Q: What information on the Libra project was revealed at the US Senate hearing on July 17?
A: The content of the hearing is very rich. We will answer the key points from the speeches of the David Marcus hearing, the key points of the hearing and answering questions, and the summary and evaluation.
David Marcus hearing speech highlights
I. The goal and positioning of the Libra project
- Facebook Libra person in charge hearing testimony: will not launch (full text)
- “Don’t be used by Facebook”, the four major consumer protection organizations urge members of the Libra Association to withdraw
- Depth | Libra positioning, application value and external influence
- Zuckerberg talks about Libra: Facebook can't build a financial system on its own, only one vote for Libra.
- Facebook currency, Libra can be converted into super sovereign currency?
- After Libra is on the line, what is the odds of Ali Tencent?
o Libra positioning
· The Libra project will create the digital native currency Libra. Libra will be used as a payment tool, not an investment tool.
o Libra goal
· Provide the world with a safe, reliable, low-cost, and efficient way to transfer assets.
o Libra payment features
· stability, low inflation, wide usabilit, fungibility
o Why is Facebook leading the Libra project?
· Facebook's core value is to empower business, and 90 million business users on its platform can explain this.
· Facebook has built a social platform dedicated to democracy and freedom to allow billions of people to communicate without restriction. Facebook also hopes to make people use unlimited boundaries in digital currency and financial services. But the difference is that this time Facebook is willing to give up absolute control over the network and currency.
Second, Libra governance structure and management
o Libra Reserve and Financial Infrastructure
· Consistent with the white paper, Marcus reiterated that Libra will endorse assets with bank deposits or short-term government bonds, and that the currency has good stability in order to allow people to conduct Libra-based financial activities. This redemption process is analogous to the exchange of currency at the exchange rate of the local currency exchange agency when the traveler needs it.
Libra's custodians will consist of a series of geographically dispersed, compliant, investment-grade credit rating and highly auditable custodians that should be able to host organizations with billions of dollars or even billions of assets.
o About monetary policy
· Libra does not intend to compete with any sovereign currency, and each of the currencies in a basket of currencies will comply with the monetary policy of the issuer's government. In the future, Libra will be managed in collaboration with the Federal Reserve and other central banks. In addition, Marcus said that monetary policy is the responsibility of the central bank.
o Associations and participants
· The association is responsible for overseeing the Libra blockchain and Libra reserve assets. The way of cooperation is both a guarantee and a necessary way. The association's position is to become an independent membership organization. The founding members will develop the association charter and become the co-founder.
· In addition, the Libra Association's committees include non-profit organizations, non-governmental organizations, multilateral organizations, and academic institutions in addition to influential commercial companies.
· (Other white papers, omitted here)
Third, Libra's regulatory compliance and privacy protection
o How does Libra face regulation?
· The Libra Foundation is registered in Switzerland and is supervised by the Swiss Financial Market Supervisory Authority, FINMA, and explores a regulatory framework with FINMA.
· Libra sees the US Treasury's Financial Crimes Enforcement Network (FinCEN), the Federal Reserve, the Federal Deposit Insurance Corporation and the National Credit Cooperatives Association's new technology to help small and large companies meet their AML/CFT and sanctions compliance obligations. Important role, and hope to help solve this problem through new technologies.
· The Libra Association expects to be a licensed, compliant, regulated organization. And hope to face the issues of anti-money laundering, terror finance and other issues with regulators, central banks and legislators, build an enhanced cash transaction network, support KYC, support legal monitoring and enforcement.
· The Libra Association will continue to engage actively and openly with all stakeholders on these key issues and will try to improve monitoring and enforcement capabilities rather than giving up on them.
· Libra will also require companies engaged in financial services on Libra Networks to comply with AML, BSA, anti-terrorist financing and securities law requirements
o Privacy protection and information security
· Protecting consumer privacy and personal privacy is a high priority for the Libra project.
· The Libra Association hopes to work with regulatory agencies that research and explore relevant technologies.
· Transaction information includes only the sender's and recipient's public boycotts, transaction amounts, and timestamps, and there is no other visible information.
· The association does not hold personal data for blockchain users and does not run infrastructure, thus ensuring that the association cannot commercialize blockchain data.
· Libra is regulated by the Swiss Federal Data Protection and Information Committee (PDPIC) for privacy and information security
Fourth, Libra's open source ecology and Calibra's business plan
o Calibra is a member of the open source ecosystem of Libra Blockchain
· Facebook is a member of the open source ecosystem as Calibra and intends to provide wallet software for use in Messenger, WhatsApp and other applications. It also means that Calibra's customer accounts and financial information will not be shared with Facebook and will not be used for ad targeting. Libra's first goal is to get Facebook to support it. This will be used by merchants on the 90 million Facebook platform. Once Facebook accepts the Calibra wallet, the Calibra wallet will in turn bring more business scenarios and business to Facebook, which will make Facebook have higher advertising revenue.
o Calibra Wallet Compliance and Privacy Protection
· In terms of financial stability and compliance, Calibra, as a company that provides financial services to its clients, and other companies that want to join Libra and provide financial services, are subject to the laws and regulations of their jurisdiction. This will include FinCEN's AML/CFT rules and OFAC's financial sanctions rules. Federal financial regulators will use Calibra as a money transfer agency, and FTC and CFPB will regulate from the perspective of consumer protection and data privacy issues. Currently Calibra is already applying for a currency transfer agency license and is registering a currency service business with FinCEN.
· In anti-money laundering, Calibra will also comply with the BSA (Bank Secrecy Act) and have the required features of KYC and AML/CFT, including customer identification, risk-based customer due diligence, and machine learning to enhance transfer monitoring and suspicious Information report. The complexity of the relevant inspections will be matched with the risk factors, including: different product characteristics, user portraits, geographical location, and transfer amount.
July 17th hearing questions and answers
Question: "Why should we set up our headquarters in Switzerland?"
Response: Marcus responded to the association's choice of headquarters in Switzerland "will not evade any supervisory responsibilities", just because the WTO and the Bank for International Settlements are set up in Switzerland, and Calibra will also be regulated by the US Treasury's Financial Crimes Enforcement Network. But Vice President Sherrod Brown said regulators may not want to see Libra's launch, and Marcus reiterated that Libra will not roll out until regulatory concerns are resolved.
Question: "Why trust Facebook?"
Response: "You don't have to trust Facebook" because it's just 28 existing, probably one of the 100 or more Libra association members, and it has no privileges. But Brown refuted this: "You know better than anyone that only Facebook can reach 2 billion people."
Question: "Does Facebook support wallets provided by third-party agencies?"
Response: Facebook will only build its own Calibra cryptocurrency wallet in Messenger and WhatsApp, and will not embed third-party wallets. According to Marcus, Calibra will be interoperable, so users can reclaim money with other wallets, and users can switch to competitors completely.
Question: "Is the data going to be commercialized?"
Response: Calibra does not sell or directly benefit from users' data, but if it works with other financial organizations to provide financial services to users, it may use the data for these special purposes.
Question: "Facebook relies on Libra's revenue source?"
Response: Facebook's core revenue model around Libra is that more Internet business models will lead companies to spend more on Facebook ads.
Question: “Why can I still hold investment tokens and get reserve income while establishing a non-profit organization?”
Response: Marcus did not answer clearly
Question: "How much money did Facebook invest in the Libra project?"
Response: Marcus did not answer clearly
Question: "Do you believe that Libra is willing to use it to pay salaries?"
Response: Marcus initially avoided the issue, saying that “Libra was not used to replace bank accounts.” But then he said he was willing to accept Libra as his entire asset. Brown did not give up asking if he would like to pay Libra to pay, Marcus expressed his willingness, because Libra is supported by a 1:1 reserve.
Question: "If a terrorist organization is found to use libra to transfer money, can the association freeze its assets?"
Response: Marcus said that Calibra and other regulated Libra wallets can do it, and those supervised by the host can also prevent Libra from being converted into French currency.
Question: “Is the Libra Association bound by the Bank Secrecy Act?”
Response: Marcus said the association will not be bound because the association does not directly contact consumers.
Summary and evaluation
Overall, Marcus's presentation at the hearing was basically consistent with the Libra white paper, with a small amount of detail added, such as: Libra's underlying reserve assets include US dollars, British pounds, Euros, Japanese yen, and the RMB was not mentioned by Marcus. . In addition, the recent legislative challenge to the Libra project does not mean that the Libra project is suspended by supervision.
With the hearing, we saw a clearer Libra and Calibra. From this we can more clearly see the need for Facebook to adopt this organizational structure to promote an emerging infrastructure. Libra, as a currency producer and regulator, needs a high degree of neutrality and professionalism to advance this difficult project. What Calibra has to do is to be more closely aligned with Facebook's business goals, which is to promote business development in the Facebook ecosystem by introducing new convenient and low-cost payment infrastructure tools. According to the hearing information, Calibra is likely to want to use Libra to master more user data, and does not rule out the use of such data directly or indirectly for commercial purposes.
In terms of regulation, Libra Association and Libra-based financial service providers or application developers such as Calibra also face legal and regulatory constraints from different countries and different fields. The willingness of regulators and legislators to work with the Libra project and how it will continue to be a compliance issue for Libra projects.
Regarding whether Libra is going to be a cross-sovereign central bank, whether it is a white paper published on June 18 or a recent hearing, it can be unanimously concluded that Libra does not have a monetary policy and therefore cannot be counted as a central bank. However, the association will formulate an asset pledge policy. If it is used in a wide range, it will definitely have a certain substitution effect on various legal currencies.
Article from: Block Technology Research and Supervision