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Facebook tells Congress how it thinks Libra should be regulated

Facebook tells Congress how it thinks Libra should be regulated

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Facebook will not launch the cryptocurrency Libra until it has “fully addressed regulatory concerns,” according to David Marcus, the head of Facebook’s Calibra. The remarks are prepared testimony he plans to give tomorrow, in front of the US Senate Banking Committee.

The testimony outlines how Facebook believes Libra — the cryptocurrency it plans to launch next year, with an initial focus on transferring money — will be regulated across the globe. It comes in response to concerns from top lawmakers, who have called on Facebook to testify about its plans to offer banking-related services. It also comes just days after President Trump indicated that Facebook may have to be regulated like a bank in order to offer these services. (This suggestion is somewhat different than the Securities and Exchange Commission’s take, which is that Libra may be an exchange-traded fund.)

Because the Libra Association is headquartered in Switzerland, Marcus says he expects the currency to be regulated by Switzerland’s financial regulator. The association is currently in “preliminary discussions” with the Swiss regulator. It will also be under the jurisdiction of Switzerland’s national privacy regulator.

There is no charter in place for the Libra Association, which Facebook has previously said it wants the other members to help design. Without a charter, all discussions are necessarily preliminary; it’s hard to know how to regulate a thing that doesn’t yet have rules.

US and state regulators will be involved when it comes to regulating services that offer Libra, such as Calibra and its digital wallet, Marcus said in the statement. In Marcus’ vision, states will montior Calibra as a money transmitter, with the Federal Trade Commission overseeing consumer protections. These services as well as the broader Libra Association will also register with the United States’ Financial Crimes Enforcement Network to comply with sanctions, and they’ll follow national security laws designed to prevent the financing of terrorism. There is nothing in the statement about the SEC, and Marcus considers Libra to be more like cash than an investment tool.

There’s been significant confusion around how Libra will be regulated in the month since it was announced. Facebook is by far the biggest company to involve itself in cryptocurrency, and laws meant to protect consumers and nations from its actions could dramatically impact how other cryptocurrencies function. As regulators consider Libra, Marcus says he expects to go through the “most extensive and most careful pre-launch oversight” in financial tech history.