David Marcus, the blockchain lead for Facebook’s Libra has been at the receiving end of Senators and policymakers for two days straight. First, it was the Tuesday hearing before the US Senates which was followed by another grilling session before the House of Representatives on Wednesday.
The hearing before the House of Representatives lasted for hours and explored several aspects of the Libra cryptocurrency. Some of the key queries included, whether Libra can be put under the security category, why Facebook chose Geneva as its headquarters for the crypto project, and since Facebook is a for-profit company, what profit did they see in the project that made them venture into a field which they have no prior experience in.
Is Libra democratic?
One of the most seething questions that echoed on the several social media platforms during and after the commencement of hearing was the claims of Facebook that Libra is truly democratic. While Facebook has made tall claims on how Libra will be truly democratic with no monopoly of Facebook over it as it would be governed by a consortium of 28 financial and tech firms with Facebook having only one vote in the decision making. However, these claims fell flat when Marcus was asked whether these 28 firms have been democratically chosen, and who decided on the number of governing bodies.
One senator called Libra project “delusional” and compared it with a toddler playing with a box of matches. U.S. Sen. Tom Cotton of Arkansas had earlier warned Marcus during the Tuesday hearing that the House of Representatives won’t spare him of intensified scrutiny either stating,
“And just wait until tomorrow when you go before the House Financial Services Committee,” Cotton said. “If you think the Democrats in this committee have hounded banks, wait until you see what you’re in for over there.”
Is Libra security, ETF or a commodity?
The confusion over the status of Libra continued on Wednesday where the senators asked Marcus whether Libra is a commodity, a security or an ETF? To which Marcus replied none of the mentioned and claimed a libra is a payment tool. He claimed that libra being a stable coin won’t be affected by the speculations or trade market volatility, thus it can’t be categorized as security under Howie test.
Gary Gensler, the former CFTC chairman took a dig at Marcus’s comment stating that if it walks and talks like a duck, then most certainly it is a duck. “This thing looks like an ETF and I’m just using common sense here,” he said. “If Congress needs to fill a gap to make sure it’s under the securities laws, I’d do that.”
The committee’s concerns over regulating such assets which looks like an ETF but claims to otherwise give rise to the discussion over Facebook decision to headquarter its project in Geneva. Senators questioned Facebook’s intentions on why a Stateside business would like to open a subsidiary overseas. Marcus replied that the decision was not to avoid any regulatory repercussions.
Marcus said that the decision to set the headquarters of Libra in Geneva was because of Switzerland’s clear regulation guidelines on digital assets.
The two hearing for Marcus was surely a nightmare, but the interesting part here and certainly thing to rejoice here is the depth of knowledge of certain Senators about cryptocurrencies and Bitcoin. A few senators made it clear that they know Bitcoin is an unstoppable force and they only want to ensure that libra won’t become an evil disruptive force for the digital asset arena.