 
already using those apps to communicate with their friends and 
family, as well as people who choose to download the standalone 
Calibra app.

Q.15. Will Libra encourage or allow members of the Libra 
Association to offer special discounts to consumers who pay 
with the new cryptocurrency?

A.15. Please see the response to Question 11.

Q.16. Many of the initial members of the Libra Association are 
large businesses with significant market shares in their 
industries. What guardrails will be created so that policies of 
Libra Association do not disadvantage small businesses?

A.16. We think Libra will be advantageous to small businesses--
the businesses that are typically most affected by the high 
fees exacted by the current system--for several reasons. First, 
a global digital currency powered by blockchain technology 
offers specific advantages over traditional financial services, 
and an open-source blockchain will enable small businesses and 
developers around the world to build services that meet the 
needs of their communities. Approximately 70 percent of small 
businesses in developing countries lack access to credit.
    Second, being able to use a global currency and blockchain 
will also allow these businesses to expand their reach by 
accepting payments from around the world, including from 
tourists.
    Third, Libra digital coins will be backed by a reserve of 
stable assets so people can trust that their Libra coins will 
retain their value, and because blockchain technology reduces 
the number of intermediaries involved in a transaction, the 
hope is that this will help keep fees to a minimum. Several of 
the expected initial members of the Libra Association, 
including but not limited to PayPal, Stripe, Mercado Pago, and 
PayU, have become large businesses through a core business 
strategy of providing merchant services to small- and medium-
sized merchants. As such, we expect that at least some of the 
incentives offered by the Association will be passed on to 
these small businesses. Our vision is to create a level playing 
field so that people and small businesses around the world have 
equal access to a simple global currency and financial 
infrastructure.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCHATZ
                      FROM DAVID A. MARCUS

Q.1. In creating Libra, does Facebook intend to create a global 
currency? If yes, what attributes would enable Libra to be used 
like currency?

A.1. We understand the Libra Association intends to create a 
new digital currency that can be transferred efficiently over 
the Libra Network and that is fully backed by a Reserve 
consisting of a basket of leading national currencies. We 
believe that Libra coins will function primarily as a medium of 
exchange, and that the various digital wallets and other 
payment mechanisms that will be built on top of the Libra 
Network will sharply reduce the cost of cross-border 
remittances and payments for local commercial transactions.

Q.2. What provision of U.S. law authorizes Facebook to create a 
new currency?

A.2. While we are not aware of any U.S. law that would prohibit 
the Libra Association from issuing the Libra digital currency 
or allowing U.S. persons to buy and sell it, we understand the 
Libra Association will not offer the Libra digital currency in 
any particular jurisdiction until it has fully addressed 
applicable regulatory concerns and received appropriate 
approvals in that jurisdiction. The time between now and launch 
is designed to be an open process and subject to regulatory 
oversight and review. In fact, we expect that this will be the 
broadest, most extensive, and most careful prelaunch oversight 
by regulators and central banks in FinTech's history.

Q.3. You have stated that Libra would not compete with 
sovereign currencies. Please explain how. How would you ensure 
that Libra does not destabilize sovereign currencies around the 
world?

A.3. Libra coins are not meant to be a replacement for existing 
currencies and, indeed, will be fully backed by the Libra 
Reserve, which will likely include the U.S. dollar and four of 
the most liquid other sovereign currencies (euro, Japanese yen, 
British pounds sterling, and Singapore dollar) and very short-
term Government securities denominated in those same types and 
percentages of currencies.
    The currencies represented in the Libra Reserve will 
continue to be subject to their respective Governments' 
monetary policies. We expect that certain changes to the Libra 
Reserve could also be subject to regulatory requirements that 
are being considered by a G7 Working Group and other 
regulators. We understand the Libra Association, which will 
manage the Reserve, has no intention of competing with any 
sovereign currencies or entering the monetary policy arena. It 
will work with the Federal Reserve and other central banks 
responsible for monetary policy to make sure Libra does not 
compete with sovereign currencies or interfere with monetary 
policy. Monetary policy is properly the province of central 
banks. And we expect FINMA and the G7 central banks to insist 
on a regulatory framework for the Libra Association that will 
ensure that the Association cannot interfere with monetary 
policy.

Q.4. Is the expectation that consumers who sign up for the 
Calibra digital wallet will exchange local currency for Libra 
and keep a balance of Libra in the wallet to use within the 
Facebook marketplace?

A.4. We expect Libra coins to be used primarily as a medium of 
exchange rather than as a store of value, at least by users in 
countries with stable national currencies, such as the U.S. 
dollar or euro. Thus, we expect most Calibra users to continue 
to hold the majority of their funds in the form of local 
currency deposited in their bank accounts or, in the case of 
the unbanked, in the form of paper money. Calibra users wishing 
to make a payment would be expected to withdraw or otherwise 
use local currency to purchase Libra coins that would be used 
to make the remittance or payment. While it is possible that 
some Calibra users located in countries with volatile national 
currencies might consider Libra coins to be a more reliable 
store of value than their local currencies, we expect that most 
users from such countries would be more likely to hold U.S. 
dollars, euros, or some other stable currency through their 
bank accounts or in the form of paper money than to hold Libra 
coins in their Calibra wallet. Nevertheless, it is possible 
that some people might choose to hold Libra coins as a store of 
value if that is the best option for them.
    Calibra is a mobile wallet that you can use to send, spend, 
and save money--built for anyone, throughout the world. Among 
other benefits, Calibra customers can save their Libra coins 
and use them for every day transactions like paying rent, 
sending money home, or reimbursing a friend for dinner. Calibra 
customers can convert their local currency into Libra coins to 
add money to their wallets, or vice versa, when they want to 
withdraw. Users will be able to choose whether to keep their 
money in their Calibra wallet or cash out, and we expect that 
many people will choose to cash out and use their local 
currencies for purchases and other transactions. When 
converting local currency to or from Libra, the app will show 
the customer the exchange rate so they know what they are 
getting.

Q.5. How will the Libra held in Calibra be protected? Will 
balances be protected by FDIC insurance?

A.5. We will take significant measures to keep people's Libra 
safe, including using cold-storage, which is air-gapped and 
offline, as well as a small percentage of coin in hot wallets 
for daily transactions. We will have physical security controls 
(including cameras, vaults, and biometrics) as well as 
cryptographic controls (such as multisignatures requiring a 
quorum of approvers, and the use of hardware security modules 
(HSMs)) to prevent any malicious activity.
    Libra coins held in the Calibra digital wallet will not be 
protected by FDIC insurance, as FDIC insurance only covers 
deposits in U.S. banks and savings associations, and Calibra is 
not a bank or a savings association. However, Calibra will be 
regulated as a money transmitter, and registered with FinCEN as 
a Money Services Business. This regulatory framework will 
require Calibra to always hold Libra coins equal to or greater 
than 100 percent of the coins owned by customers. Further, 
Calibra will offer strong consumer protections, including 
automated fraud detection, in-app reporting, and dedicated 
customer service. In the rare event of unauthorized use of the 
Libra coin stored in the Calibra wallet, Calibra will offer 
full refunds.

Q.6. One of Libra's potential consortium members, Visa, 
conducted $8.2 trillion in payments in 2018. If $8.2 trillion 
in transactions were conducted with Libra, does that mean the 
Libra reserve would hold $8.2 trillion of sovereign currencies 
in reserve? Or could the Libra consortium invest in other 
assets?

A.6. Because the Libra Reserve will be backed on a one-to-one 
basis, a consumer's unit of Libra will always be backed by the 
same value in the Reserve at all times. Those assets will 
consist of a basket of currencies in safe assets such as cash 
in banks and very short-term Government securities. The amount 
of the Reserve will be determined by Libra coins in 
circulation, not by total payment volume, and we expect that 
many coins will change hands rapidly and also be sold by the 
users for fiat currency.

Q.7. What legal or regulatory body would oversee the decisions 
by the Libra consortium about which assets to hold in reserve?
    Would there be any limit enforceable by law on the types of 
assets the Libra consortium could hold in reserve or the amount 
of interest Libra members could make from the reserve?

A.7. We expect that the Libra Association will be subject to 
regulatory and supervisory oversight by FINMA, and that FINMA 
will oversee the decisions by the Libra Association about which 
assets to hold in the Libra Reserve, potentially in 
consultation with other regulators, including the Federal 
Reserve and the other G7 central banks. Similarly, we expect 
that certain changes to the Libra Reserve could also be subject 
to regulatory requirements that are being considered by a G7 
Working Group and other regulators.
    We expect that the Libra Association's future commitments 
in its charter and bylaws as to the type of assets it could 
hold in the Reserve, and the policy to make investments for 
capital preservation and liquidity, not for yield, would be 
enforceable by regulation.
    Regarding the Reserve itself, we understand that each Libra 
coin will be backed one-to-one by a pro rata share or unit of a 
fungible pool of cash and very short-term Government securities 
that are expected to be denominated in U.S. dollars (50 
percent), euros (18 percent), Japanese yen (14 percent), 
British pounds sterling (11 percent) and Singapore dollars (7 
percent) (each such pro rata share corresponding to a Libra 
coin, a ``Currency Basket'') and held by a global network of 
well-capitalized bank custodians or other similarly secure 
custodial arrangements as agreed upon with applicable 
regulators. We understand the Libra Association is continuing 
to evaluate the specific percentages of assets in the Libra 
Reserve denominated in each currency, so these percentages are 
subject to change as agreed among the members of the Libra 
Association.

Q.8. What would the potential impact be on sovereign 
currencies--both those held in reserve and those that are not 
part of the Libra basket of currencies--if trillions worth of 
those currencies are converted into Libra?

A.8. We believe that consumers in countries whose currencies 
are represented in the Libra Reserve are likely to use Libra 
coins primarily as a medium of exchange and will continue to 
hold their local currencies as their preferred stores of value. 
Moreover, we believe consumers looking for a better store of 
value than their local currencies will continue to prefer the 
U.S. dollar or other sovereign currencies.
    Moreover, for countries that have capital controls in 
place, we expect regulators in those countries will apply them 
to wallets that enable Libra as they see fit, since on- and 
off-ramps will be regulated. We understand the Libra 
Association, which will manage the Reserve, has no intention of 
competing with any sovereign currencies or entering the 
monetary policy arena. It will work with the Federal Reserve 
and other central banks responsible for monetary policy to make 
sure Libra does not compete with sovereign currencies or 
interfere with monetary policy. And we expect FINMA and the G7 
central banks to insist on a regulatory framework for the Libra 
Association that will ensure that the Association cannot 
interfere with monetary policy.

Q.9. You emphasized that Calibra would have strong anti- money-
laundering (AML) and know-your-customer (KYC) systems in place. 
But, how will the Libra consortium ensure that any entity that 
serves as an on- or off-ramp for Libra will have strong AML and 
KYC systems in place?

A.9. The Libra Association is committed to complying with 
applicable laws and evaluating steps to safeguard the Libra 
Network from abuse by criminal actors. Entities that are not 
Libra Association members that provide services, including on- 
and off-ramps, for Libra users may be subject to AML and other 
laws depending upon the jurisdictions in which they are located 
and operate.
    We understand that the Libra Association expects to 
establish KYC/AML standards pertaining to the on-boarding of 
Libra Association members and authorized resellers. 
Additionally, the Reserve's liquidity will be controlled by the 
Association, as the only party able to mint coins (unlike in 
other blockchains), and we understand the Association will 
engage only with regulated resellers to provide liquidity. 
Those resellers will be subject to the same KYC process as 
members.
    The Libra Association expects that its Articles of 
Association, or other appropriate document(s) binding on the 
Libra Association members under Swiss law (such as the member 
agreement or bylaws) will include a commitment to compliance 
with applicable AML/CFT obligations. We understand the Libra 
Association also expects to establish AML/CFT guidelines that 
govern its activities and those of Libra Association members, 
each with respect to their involvement with the Libra 
Blockchain. The Libra Association expects to evaluate what 
technical and/or contractual mechanisms to employ to ensure 
that custodial wallet providers operating on the Libra Network 
comply with such requirements. And we understand the Libra 
Association expects financial service providers operating on 
the Libra Network (such as custodial wallet providers) will 
comply with applicable AML/CFT obligations, including, for 
example, by collecting and retaining information on 
transactions involving their customers, as required under 
applicable local law. Information stored in the Libra 
Blockchain will be publicly available, such that anyone, 
including Government authorities, will be able to conduct an 
analysis of Libra Blockchain activity, including monitoring 
transaction activity on the Libra Network (although that 
information will be available only based upon public blockchain 
addresses).

Q.10. How will you ensure that Libra is not used to facilitate 
election interference, the destabilization of democracies, or 
the spread of disinformation?

A.10. The Libra Blockchain will be used for payment 
transactions and therefore will not provide a ready vehicle for 
content distribution, nor will it function readily as a file 
storage system or a means to disseminate information.

Q.11. What responsibility would the Libra consortium have to 
proactively ensure that Libra is not being used to subvert 
economic sanctions or finance criminal enterprises?

A.11. We understand that the Libra Association intends to 
register with FinCEN as a money services business and, as such, 
will be subject to the Bank Secrecy Act's AML requirements. In 
addition, we understand the Libra Association intends to 
require that each member of the Association comply with AML 
guidelines that the Libra Association expects to establish 
along with all applicable legal and regulatory obligations--
including those relating to AML--to which the member is subject 
based upon the member's activities and the jurisdictions in 
which it operates. Entities that are not Libra Association 
members that provide services for Libra users, such as digital 
wallet services, may be subject to AML and other laws depending 
upon the jurisdictions in which they are located and operate.
    Our understanding is that, in recognition of the importance 
of this issue, the Libra Association intends to work with 
regulators to address, before launch, any regulatory concerns 
related to the Association's AML obligations.

Q.12. As described, Libra sounds like an asset-backed security. 
Would Libra be considered a security and subject to regulation 
by the Securities and Exchange Commission? Why or why not?

A.12. The Supreme Court has explained that a key consideration 
in determining whether a nontraditional asset is a security is 
whether holders of that asset have a reasonable expectation of 
profits based on the entrepreneurial or managerial efforts of 
others. See, e.g., SEC v. W.J. Howey Co., 328 U.S. 293 (1946). 
The SEC has repeatedly reiterated this view with respect to 
digital assets, including through recent staff-level guidance 
and no-action letters. See, e.g., SEC, Strategic Hub for 
Innovation and Financial Technology, ``Framework for 
`Investment Contract' Analysis of Digital Assets'' (Apr. 3, 
2019), https://www.sec.gov/corpfin/framework-investment-
contract-analysis-digital-assets; SEC Division of Corporation 
Finance, No-Action Letter, TurnKey Jet, Inc. (Apr. 3, 2019), 
https://www.sec.gov/divisions/corpfin/cf-noaction/2019/turnkey-
jet-040219-2a1.htm; SEC Division of Corporation Finance, No-
Action Letter, Pocketful of Quarters, Inc. (July 25, 2019), 
https://www.sec.gov/corpfin/pocketful-quarters-inc-072519-2a1.
    Fundamentally, a Libra digital coin is not an investment 
and not a security. It is a payments tool. Libra does not 
provide any prospect of an investment return for the holder of 
a Libra digital coin based on the activities of others. People 
will not buy a Libra coin to hold it as if it were a stock or a 
bond, expecting the Libra coin to pay income or otherwise 
increase in value. We are continuing to discuss these issues 
with the SEC and its staff, but for these and related reasons, 
we believe that a Libra digital coin should not be considered a 
security under U.S. law.

Q.13. You stated that consumer's Calibra transaction data would 
not be shared with Facebook. What specific information or types 
of information would be shared between Calibra and Facebook?

A.13. Facebook created Calibra as a regulated subsidiary in 
part to ensure separation between social and financial data and 
to build and operate services on its behalf on top of the Libra 
Network. And, except in limited circumstances that are 
described below, Calibra will not share customers' account 
information or financial data with Facebook.
    Those limited circumstances where data might be shared 
between Calibra and Facebook include when data sharing is used 
to prevent fraud or criminal activity, as well as when users 
choose to share their data. As a Facebook subsidiary, Calibra 
may be legally obligated to share certain data with Facebook so 
the company can meet its regulatory requirements. This could 
consist of aggregated payment numbers for financial and tax 
reporting or information necessary to comply with the law.
    The limited user information that Calibra does collect and 
store will be subject to strong security and access controls. 
User payment credentials, such as a debit card number, will not 
be accessible by Facebook or its affiliates. User transaction 
activity is private and will never be posted to Facebook, 
unless users themselves choose to share it.
    Similar to other commerce platforms, there may be times 
when Facebook, acting in its capacity as a merchant or 
platform, will independently have access to information about 
completed transactions that take place on Facebook's commerce 
platform (e.g., purchase made, merchant, transaction amount, 
date, time). This may include transactions completed via 
Calibra with Libra as the exchanged currency, though this would 
not involve a special transfer of information from Calibra to 
Facebook. In those situations, Facebook's independent access to 
transaction information will be the same as for other 
transactions on the Facebook platform completed using other 
payment methods like credit cards.

Q.14. On July 22, the Washington Post reported that ``[a] wave 
of fakes purporting to sell or represent Facebook's not-yet-
available Libra currency [has] swept onto'' Facebook and 
Instagram, and that Facebook removed these pages ``after the 
Washington Post alerted Facebook to their spread.'' \1\
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facebooks-libra-currency-spawns-wave-fakes-including-facebook-itself/
?utm-term=.11a7729b2c3c
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    Before being alerted to the fake activity, what steps had 
Facebook taken to prevent fake accounts, pages, and groups 
purporting to sell or represent Libra? Why did those steps fail 
to prevent these fake activity on Facebook and Instagram? Why 
did Facebook not detect these fake activity? What steps will 
Facebook take going forward to address this problem? What 
protection will Facebook provide to consumers who may fall prey 
to fake activity and fraud?

A.14. Before they are published on Facebook, ads go through an 
ad review process. Additionally, Facebook removes ads and Pages 
that violate our policies when we become aware of them, and we 
are constantly working to improve detection of scams on our 
platforms.
    Misleading or deceptive ads have no place on Facebook. We 
want people to continue to discover and learn about new 
products and services through Facebook ads without fear of 
scams or deception. We are committed to preventing misleading 
advertising on our platforms, especially in the area of 
financial products and services. That is why ads may not 
promote cryptocurrency trading or related products and services 
without prior written permission. This policy is part of an 
ongoing effort to improve the integrity and security of our 
ads, and to make it harder for scammers to profit from a 
presence on Facebook.
    Authenticity matters, for Pages as well as ads, because 
people need to trust that the content they are seeing is valid 
and they need to trust the connections they make. We are now 
blocking millions of attempts to register false accounts each 
and every day. When it comes to abusive fake accounts, our goal 
is simple: find and remove as many as we can while removing as 
few authentic accounts as possible. We do this in three 
distinct ways and include data in the Community Standards 
Enforcement Report to provide as full a picture as possible of 
our efforts:

  1.  Blocking accounts from being created: The best way to 
        fight fake accounts is to stop them from getting onto 
        Facebook in the first place. We have built technology 
        that can detect and block accounts before they are 
        created. Our systems look for a number of different 
        signals that indicate if accounts are created in mass 
        from one location. A simple example is blocking certain 
        IP addresses altogether so that they cannot access our 
        systems and thus cannot create accounts.

  2.  Removing accounts when they sign-up: Our advanced 
        detection systems also look for potential fake accounts 
        as soon as they sign-up, by spotting signs of malicious 
        behavior. These systems use a combination of signals 
        such as patterns of using suspicious email addresses, 
        suspicious actions, or signals previously associated 
        with other fake accounts we have removed. Most of the 
        accounts we currently remove are blocked within minutes 
        of their creation before they can do any harm.

  3.  Removing accounts already on Facebook: For accounts that 
        make it onto the platform, we give these accounts the 
        benefit of the doubt until they exhibit signs of 
        malicious activity. We find these accounts when our 
        detection systems identify such behavior or if people 
        using Facebook report them to us. We use a number of 
        signals about how the account was created and how the 
        account is being used to determine whether it has a 
        high probability of being fake and disable those that 
        are.

    With respect to the Calibra digital wallet, Calibra will 
offer strong consumer protections and intends to comply with 
applicable consumer protection regulations, including 
responsibilities arising out of its State money transmission 
licenses. Calibra's consumer protection efforts will include 
automated fraud detection, in-app reporting, and dedicated 
customer service. In the rare event of unauthorized 
transactions of Libra coins stored in the Calibra wallet, 
Calibra will offer full refunds.
                                ------                                


               RESPONSES TO WRITTEN QUESTIONS OF
           SENATOR CORTEZ MASTO FROM DAVID A. MARCUS

Q.1. Money Laundering--During the hearing I asked about how the 
Libra Association itself will be involved in enforcing AML 
rules and obligations. You responded that the association 
itself ``is not running anything, it's just coordinating 
governance.'' However, in your letter to Chairman Crapo and 
Ranking Member Brown, you state that the Association will be 
``operating the Libra Blockchain.'' This raises questions of 
what obligations the Association will have to prevent 
laundering.
    Please specify how AML obligations, as they exist in the 
United States, will work with the varying entities that make up 
the Libra system.

A.1. We understand that the Libra Association intends to 
register with FinCEN as a money services business and, as such, 
will be subject to the Bank Secrecy Act's anti- money-
laundering (AML) requirements. In addition, we understand the 
Libra Association intends to require that each member of the 
Association comply with AML guidelines that the Libra 
Association expects to establish along with all applicable 
legal and regulatory obligations, including those relating to 
AML, to which the member is subject based upon the member's 
activities and the jurisdictions in which it operates. Entities 
that are not Libra Association members that provide services 
for Libra users, such as digital wallet services, may be 
subject to AML and other laws depending upon the jurisdictions 
in which they are located and operate.
    In recognition of the importance of this issue, we 
understand that the Libra Association intends to work with 
regulators to address, before launch, any regulatory concerns 
related to the Association's AML requirements.

Q.2. Under FinCEN guidance, do you believe the Libra 
Association would qualify as an ``administrator,'' placing AML 
obligations on the Association itself?

A.2. The Libra Association is committed to ensuring that the 
Libra Network is compliant with applicable laws and 
regulations. We understand that the Libra Association is 
evaluating whether it would qualify as an ``administrator'' of 
a virtual currency as described in FinCEN guidance, but that, 
in any case, it intends to register with FinCEN as a money 
services business and, as such, will be subject to the Bank 
Secrecy Act's AML requirements.

Q.3. Have you thought about any concerns related to synthetic 
identity fraud?

A.3. The Libra Association is committed to preventing 
malicious, fraudulent, or other illegal conduct using the Libra 
Blockchain, including synthetic identity fraud. We expect that 
the Libra Association will explore a range of appropriate 
technical and contractual options to mitigate this concern.
    With respect to Facebook's operation of the Calibra wallet, 
we have established a multitiered, risk-based customer due 
diligence program that requires different levels of information 
collection, user identification, and due diligence based on the 
risk associated with a specific user. We expect that our 
procedures and processes for user identification, due 
diligence, and enhanced due diligence will play a critical part 
in Calibra's overall compliance program. Among other things, 
Calibra will subject all users, irrespective of assessed risk 
value, to customer identification and verification processes 
before a user can utilize the Calibra wallet and related 
services, including purchasing or sending Libra.

Q.4. Tax Issues--Libra's value is pegged to a basket of global 
currencies. This seems to mean that as global exchange rates 
change, the domestic value of a person's holdings will change 
as well. This can create capital gains, which are taxed in many 
countries. A spokesperson has said that ``People will be 
responsible for filing their taxes in accordance with local 
laws in the jurisdictions in which they operate. We expect that 
many wallets and financial services built on the Libra 
Blockchain will provide people with tools to help manage 
this.''
    Is there going to be any sort of oversight over potential 
tax evasion issues?
    Will Governments have any means to police this on the 
platform?

A.4. Facebook's Calibra product (i.e., digital wallet) will 
include functionality to assist both Facebook and users in 
complying with the required reporting obligations for 
transactions that occur on the platform.

Q.5. International Monetary Policy Impacts--The director of the 
People's Bank of China research bureau stated if Libra is 
established, other countries may look to compete by developing 
central bank digital currencies that are more closely linked to 
their own national currencies. China is already exploring this 
option.
    What are the implications for global monetary policy, such 
as the status of the dollar as the world's reserve currency?

A.5. The Libra Blockchain is meant to complement the existing 
global payments system. We do not believe that the existence of 
Libra coins will have a destabilizing impact on global monetary 
policy or affect the U.S. dollar's status as the world's 
reserve currency. Each Libra coin will be backed one-to-one by 
a basket of assets held in the Libra Reserve. The current plan 
is for the assets in the Libra Reserve to be limited to cash 
and very short-term Government securities that are expected to 
be denominated in U.S. dollars, euros, Japanese yen, British 
pounds sterling, and Singapore dollars that will be held by a 
global network of well-capitalized bank custodians.
    Libra is not meant to be a replacement for Government-
issued currencies and is not meant to--and we would not expect 
it to--affect the ability of countries whose currencies are 
included in the Reserve to carry out their independent monetary 
policy. The currencies represented in the Libra Reserve will 
continue to be subject to their respective Governments' 
monetary policies. We expect that certain changes to the Libra 
Reserve could also be subject to regulatory requirements that 
are being considered by a G7 Working Group and other 
regulators. We understand the Libra Association, which will 
manage the Reserve, has no intention of competing with any 
sovereign currencies or entering the monetary policy arena. It 
will work with the Federal Reserve and other central banks 
responsible for monetary policy to make sure Libra does not 
compete with sovereign currencies or interfere with monetary 
policy. Monetary policy is properly the province of central 
banks. And we expect FINMA and the G7 central banks to insist 
on a regulatory framework for the Libra Association that will 
ensure that the Association cannot interfere with monetary 
policy.

Q.6. Can you explain more about how the basket of reference 
currencies will impact the value of real, existing currencies?

A.6. We understand that each Libra coin will be backed one-to-
one by a pro rata share or unit of a fungible pool of cash and 
very short-term Government securities that are expected to be 
denominated in U.S. dollars (50 percent), euros (18 percent), 
Japanese yen (14 percent), British pounds sterling (11 
percent), and Singapore dollars (7 percent) (each such pro 
rata share corresponding to a Libra coin, a ``Currency 
Basket'') and held by a global network of well-capitalized bank 
custodians or other similarly secure custodial arrangements as 
agreed upon with applicable regulators. We understand the Libra 
Association is continuing to evaluate the specific percentages 
of assets in the Libra Reserve denominated in each currency, so 
these percentages are subject to change as agreed among the 
members of the Libra Association.
    We do not believe that Libra will materially affect the 
value of the basket of currencies in the Libra Reserve. Though 
Libra may increase demand for one or more of the individual 
currencies, we do not expect that any such increase in demand 
would be sufficient to affect the market values of those 
currencies. Again, we understand the Libra Association, which 
will manage the Reserve, has no intention of competing with any 
sovereign currencies or entering the monetary policy arena. It 
will work with the Federal Reserve and other central banks 
responsible for monetary policy to make sure Libra does not 
compete with sovereign currencies or interfere with monetary 
policy. And we expect FINMA and the G7 central banks to insist 
on a regulatory framework for the Libra Association that will 
ensure that the Association cannot interfere with monetary 
policy.

Q.7. Governance and the Libra Association--According to the 
white paper, you say ``The Libra Association is an independent, 
not-for-profit membership organization headquartered in Geneva, 
Switzerland. The association's purpose is to coordinate and 
provide a framework for governance for the network and 
reserve.''
    What transparency standards will apply to this new 
association that Facebook proposes should govern Libra?

A.7. While Facebook currently has a leadership role in the 
Libra Association, once the Libra Network launches, Facebook 
and its affiliates will have the same privileges, commitments, 
and financial obligations as any other Initial Member of the 
Association. Moreover, the Association is a separate 
organization from Facebook with its own executives, and it is 
still in formation. We can speak only to our current 
understanding of the Association and its plans.
    We expect that the Libra Association will make decisions 
democratically and transparently in a manner to be agreed among 
the members of the Libra Association. We understand the 
Association will be governed by the Libra Association Council, 
which will be comprised of a representative from each member of 
the Association. Together, they will make decisions on the 
governance of the Libra Blockchain and Reserve. Operating and 
policy decisions of the Council will require various voting 
thresholds depending on the importance of the decision; major 
policy or technical decisions will require the supermajority 
consent of two-thirds of the votes. We understand that the 
voting process will be transparent: most votes will be 
conducted on the Libra Blockchain, especially when the decision 
affects the Blockchain, such as votes to add new members. 
Ultimately, the governance of the Association will be 
determined by the members, and it is our expectation that the 
charter and bylaws of the Association will be public once 
finalized, and will continue to be public as they evolve.

Q.8. Are there any sort of public feedback mechanisms to 
decisions made by Libra?

A.8. We understand the Association welcomes input from the 
general public and is committed to providing Libra users the 
opportunity to ask questions about and comment upon the Libra 
coin and the operations of the Libra Association. We expect the 
exact nature of these processes will be agreed among the 
members of the Libra Association. When it comes to decisions 
made by wallet providers, users will be able to choose among 
wallets offered by various companies, which will create 
competitive pressures to provide useful features and rigorous 
protections. The consensus mechanisms and other programming 
underpinning the Libra Blockchain have also been made open-
source, and we welcome developers to provide feedback and 
contribute code to help build the Libra ecosystem.

Q.9. Will Libra's decisions take into account national 
interests, such as the value and control of currencies?

A.9. We understand the Libra Association has no intention of 
entering the monetary policy arena. The currencies represented 
in the Libra Reserve will be subject to their respective 
Governments' monetary policies. We understand the Libra 
Association will only mint or burn Libra Coins in response to 
buy or sell orders from authorized resellers, and the 
Association will not have targets for the number of coins that 
``should'' be in circulation. We expect the Libra Association 
will work with the Federal Reserve and other central banks to 
make sure Libra does not compete with sovereign currencies or 
interfere with monetary policy.

Q.10. Isn't there risk of collusion amongst the participants 
that could vote to change behavior to their benefit?

A.10. As noted in the response to Question 7 above, the 
Association is a separate organization from Facebook and is 
still in formation. That said, while the Libra Association will 
make final decisions about governance, we understand that the 
Council will be structured to minimize the risk of collusion. 
For example, we understand most decisions will be made by votes 
of the full Council, requiring an absolute majority, if not a 
two-thirds supermajority, which will make swaying the results 
of a vote difficult--especially given the geographic diversity 
and the requirements and profile of Initial Members. We expect 
that the voting powers in the Council will be capped for each 
member to avoid concentration of power. Additionally, we expect 
that the Libra Association will develop a policy that will 
forbid a degradation of the assets in the Reserve to the 
advantage of Association members or investors.

Q.11. Capital Controls--In response to the Great Recession a 
number of countries like Brazil, Uruguay, and China imposed 
capital controls. These are measures taken by a Government or 
central bank that aim to limit the flow of capital in and out 
of the domestic economy. Many Nations resort to these policies 
to prevent capital flight from their Nations during financial 
crises.
    Have you thought about how Libra will impact the ability of 
Nations to respond to crises with tools like capital controls?

A.11. For countries that have capital controls in place, we 
expect regulators in those countries will apply them to wallets 
that enable Libra as they see fit, since on- and off-ramps will 
be regulated. And we understand that the Association plans to 
work with central banks to identify issues that may relate to 
those central banks' ability to perform monetary policy.
    For more information on how the Libra Blockchain is meant 
to complement the existing global payments system, please see 
the response to Question 5.

Q.12. Smart Contracts--According to the white paper put out by 
the Libra Association, the system will rely on so-called 
``smart contracts.'' As far as I understand, these are 
computer-coded sets of instructions that ``self-perform'' 
contracts without a middleman by automatically transferring the 
good or services to the buyer when the monetary and other 
conditions are agreed upon.
    Would you agree with is an accurate characterization?

A.12. The automated purchase of goods or services is one 
possible use case for ``smart contracts.'' More generally, 
smart contracts describe the rules for changing the ``state'' 
of the blockchain. A rule that encodes an exchange is one way 
of changing that state.

Q.13. Certain factors in contract law such as frustration, 
duress, undue influence, or misrepresentation need subjective 
human interpretation of judgement on a case-by-case basis, how 
is this possible under automated contract execution?

A.13. Whether contracts governing Libra or the Libra Network 
are traditional contracts or take the form of smart contracts 
embodied in computer code, these contracts would be subject to 
the same laws that apply to other types of contracts. We 
understand the Libra Association expects to carefully consider 
the implications of contract law and other law in the 
jurisdictions in which it will operate. Developers building on 
the Libra Blockchain will also be responsible for ensuring that 
what they build complies with applicable law.

Q.14. Broadly, how have you thought about how contract law in 
the various Nations you will be operating in will impact Libra?

A.14. Please see the response to Question 13.

Q.15. Libra and ``Right to Deletion''--The European Union's 
GDPR as well as my bill includes a right for consumers to 
delete information that is stored about them. Because of their 
decentralized nature, blockchains and the information stored on 
them is not designed to be removed, it is immutable.
    Can you explain the tension between these consumer rights 
and how Libra will work?

A.15. The Libra Blockchain is pseudonymous and allows users to 
hold one or more addresses that are not linked to their real-
world identity. This approach is familiar to many users, 
developers, and regulators. Companies that write onto the Libra 
Blockchain, such as wallets, exchanges, merchants, and similar 
services, will be the entities that store consumers' personal 
information and therefore, they will have the legal obligations 
to comply with applicable data protection laws and 
regulations--including any rights of deletion.

Q.16. Have you thought through how Libra may have to work 
differently in the EU?

A.16. The Libra Association is committed to supporting the 
global dialogue on how blockchain and cryptoassets should be 
regulated, including in the EU. We understand that the 
Association fully plans to engage with privacy regulators in a 
clear and transparent fashion to understand regulatory 
requirements and discuss technological and governance solutions 
for compliance.

Q.17. Investments--The way the Libra Association will make 
profit is by earning interest and investing the reserves it 
holds. As you know, by a two-thirds vote of Libra members, 
policy can be changed without any input from Libra users or 
regulators.
    Isn't it possible that by a simple vote, the Libra 
Association can simply change the investment strategy and 
invest the reserves in risky assets? What protections exist for 
users in this case?

A.17. We expect FINMA and the G7 central banks to insist on a 
regulatory framework for the Libra Association that will impose 
controls on the investments in the Libra Reserve to prevent the 
Libra Reserve from being invested in risky assets. Subject to 
these regulatory controls, we understand the Libra Association 
may change the Reserve composition to ensure it preserves value 
and to respond to significant changes in market conditions 
(e.g., an economic crisis in one of the represented regions). 
Additionally, we expect that the Libra Association will develop 
a policy that will forbid a degradation of the assets in the 
Reserve to the advantage of Association members or investors.

Q.18. Consumer Profiling--In the last few years we have seen 
financial data being using to create secret consumer scores 
that can become proxies for credit scores. This has led to 
highly concerning practices like digital redlining and 
discrimination.
    Will there be protections in place to ensure data collected 
from Libra is not used for this purpose?

A.18. Discrimination has no place in the Libra Association. To 
the contrary, the goal of Libra is to foster inclusion in the 
financial system by lowering transaction costs and removing 
barriers to access. Libra was established to be a digitally 
native currency that can be used around the world and enable 
economic empowerment.
    We also know that consumers of financial services and 
products can be vulnerable. That is why there is a commitment 
to strong consumer protection in the Libra ecosystem. We 
understand the Libra Association is committed to working with 
authorities to shape a regulatory environment that encourages 
technological innovation while maintaining the highest 
standards of consumer protection. When it comes to data 
privacy, we are committed to complying with global privacy 
regulations and working with regulators and policymakers to 
ensure protection of user data.

Q.19. Cambridge Analytica Similarities--Calibra will partner 
with third party developers to build digital wallets. Such 
vendors get to decide what personal information they require 
from consumers and what they get to do with it. It goes without 
saying that Facebook does not have a good track record 
overseeing partners when personal data of millions of users is 
involved.
    What does Facebook plan to do to ensure that Libra doesn't 
become the next Cambridge Analytica?

A.19. At this time, Calibra does not plan on partnering with 
third-party developers to build digital wallets. And Calibra is 
being designed with a strong commitment to ensuring customers' 
privacy rights in relation to their data. We believe that 
customers hold rights to their data and should have simple, 
understandable, and accessible data-management controls and 
clear information about how we may work with vendors and 
service providers to support our services. Facebook will be 
leveraging its third-party compliance program to ensure that 
any vendor or service provider with access to personal data is 
appropriately vetted and monitored.
    It is also important to note that the Libra Blockchain is 
the platform upon which Calibra will be built. There are no 
plans for a platform operated on top of Calibra.
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