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Everything Congress wants to know about Libra in the upcoming hearing

Biraajmaan Tamuly

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Everything Congress wants to know about Libra in the upcoming hearing
Source: Unsplash

Facebook is set to appear before the Senate coming Tuesday and House of Representatives on Wednesday to answer their queries on Libra. David Marcus, the head of the Libra Project will be representing Facebook before the lawmakers in Washington.

It all started with the announcement of the crypto project by Facebook in June, which was followed by tremendous outrage among regulators around the globe. These regulators pointed out that Facebook is merely using the name of blockchain to piggy ride on the existing financial system. Libra’s whitepaper mentioned that it would be backed by a number of fiat currencies from around the world. Regulators argue that this particular financial working model would make it near impossible for any regulatory body to control it.

According to a news published in The Block, they have inside information on the nature of the questions that will be put forward by the Senate on Tuesday and the House of Representatives on Wednesday. A report in the Wall Street Journal can also be taken as a confirmation of their inside information.

The possible queries of policymakers on Libra

The sources say that the first and foremost headache for the Security and Exchange Commission is the nature of Libra cryptocurrency and how it would be regulated. Many believe that the financial watchdogs are bursting their head whether they can categorize Libra as security, equity derivatives or ETF.

The working structure of Libra as mentioned in its whitepaper, the reserve funds of the stable coin will be managed by a consortium of financial and tech firms called Libra Association. The Libra Association would act as node validators on the libra network and receive a certain percentage of return for their role.

Jerry Brito, Executive Director of Coin Center, and Kristin Smith of lobbyist firm Blockchain Association say the structure looks quite like a fund, but which type of fund, they were not really sure of. Similarly, Dave Nadig, a managing director of ETF.com called libra as one of the most interesting takes on ETF.

The privacy concerns

Facebook has been at the epicenter of privacy debates and mismanagement of user personal data on more than one occasion. The ghosts of Cambridge analytical is still haunting them, and the recently proposed fine of $5 billion is being called out a joke by many. Although Facebook insists that Libra would be totally independent of Facebook and handled by the Libra Association. 

However, there are not many takers for the argument as the story has been the same, Facebook has assured on numerous occasions that they take user privacy concerns very seriously, but every time something like Cambridge analytical happens, the same cycle of apology follows.

The registration of the project

One of the most concerning factors apart from whether libra is an ETF or how it would instill faith about its privacy concerns is the registration of the Libra in Geneva, Switzerland. Libra association is headquartered in Switzerland.

The obvious question from the policymakers could be the reason behind this move by Facebook, as it would not only curb the reach and overseeing of the project by US regulators, but also deprive the United States of the innovative progress that the project might see.

However, it is quite obvious that Facebook is trying hard to get away from the regulators not just in the US, but it is working structure makes it equally difficult for any regulator to keep a tap on it.

With all the drama surrounding Facebook’s nascent crypto project, a lot depends on the coming week’s hearing. It would be interesting to see whether the hearing brings out a much clearer picture on the future of Libra or is it a dead end.

Biraajmaan is a full-time journalist at AMBCrypto covering the US market. A graduate in Automobile engineering, he writes mainly about regulations and its impact with a focus on technological advancements in the crypto space.

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