All you need to know about Facebook’s Cryptocurrency Testimony
Mark Zuckerberg, Facebook's CEO went on to be the sole witness in front of the USHRCFS (United States House of Representatives Committee on Financial Services) to testify his role in developing Libra, a cryptocurrency backed by a bunch of stable international assets and designed to be used anywhere in the world. Following the tradition, an unabridged testimony was submitted in advance with the members of Congress for the lines of questioning to be prepared.
As the government and central banks struggle to keep up with the global currency backed up by their assets, the comments from Zuckerberg were disappointingly predictable in some ways. With three new bills being introduced to the house in the days leading up to the testimony, can spell doom for Mark’s plan. However, a closer analysis of his comments puts a light on Facebook’s bigger strategy.
The structure- Explained.
The written testimony submitted by Mark is classified into five sections namely, the Introduction, a summary of the Libra Project, plans on combating discrimination, a commitment to diversity, and finally the conclusion.
The first section is interesting for the following reasons.
First, Mark’s plan to place Libra in the global context as a reaction to China’s plan to establish a similar cryptocurrency that can be spent anywhere in the world, and distributed via a consortium of state-owned companies!
While the social media giant had previously emphasized on cryptocurrency being backed by a bunch of international assets, perhaps awarding a stake in the technology to a broader group of people, Mark utilized political undertones and the audience of the US elected officials to refocus his project on its American roots.
“Libra will be backed by dollars mostly, and I believe it will help strengthen America’s financial leadership, democratic values as well as oversight around the world. The only need is for America to innovate, without which our leadership is not guaranteed”, Mark said.
The introduction part is also worth noting as it draws a great amount of attention towards questions of diversity and civil rights, topics that have already been addressed in front of the congress but are only tangentially related to the cryptocurrency designed to serve unbanked people typically those consisting of underrepresented groups.
“I feel blessed to be in a position where we can make a difference in people’s lives,” Mark concluded with what appeared to be a hat-tip to the US voters and the religious inclinations of elected officials.
Ii. The Summary
The summary part of Mark’s testimony strongly rehashes the well-known definition of The Libra Association, the Libra cryptocurrency, and the Calibra wallet for storing the cryptocurrency with one small change. Since the time FB’s head of cryptocurrency, Davis Marcus was testified before Congress during July 2019, a letter was sent to members of the association by four US lawmakers asking to withdraw their participation from the group. This event was followed by an exodus of some major financial players including PayPal, MasterCard, and VISA. With a few members responding harshly, the US senator of South Dakota “Mike Rounds” called his colleagues’ tone disappointing, while expressing support for the financial innovation at the same time.
The second section is concluded by distinguishing Facebook’s cryptocurrency wallet, Calibra, from the Libra Currency. This clarified Facebook’s intentions of not selling data about Calibra users to third parties. This section also reiterates the desire of Facebook to position Libra as a US tool for global financial competition.
Iii. Combating discrimination and committing to diversity
The descending sections address the subject of combating discrimination. However, reading between the lines, the comments serve two goals related to Libra.
First, they focus on the recent positive changes made by Facebook, including the establishment of a CRTF (Civil Rights Task Force), leaving a good taste in the mouths of the congress members but negative news filling the headlines.
Second, focus on the publicly identified under-banked population including groups of people addressed in civil rights campaigns, women and underrepresented groups as the key target users of cryptocurrency.
iv. The Final Word
The conclusion reiterates Facebook’s intention of not launching the cryptocurrency without any regulatory support, which looks like a tough sell. As of early last week, 21 bills related to block-chain were under congressional review. However, on October 19, 2019, three new bills were introduced aiming at undermining Facebook’s efforts. According to Jason Brett, CEO of the Value Technology Advocacy Group, the updated version of “Keeping Big Tech out of the Finance Act” was largely aimed at keeping the social media giant away from cryptocurrency.
He also added by saying that “Stablecoins are Securities” bill has far-reaching implications on companies like Gemini, Circle, and Coinbase. These companies have already created Stablecoins backed by different assets similar to Libra. Whereas, bills like “Prohibiting the listing of certain securities” tend to prevent Stablecoins like Libra from entering the capital market space.
“As Congress prepares to reign in the Libra cryptocurrency from its perceived impact to the strength of the US Dollar, policymakers are framing measures that have an impact beyond Facebook. If the three bills are passed, no big Tech company will be able to offer cryptocurrency. Stablecoins will be treated as a security and any firm or its members benefiting from it will be delisted from the stock exchange,” added Brett.
It would be interesting to see the way Facebook tackles such a situation.