Christian Catalini: Co-Creator of Libra Explains How the Facebook-led Project Aims to Enable Financial Inclusion

Christian Catalini, co-creator of the Facebook-led Libra payment system and head economist at Calibra, a subsidiary of the social media giant that’s focused on developing a digital wallet for Libra, says he’d been doing research in the cryptocurrency and blockchain space for many years before joining the Libra project.

Catalini, whose comments came during a November 7 installment of the MIT Sloan Expert Series, noted that in 2013, he co-designed the MIT Bitcoin experiment with Catherine Tucker. The goal of the project was to explore what the technology had to offer in terms of “democratizing access to payments and financial services.”

After working on the project for several years, Catalini says he got frustrated with the technology because he felt it was unable to solve many of the common financial problems people were experiencing throughout the world. It was at this point that it became clear to him that a company with the type of engineering talent and reach and skill of Facebook would be able to properly design a digital payments system.

Catalini thinks Facebook can build a payments platform that will promote financial inclusion and have a “transformative impact” on the global economy.

In response to a question about major partners withdrawing from the Libra Association and concerns raised by policymakers and regulatory authorities regarding the Facebook-backed crypto project, Catilini remarked:

“This is a phase we were planning for, which was … instead of doing what is often done in tech … you deploy something, you launch something and then you can adapt after the fact. With Libra, we realized this is a very complex industry, a regulated industry, and if we really wanted to have an impact, we needed multiple stakeholders to kind of support the project and push it forward.”

He added:

“That’s why we [formally] announced [the Libra project] and we’re also planning for an extensive phase of dialogue with regulators, policymakers, with NGOs, and all [other] ecosystem participants that will have a major role in defining the success of Libra. That’s where we’re at. So, it’s been a phase where [we’ve] heard criticism coming from a number of voices. We’ve absorbed all of that. We’re iterating on the design.”

Catalini, who earned his Phd in strategic management from the University of Toronto, revealed that Facebook had incubated the Libra project for a year. He confirmed that there are now 21 entities who’ve committed to developing the Libra payments system and that there will be many more partners once the project goes live.

When asked to explain the “nuts and bolts” of the Libra initiative by Rebecca Knight, the host of MIT Sloan Expert Series, Catalini said:

“Every decision in the economic design of Libra since the very beginning was targeted at making it a very efficient medium-of-exchange (MoE) and payment tool, especially for cross-border transactions. When we were looking at all the excitement around blockchain, I think one of the things that we paused on is this concept that you have all these new platforms … for transferring value, but you also had massive speculation, massive swings in valuations of these [crypto] assets…[so,] if we wanted to make Libra actually useful … we took a step back and asked how can this actually function as a payment tool.”

Catalini went on to argue that Libra would have intrinsic value because it would be backed by a basket of major fiat currencies, which have a history of remaining stable over extended periods of time.

Responding to a question about the application of blockchain to the Libra platform, Catalini noted that several years ago, he had authored a research paper on the basics of blockchain technology. According to the research, transactions can be verified at a low cost when you use a blockchain. Another benefit of using the distributed ledger is related to the “cost of networking.”

Catalini explained:

“What [blockchain helps us do is] that [it allows us] to design digital platforms where you don’t have to trust a single intermediary, you don’t have to trust a platform architect, and so the journey around Libra … is about establishing a new model of trust in digital platforms.”

He added that blockchain allows us to build distributed governance systems that are based on open technology standards.

When asked how much Libra would actually be worth and how it would maintain its value, Catalina confirmed that the stablecoin would be backed by a basket of major currencies. He also mentioned that the goal is to make Libra “a global MoE” for remittances and international payments.

He continued:

“[In] the beginning, Libra’s value might be anchored around a [US] dollar and would really depend on the assets behind it. What’s really important is that these are all assets that are managed, controlled, and governed by central banks. Not only just random central banks, but [ones] that have a history of low inflation … and really [being able] to deliver on the promise of value preservation.”

He clarified that Libra is not a speculative asset and that it is a quick and reliable means of sending remittance payments.

When questioned about whether there could be bank runs in the case of Libra, Catalini said:

“When you think about a system, you always have to plan for the worst case scenario and many of the conversations with regulators are about the black swan cases. Most of the systems can be extremely resilient, but then when you look at something like 2008 or other major microeconomic crises, you want the system to be ready for that. That’s why Libra is fully backed. So essentially for every coin to ever be minted, an equivalent amount of value has to be put into the basket. And this is different from parts of the current financial ecosystem where you have fractional reserves.”

He added:

“A classic reason for a run is that if you only have so much [money] on balance relative to your liabilities outstanding, then if I’m the first one to run to the bank, I may get my money out and later [others might not be able to.]”

Catalini claims that Libra is designed to “mitigate” these concerns by being “fully backed.”

Commenting on Libra’s anticipated launch, Michael Cusumano, SMR Distinguished Professor of Management at MIT Sloan, stated:

“The peer to peer (P2P) money exchange problem which I think Libra is targeting is not solved by the financial system we have in the United States in general. There’s a gap in financial transactions that Libra could fill even in the US.”

Cusumano explained:

“For country to country money transfers among families, possibly for some purchases … [Libra] could save consumers quite a bit of money and on the side, it could make Facebook some money. However, if I use Libra to send money to my mother or brother or my friend, I have to record it as an asset sale and report it to the Internal Revenue Service (IRS). So, unless the government comes up with some accommodation for Libra or similar cryptocurrencies, it’s going to really have [bad effects.]”

Cusumano gave the example of WeChat adding WeChat Pay in China, which he said has been very successful. He believes Libra is at least in part influenced by the success of WeChat Pay. He pointed out that WeChat Pay is not an open platform and it’s not compatible with other payment systems. Meanwhile, Libra is “trying to position itself as a more open platform,” Cusumano argued.

Cusumano added that while Facebook claims the Libra Association members will share the responsibilities and control over the Libra initiative, he believes that the social media giant will actually be in charge of the digital payments project.

He also thinks the scheduled launch of the Libra project is being done at a bad time because the company has been accused of serious issues involving data security and the misuse of user data. He went on to mention that “the feelings of trust” towards Facebook are “pretty low right now.”

Catalini noted that we have to ask ourselves why there are still so many problems with the existing financial system, with around 1.7 billion people in the world being unbanked.

He added the main idea behind Libra is to introduce interoperability in the global financial system and make it affordable to switch between different payment platforms. He also mentioned that Libra aims to enable “equal access” for everyone.

In response to a question about how Libra will protect user data and keep their social data separate from their financial information, Catalini said:

“[Users’] social and financial data will not be connected. There’ll be measures in place from encryption to access control, to ensure that the [different sets of data] don’t get linked. More importantly, if you don’t like the Calibra wallet, then there will be other wallets competing on different features. Privacy will be a dimension where wallets will have to compete. [As a result,] we’ll see different business models and different approaches.”

He continued:

“From Facebook’s perspective, I think the idea here is to not to use the data to show more Ads or to sell more Ads. The Calibra wallet will have new features and we’ll build on those and that will be a new business model for the company.”

When asked about how “safe” Libra will be, Catalini said that blockchain technology could help Libra survive different types of cyberattacks. When it comes to fighting financial crime, the Libra Association has adopted an extensive framework which includes comprehensive anti-money laundering (AML) and know-your-customer (KYC) checks.

He remarked:

[These measures] will ensure that the [Libra] network is not only fast, cheap, and efficient, but also meets and exceeds current standards around AML and KYC. I think often what [we] hear is ‘Ohh, remittances are expensive.’ And that’s because of compliance costs.”

Catalini claims that Libra will use special technology to lower the costs of compliance. He also noted that when we apply new technologies such as artificial intelligence (AI) and machine learning (ML), we will be able to deliver “low cost, frictionless” MoE systems, “while also making the network safer.”

Commenting on financial inclusion, Scott Onder, senior managing director at Mercy Corps Ventures, a global humanitarian organization, said:

“There’s a real and pressing need to address what we see as a flaw in the global financial system that leaves the world’s most vulnerable people caught in a poverty trap, which is almost impossible to escape.” 

He argued:

“It’s very expensive to be poor. The cost of transactions, especially remittances, can make the cost of being poor even higher. We’re excited about … borderless cryptocurrencies and low volatility … and [those which] are low cost to users… With Libra, we see the potential to have a truly global, low volatility, and open-source currency that can meet the needs of people that are currently unbanked or poorly served by the financial system.”

He explained:

“Libra has the potential, because it is open-source, to foster an ecosystem around it that could design a lot of different use cases and applications that are very relevant to people that are currently excluded from the financial system. We’re excited as an aide organization to see how aide could be transformed through a truly frictionless payments system.”

Commenting on the fact that there are around 1.7 billion people in the world who’re unbanked, Catalini pointed out that most of them have a smartphone and a large percentage also have access to digital data.

He further noted that with blockchain, we have this great digital verification machine, but then we also have to actually “reach the people” by delivering the services.

He explained:

“Part of the goal of the Libra Association and the NGOs is ensuring that [users] can cross that last mile. It’s a complex issue and it’s not one that Libra will be able to solve immediately. It will take time and there are many pieces to the puzzle.”

He continued:

“[One piece of the puzzle] is identity. You want to lift identity standards so you can bring more people into the financial system. You can provide them services. I think we’ve seen very successful efforts, for example, in India where with a stronger identity system and then a unified payment system … you suddenly have a number of people who were on the fringes of the economy, of the financial system, having access to credit, having access to all sorts of new functionality that they were excluded from.”

He went on to mention:

“With Libra, I think the goal is to rely on this element of distributed governance and open platform to ensure that if I’m an entrepreneur of a region where I feel there’s a lack of financial services…there’s lack of access to basic payments functionality….[then I can use the Libra platform.] Maybe you’re a small business and you’re dealing with cash and it’s risky. Now you build those services and you don’t need to be a member of the association to build those services. And so I think what we’ll see across the globe from Africa to Asia to many of these regions where users are unbanked of severely underbanked…they can start building new types of products that lower costs, lower frictions, and take advantage of [Libra’s] global network.”

Responding to a question from a social media user who asked how the launch of Libra will affect other digital currencies such as Bitcoin, Catallini said:

“Libra and Bitcoin and other crypto assets are complements. I don’t see them as substitutes [or replacements for each other.] They can all solve different types of problems for different audiences. I think what’s exciting is that the space has a lot of experimentation and all these different experiments are going in different directions. So, over time, I think this will lead to more choice and more types of solutions. In fact, I see them building on each other and rewiring a lot of our financial ecosystem.”

Dutch Court Orders Facebook to Control Fake Bitcoin-Endorsing Ads

A Dutch court has determined that Facebook has the means at its disposal to restrict Bitcoin and cryptocurrency ads featuring celebrities who did not consent to the use of their name or image, Dutch News reports.

Judges in Amsterdam have also threatened to fine Facebook €1.1m ($1.2m USD) if the platform does not clean up its act.

The case was advanced in June by Dutch media tycoon and billionaire John de Mol, producer of the Big Brother and The Voice TV franchises.

Dutch celebrities Eva Jinek and Jort Kelder, whose images and names were also used to promote fake sales of bitcoin, also reportedly backed the case.

All told, it is believed that fake bitcoin ads on Facebook featuring Dutch stars conned more than 150 Dutch nationals into sending money to fraudulent crypto projects.

Victims are believed to have collectively lost €1.7m ($1.872m USD).

The judges determined that, “Facebook cannot hide behind its role as a ‘neutral’ platform,” Dutch News writes.

According to a press release from the court:

‘The company, which has adverts as its primary source of earnings, takes too active a role [to be neutral]…Facebook not only sets the prices, but has an active policy about which adverts appear on Facebook and Instagram.”

The judges also found that the cost of filtering out fake ads is not a sufficiently prohibitive to rule out the practice.

They also cited the fact that ads featuring De Mol have now largely been taken down as evidence that it is possible.

“Facebook’s responsibility for its own advertising platform is too big and fake adverts have too much impact,” the judges wrote.

Facebook has also reportedly been ordered to furnish the names of the parties behind the fake ads to De Mol’s lawyers.

In a statement regarding the ruling, De Mol promised to monitor Facebook and make sure it implements the measures it has been ordered to:

“I hope this ruling will lead Facebook to take steps as quickly as possible so that innocent people can no longer be conned by fake bitcoin adverts…My legal advisors and I will be following Facebook closely to see if it does take the necessary steps.”

Facebook Launches a Payment Platform that has Nothing to do with Crypto

Facebook (NASDAQ:FB) has launched a payment platform, Facebook Pay. The new payment service will be available across the entire Facebook ecosystem including Messenger, WhatsApp, and Instagram. The news was revealed in a blog post today by Deborah Liu, VP, Marketplace & Commerce. The payment service is in contrast to Facebook’s attempt to create a “stablecoin” called Libra with Facebook Pay having nothing to do with crypto while, effectively, having a similar impact to its internal services.

Facebook Pay is built on existing financial infrastructure and is separate from the Calibra wallet which is expected to run on the Libra network.

Facebook Pay will begin rolling out on Facebook and Messenger this week in the US with Instagram and WhatsApp to follow. Over time, Facebook plans to extend the service to “more people and places” thus indicating their global ambitions.

The company said that Facebook Pay will make transactions easier while “continuing to ensure your payment information is secure and protected.

Facebook Pay can:

  • Add your preferred payment method once then use Facebook Pay where available to make payments and purchases on our apps, instead of having to re-enter your payment information each time
  • Set up Facebook Pay app-by-app, or choose to set it up for use across apps (where available) — that means we won’t automatically set up Facebook Pay across the apps you are active on, unless you choose to do so
  • View payment history, manage payment methods and update your settings in one place
  • Get real-time customer support via live chat in the US (and in more places around the world in the future)
  • Clearly understand which payment services are part of Facebook

Facebook Pay is said to support most major credit and debit cards as well as PayPal.

This is probably the payment platform Facebook should have announced before Libra was hoisted up the flagpole. Facebook Pay could potentially leverage blockchain technology at some point in the future.

Report: Stripe CEO “Very Skeptical of Anyone…Adamant That Crypto’s Gonna Work”

CEO Patrick Collison of Stripe told Wired magazine last Friday that he’s, “very skeptical of anyone who’s adamant that crypto’s gonna work,” but said he thinks companies should experiment even if the chance of success seems slight.

Collison reportedly made the comments while doing on on-stage interview with Wired editor-in-chief Nicholas Thompson at the WIRED25 conference in San Francisco.

Stripe was an initial member of Facebook’s Libra Association, an advisory established in Switzerland to consult on Libra, Facebook’s proposed global cryptocurrency project.

But Stripe, Mastercard, and Visa all abandoned Libra one week after PayPal’s exit in early October.

Shortly thereafter, it was revealed that Stripe had received a letter from US Senators Brian Schatz and Sherrod Brown claiming Facebook, “has not provided a clear plan for how it will prevent Libra from preventing criminal and terrorist financing, destabilizing the global financial system, interfering with monetary policy, or exposing consumers to risks…”

The letter also warned Stripe that Libra Association participants could expect more scrutiny of their own activities if Libra proceeds before it is properly regulated.

Facebook has said it hopes to roll out Libra by 2020.

According to the letter to Stripe from US senators:

“You should be concerned that any weaknesses in Facebook’s risk management systems will become weaknesses in your systems that you may not effectively mitigate…If you take this on, you can expect a high level of scrutiny from regulators, not only on Libra-related payment activities, but on all payment activities.”

Stripe initially embraced Bitcoin and attempted to incorporate it as a payment option. But in January 2018, Stripe made the determination that Bitcoin had become more of an investment vehicle than a payment option. At that time, Stripe indicated they were still optimistic about crypto.

Stripe was conceived by Collison and his brother when they participated in Silicon Valley’s famous Y-combinator tech-incubation program in 2010.

Collison said on stage at Wired25 that Peter Thiel ended up investing after Collison told him PayPal worked badly. Collison and Stripe staff have since built the company into a payments contender with a $35 billion USD valuation.

Stripe reportedly now provides payments and other services to a million companies on its platform, which simplifies compliance and payment provision and offers an alternative to banks.

Stripe also rolled out a program called Stripe Atlas in 2016.

According to Wired, Stripe Atlas is similar to an “incorporation-in-a-box” service that allows companies anywhere in the world to incorporate in Delaware and thus gain access to US markets.

According to Wired’s Michael Calore, the service is a two-way win-win:

“These types of services can be key to Stripe’s strategy in risky markets, allowing it to engage with businesses and consumers without entering those markets directly.”

Report: Head of Russia’s Central Bank Joins Chorus of Regulators Critical of Private Currencies Like Facebook’s Libra

Elvira Nabiullina, governor at the Bank of Russia since 2013, told the Russian parliament this week that she supports Fintech innovations but opposes private currencies like Facebook’s Libra because they pose a threat to financial stability.

She also said she and the bank are monitoring the development of digital currencies by central banks in different regions.

“We are in favor of the development of financial technologies. But we do not support private money in any form, digitally or not,” she said.

“If they replace public money, they will destroy both monetary policy and financial stability.”

Despite its opposition to Libra, the Bank of Russia is exploring the potential use of a digital form of Russia’s national currency, the Ruble, Nabiullina said.

Cryptocurrency investors have been “bullish” about news that central banks are considering “digitizing” national currencies.

More circumspect commentators, including regulators, have pointed out that enhanced regulated payments networks such as Europe’s new TARGET2 system are close to being implemented.

Nabiullina seemed to refer to a similar more conventional payments system being developed in Russia now, and she questioned whether a national digital currency has any advantage:

“At the same time, we are studying, like many countries, the digital currency of central banks. But this is a process of studying and we need to look at what we will get from this digital money. What will be an additional advantage compared to the fact that we are developing an electronic money transfer system?”

EU: “No global stablecoin arrangement should begin operation in the European Union until the legal, regulatory and oversight challenges and risks have been adequately identified and addressed”

The Council of the European Union has posted a memo, or “draft joint statement,” regarding stablecoins – a hot policy topic these days due to Facebook’s attempt to launch a global, non-sovereign, cryptocurrency.

When Facebook revealed the creation of Libra, and the executive body the Libra Association, it took global policymakers a bit of time to ingest exactly what Facebook was attempting to accomplish. While the giant social media platform packaged Libra in a glow of altruism the true economic impact obviously has the potential to be far different. Facebook claims over 2 billion global users which could, potentially, migrate into the non-sovereign currency thus undermining monetary policy around the world. Understandably, both elected and appointed officials have hit the pause button on Facebook’s move to undermine national governments.

The Draft Joint Statement, in its final form, by the Council and the European Commission, will be officially submitted on December 5, 2019 to the Permanent Representatives Committee with a view to the approval by the Council (ECOFIN).

In brief, the statement declares:

“… the Council and the Commission state that no global stablecoin arrangement should begin operation in the European Union until the legal, regulatory and oversight challenges and risks have been adequately identified and addressed.”

This should effectively halt Facebook’s goal of launching Libra in Europe.

The Council and Commission believe that global stablecoins demand a “coordinated global response.”

The authors recognize the intrinsic innovation affiliated with stablecoins but the many known, unknowns far outweigh any benefits.

Perhaps the best outcome of Facebook’s ham-fisted attempt to create their own cryptocurrency is this should incentivize public entities to speed up the digitization of currency and facilitate faster payments.


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VP Product, Calibra Wallet: Facebook Cryptocurrency Will Take Decades to Implement

In comments likely designed to assuage regulator concerns, Kevin Weil, VP Product for Facebook’s Calibra cryptocurrency wallet program, told people attending the Web Summit technology conference in Lisbon November 5th that Facebok’s proposed cryptocurrency network will take decades to implement:

“This is not going to be a thing that spreads like a social network…This is going to be the work not of years but of decades, and it’s worth making.”

Weil also said that Facebook CEO Mark Zuckerberg has been un-phased by the resounding criticism from global regulators that followed Facebook’s announcement of Libra in May.

“When Mark commits, he commits,” said Weil.

“Libra” is the name chosen by Facebook to describe a proposed cryptocurrency network the company plans to begin rolling out across its global network of 2.4 users in 2020.

The network’s currency unit, the libra, is being designed as a “stablecoin” that, unlike bitcoins, does not fluctuate in value.

Facebook has stated that it plans to “back” every libra it issues by maintaining a basket of currencies and short-term bonds held in reserve.

Regulators are concerned that if rapidly implemented, such a vast private currency network could lead citizens in certain countries to abandon local currencies in favour of using libras.

Regulators have argued that currency issuance and management is the rightful province of elected governments and should not be permitted among private entities.

Regulators are also concerned about Facebook’s poor ethical track record with regards to whether or not the company has the will and capacity to thwart the use of its payments network by criminals and terrorists.

David Marcus is the head of Libra, and Weil is heading Calibra, the arm of the project now handling design of Calibra, a digital wallet designed to hold customer Libra.

Weil reportedly told conference attendees in Lisbon that he already has a Calibra prototype set up on his phone and that the wallet will be designed to send money via Messenger and WhatsApp as easily as a text message.

According to Business Insider, “The intent of Libra was to involve broad industry support to build an open set of technologies for sending money.”

Libra is being built to unite payments across several competing payments apps such as Venmo, Zelle and Paypal, said Weil

But since the project’s announcement and subsequent storm of criticism, a number of high-profile initial members of the Libra advisory, the Libra Association, have left the project.

On Friday, October 11th, Visa, Mastercard, Stripe, Mercado Pago and eBay all exited as corporate backers of Libra.

PayPal left one week earlier.

It is believed the initial Libra payments partners all received letters from US lawmakers asking them to, “carefully consider how your companies will manage risks before proceeding,” as backers of Libra and warning that their participation would invite enhanced scrutiny of their operations.

In Lisbon, Weil talked down the exodus:

“That’s ok…In 18 months this went from an idea to 21 fantastic, committed organizations.”

Romanian Fiscal Council President: Facebook’s Libra Cryptocurrency “Very Dangerous”

Daniel Daianu, president of Romania’s Fiscal Council, told members of the Romanian Academy Tuesday that Facebook’s Libra cryptocurrency could destroy the current global monetary balance and so disrupt the work of central banks that they become ineffective at managing money supplies, Agerpres reports.

Facebook hopes to begin enabling cryptocurrency payments throughout its network of 2.4 billion users by 2020.

The company says it plans to “back” libra coins using a basket of real-world national currencies and short term bonds.

The Fiscal Council “is a relatively new institution” established to help Romania integrate EU fiscal regulations into domestic laws.

Daianu commented on how Facebook would predicate its network coin on standard currencies while seeking to disrupt the standard financial order:

“Cryptocurrencies are highly speculative financial assets, and assets such as Libra – whether they rely on a bunch of assets which are considered safe or on coins – are very dangerous because they are part of the logic of those who believe that there is a need for parallel markets, the disappearance of central banks. There is such a way of thinking.”

Daianu acknowledged that enthusiasm for cryptocurrencies has been partly informed by opposition to malfeasance among mainstream financial players,

The type of disruption envisioned by “(crypto) libertarians,” however, said Daianu, could “fracture” current global monetary systems:

“The financial crisis ruined the reputation of governments and central banks, and some think we need other currencies, parallel circuits, non-hierarchical structures. So the discussion is much deeper. It is not only about the monetary system. It is not by chance that libertarians are so attached to this vision. Those who reject central banks would like to return to the world of free-banking. That is why Libra is very dangerous, because it would target billions of users and in fact would almost inevitably fracture the monetary system and central banks would lose their effectiveness.”

Daianu is far from the only regulator to have decried the danger of a private currency network run by a corporation with a  spotty ethical track record.

Regulators in China, Japan, Australia, the US, France, Spain, the UK, and Germany have all issued stern warnings regarding Facebook’s libra since the project was announced last May.

Some of those regulators are concerned that Facebook users living in countries with small, less stable local currencies could be inclined to dump local money in favour of using Libra.

Under those circumstances, local currencies could rapidly devalue.

Romania is a region using a non-reserve currency, and the Fiscal Council’s landing page states that it was created, in part, to manage risks implied when a country’s money is not a reserve currency:

“The fiscal space is vital in emerging economies which, by definition, do not issue reserve currency. Such economies need appropriate ‘buffers’, especially in times of high uncertainty and rapidly changing financial markets. The Romanian leu is not a reserve currency and the National Bank of Romania does not have a space for maneuver similar to large central banks. That is why imbalances must be a cause for serious concern in order to avoid the deterioration of financial stability, sovereign risk assessment, financing and the dynamics of the economy.”

The Fiscal Council site also states that it, “has its origin also in the lessons of the Great Recession. Countries with vulnerabilities, augmented by pro-cyclical fiscal policies, external deficits and increased indebtedness fueled by the unrestricted capital movement (specific to the Single Market) and by the lack of macro-prudential tools, have suffered painful corrections after 2009. This reality calls for prudence and caution when formulating economic policies…”

Managing money supplies is already hard enough, Daianu told the Romanian Academy, and rules, even in regular finance, should get tighter:

“For the future, if we put cryptocurrencies aside, which have to be very strictly regulated, I am for a very severe regulation of capital markets, of what is called the shadow banking sector. In the future, monetary policy will be a mix of a pragmatic inflation targeting and the control of monetary aggregates. Macro-prudential measures inevitably also mean the control of monetary aggregates because we are trying to (manage) the movement of money in the economy.”

IOSCO Board: Stablecoins Like Libra Can Include Features that are Typical of Regulated Securities

The International Organization of Securities Commissions (IOSCO) has issued a statement on stablecoins.

The concept of stablecoins has endured increasing regulatory scrutiny following the announcement by Facebook that it intends to issue Libra – a stablecoin expected to be backed by fiat currency and other low volatility assets.

The Board of IOSCO met last week in Madrid (October 30, 2019) to consider the risks and benefits of Stablecoins with a potentially global reach (IE Libra) and how securities regulation may apply.

The IOSCO Board acknowledged that stablecoins may offer benefits to market participants, consumers and investors.  However, IOSCO said it is also aware of potential risks regarding “consumer protection, market integrity, transparency, conflicts of interest and financial crime, as well as potential systemic risks.”

The IOSCO Fintech Network reportedly produced an assessment as to how Principles and Standards could apply to global stablecoins.

This assessment concluded that a “case-by-case approach is needed to establish which IOSCO Principles and Standards, and national regulatory regimes, would apply.”

Ashley Alder, Chair of the IOSCO Board, commented on the stablecoin review:

“Our analysis has shown that so-called ‘stablecoins’ can include features that are typical of regulated securities. This means IOSCO Principles and Standards may apply to stablecoins depending on how they are structured, including those related to disclosure, registration, reporting and liability for sponsors and distributors. Global Stablecoin initiatives are rightly subject to significant international and public scrutiny.

Adler said they agree with the recent G20 press release that global stablecoins may create systemic risk.

The Fintech Network is currently chaired by the UK Financial Conduct Authority (FCA) widely recognized as one of the most innovation-friendly regulators in the world.

Alder said that systemic footprints “give rise to a set of serious public policy and regulatory risks.”

“We, therefore, encourage international collaboration, so the risks relating to stablecoins can be identified and mitigated, and the potential benefits realized. The recent G7 Report outlined a number of concerns and IOSCO will participate fully in the Financial Stability Board’s follow-up work, working closely with other standard-setting bodies to ensure a coordinated response. It is important that those seeking to launch stablecoins, particularly proposals with potential global scale, engage openly and constructively with all relevant regulatory bodies where they may be seeking to operate,” added Adler.

He explained that in addition to supporting the work of the FSB, the IOSCO Fintech Network will continue its assessment and consideration of global stablecoin initiatives.

Multiple regulators and policymakers have voiced concern regarding Libra which, if launched in its currently expected form, will be, in effect, a global non-sovereign currency. Recently, the US Congress has held a series of hearings on Libra that challenged Facebook on its intent as well as its past indiscretions regarding consumer data abuse.

Many industry observers have noted that if Libra generates a return for Libra Association members it is, in fact, a security.

The Network will facilitate information sharing between securities market regulators on such proposals.

Five European Countries Uniting to Stall Libra, Facebook’s Proposed Global Cryptocurrency

Deputy finance ministers from France, Germany, Italy, Spain and the Netherlands have been meeting behind closed doors throughout October to devise a strategy to prevent Facebook from launching its proposed Libra cryptocurrency network among its 2.5 billion users next year.

According to four sources to Politico EU, the five ministers lobbied the rest of the EU assembly regarding Libra on Monday.

According to the outlet:

“Their opposition raises the barrier to introducing Libra in Europe and may add pressure on Facebook plus the 20 other companies and organizations behind the initiative to give it up. Mastercard and Visa have already left the group.”

When it announced Libra in May, Facebook seemed almost blindsided by the widespread condemnations and warnings that followed from regulators across the globe.

Many fear that a rapid rollout of Libra across Facebook’s global network could lead users to abandon local, government-controlled currencies in favour of a corporate one.

Such an event would likely make it difficult for governments to balance money supplies and implement fiscal policies.

Many other regulators worry that Facebook’s poor ethical track record implies its currency could become a popular means of transmitting illicit funds.

Politico EU says, “The Paris-led coalition is encouraging EU governments to consider banning Libra altogether, according to eurozone diplomats and European Commission officials…(but) an outright EU ban seems problematic in the eyes of the Commission…Brussels would need a legal reason to prohibit the payment service and still needs more information to know what rules would apply to Libra.”

For now, the diplomats are focussing on preparing a statement to be delivered by the ministers in December.

In it, the ministers will reportedly insist that the Libra Association shouldn’t be allowed to introduce the Libra currency unless the EU can properly regulate it.

A press person for France’s finance minister, Bruno Le Maire, told Politico to refer back to strong statements he made regarding Libra while attending the G7 in Washington October 18th.

There, finance ministers from Rome and Berlin also proposed that Libra be banned.

“Countries would lose their sovereignty to private interests and lose control over their monetary policies, which is something that would be totally unacceptable,” Le Maire said at the time.

In October, German Fi­nance Min­is­ter Olaf Scholz told WirtschaftsWoche magazine that he takes a “very, very critical” view of Libra and stands against private currencies that could disturb official money systems.

U.S. Treasury Secretary Steven Mnuchin was a sticking point at the G7, however, and reportedly wished to refrain from recommending policies for stablecoins in favour of simply emphasizing the risks.

Certain EU diplomats on Monday also reportedly warned against creating a law that would make the EU inhospitable for tech companies.

With regards to the ministers’ efforts at the EU, a spokesperson for the Libra association promised that its, “priority is to partner with regulators to ensure all their questions and concerns are rightfully addressed.”

Libra Lead in Las Vegas: Facebook Currency System Will Outperform Other Anti-Money Laundering Systems

Libra lead David Marcus told an audience at Money 20/20 USA in Las Vegas this week that, due to the system’s use of a transparent “blockchain” ledger, Facebook’s proposed in-app (crypto)currency system will manage anti-money laundering (AML) more effectively than current payment systems, Finextra reports.

“If you want to change the way that money moves around, there is no better way,” Marcus said.

“AML is something we need to address, and…the efficacy of sanction enforcing can be much higher on Libra than other payments networks. Digital to digital is more traceable than when cash in involved and will be more secure as it will run on real-time systems,” he added.

“The open ledger – the blockchain – enables regulators to look at what is happening themselves and identify where the risk is without relying on reports. The onus is on us to do that work,” said Marcus, “and now that we have the governance structure in place, we can now demonstrate this improvement.”

If all goes according to plan, Facebook will begin launching Libra across its network of 2.4 billion users some time in 2020.

Marcus reportedly began his remarks by claiming that the overwhelming critical response towards Libra from global regulators and others is a sign that Facebook is one the right track. “The most meaningful innovations that have changed the lives of millions across the world in a profound way have always been met with damning headlines,” he said.

Like other blockchain proponents before him, Marcus then cited examples of tech erroneously panned in the past, including electricity, the Internet, mobile phones and smartphones.

Marcus told the 20/20 audience that Libra has the potential to, “change the direction of the world,” and said the Libra Association’s remaining 21 members are all committed to the prospect.

Global regulators in Japan, China, Australia, England, France, Germany, the US and elsewhere have been singing quite a different tune on Libra, however.

Chinese officials worried aloud in July that Libra might upset the global financial balance established by the International Monetary Fund’s Special Drawing Rights basket.

That basket currently includes proportions of Chinese yuan, US dollars, Euros, Japanese yen and British pounds, and, according to the IMF, “serves as the unit of account of the IMF and some other international organizations.”

In September, Libra Association General Director Bertrand Perez confirmed China’s suspicions when he stated publicly that, “the Renminbi will not be part of,” the basket of reserve currencies used to back Libra.

Some regulators have expressed concern that the rapid roll-out of Libra could lead people in small countries to abandon their national currencies in favour of Libra coins.

Others have claimed that history shows currency management is best handled by elected governments, not by unelected corporations.

Regulators also doubt that Facebook has the necessary will and skill to police misconduct on the platform, which could lead to Libra becoming a major conduit of illicit proceeds.

Though Marcus characterized strong resistance to Libra as a sign the company is on the right side of technological history, he also told the 20/20 audience to expect more challenges.

But all would be for the best, he said:

“These headlines are a preamble to more hard times ahead and we must govern the network into a place where it will meet regulatory standards, then we will see the network come to life. People deserve much better than they have.”

Marcus said Libra aligns with a globalist vision:

“It is all about the people and we believe that there is still no network that is truly global and opens doors to people all over the world.”

He also promised that Libra would involve, “no money creation whatsoever”:

“We have a full one to one back reserve, there is no money creation whatsoever.”

Report: Indian Finance Minister Says Many Countries Cautious About “Rushing” into Crypto

Indian Finance Minister  has said that despite a sense of urgency kicked up by Facebook’s proposal to create a global currency system (Libra), many countries remain cautious about “rushing into” a cryptocurrency arms race, Business Standard reports.

“On our side, the Reserve Bank Governor (Shantikanta Das) spoke about (Libra) during our turn to intervene (at recent meetings of the International Monetary Fund and the World Bank),” Sitharaman told Indian reporters following the meetings. “I got the sense that many countries were cautioning on rushing into this.”

Currently, the Reserve Bank of India has imposed a ban on cryptocurrencies in India. The ban is being observed by all licensed banks in the region.

Libra was “a buzzword” on everyone’s lips at the IMF and world bank meetings, Business Standard writes, and some of the discussion involved how cryptocurrencies should be defined, said Sitharaman.

“Some of them (countries) of course even suggested that they shouldn’t be using, all of us shouldn’t be using, the name stable currency because that’s the expression they used. Many cautioned to the extent saying even the name should not be stable currency, it should relate to virtual currency or something of the kind,” she said.

Though some presentations were pro-crypto, on balance, delegates acknowledged complexities, Sitharaman stated. “(S)ome of the presentations were also highlighting the strengths of such virtual currency. But equally everyone without fail spoke about the challenges together with talking about it as a if necessary step forward. So everyone was stepping cautiously on it,” she said.

Kristalina Georgieva, Managing Director of the IMF told the reporters that the IMF has been working with organizations like the Financial Stability Board and the European Central Bank around the benefits and risks of cryptocurrencies.

“We take a very balanced approach. We look at the ease of use, cost savings, and most importantly, financial inclusion as very important benefits. But we are also very mindful that they can be a risk for privacy, consumer privacy,” she said.

Georgieva admitted that digital currency can be used for illegal ends, including terrorist financing.

She also acknowledged how the Libra currency systems, if rapidly implemented among Facebook’s 2.4 billion users, could affect the stability of small currencies if citizens in certain regions decide to dump local currencies in favour of Libra. “And there are issues on sovereignty that need to be well understood and addressed. And in that sense, we will continue to work,” Georgieva said.

She said the IMF is looking at the whole phenomenon of the “digitization” of currencies, not just at Libra:

“We are not specifically focusing on Libra. We are looking into, one, the inevitability of expanding digital money on the wave of the digital revolution, but then the necessity to do so, mindful of monetary stability.”

As Libra Increasingly Falters, 47 States Join Facebook Anti-Trust Investigation

As Facebook tries desperately to keep its proposed in-app global currency project, Libra, afloat, New York Attorney General Letitia James has announced that attorneys general from 47 American states have joined a multistate antitrust investigation now scrutinizing Facebook:

“After continued bipartisan conversations with attorneys general from around the country, today I am announcing that we have vastly expanded the list of states, districts, and territories investigating Facebook for potential antitrust violations. Our investigation now has the support of 47 attorneys general from around the nation, who are all concerned that Facebook may have put consumer data at risk, reduced the quality of consumers’ choices, and increased the price of advertising. As we continue our investigation, we will use every investigative tool at our disposal to determine whether Facebook’s actions stifled competition and put users at risk.”

According to Investopedia, “Antitrust laws are regulations that monitor the distribution of economic power in business, making sure that healthy competition is allowed to flourish and economies can grow.”

On Wednesday, Facebook founder and CEO Mark Zuckerberg testified for more that 6 hours before the House Financial Services Committee, a committee of the US House of Representatives that oversees the entire financial services sector in the US.

In her opening remarks before Zuckerberg’s testimony, Committee Chair Maxine Waters accused Zuckerberg of hubris and said his actions have inspired discussion of whether Facebook should be broken up:

“Mr. Zuckerberg, each month, 2.7 billion people use your products. That’s over a third of the world’s population. That’s huge. That’s so big that it’s clear to me and to anyone who hears this list, that you believe that you are above the law, and it appears that you are aggressively increasing the size of your company, and are willing to step on or over anyone– including your competitors, women, people of color, your own users, and even our democracy– to get what you want. With all of these problems I have outlined, and given the company’s size and reach, it should be clear why we have serious concerns about your plans to establish a global digital currency that would challenge the U.S. dollar. In fact, you have opened up a serious discussion about whether Facebook should be broken up.”

Meanwhile, the anti-trust investigation is being fronted by “a leadership team” that includes Letitia James and attorneys general from Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee, and the District of Columbia.

As well, “(A)ttorneys general from Arizona, Arkansas, Connecticut, Delaware, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Virginia, Wisconsin, Wyoming, and the territory of Guam have all joined the investigation, in addition to a number of other states that cannot confirm their participation in pending investigations.”

Connecticut Attorney General William Tong said Facebook’s practices may have harmed small business:

“Social media is a critical part of doing business in today’s economy. Any effort by Facebook to unlawfully stifle competition could cause wide-ranging harm to smaller companies, restrict consumer choice, and increase costs for all…We cannot prejudge the outcome of this investigation, but stand ready to follow the evidence where it takes us to protect American consumers.”

Indiana Attorney General Curtis Hill said big companies are beholden to the same laws as everyone else:

“Just like individual citizens, corporations must be held accountable for following the law…To protect consumers and the free market, we must promote conditions under which all entities may compete on a level playing field in accordance with the rule of law.”

Louisiana Attorney General Jeff Landry suggested lawmakers are keeping better pace with new developments in tech:

“Big Tech must account for its actions. I am proud to join my Republican and Democrat colleagues in efforts to ensure Tech Giants can no longer hide behind complexity and complicity.”

Massachusetts Attorney General Maura Healey said, “It’s important that the internet remain fair and open to everyone.”

Michigan Attorney General Dana Nessel talked about protecting consumer data against exploitation by “monopolists”:

“Our personal data is the biggest commodity in today’s online economy and, as the chief law enforcement officer of the state, it is my duty to ensure Michigan residents’ personal data doesn’t continue to be pillaged in a monopolist’s quest to control social media and advertising markets.”

North Carolina Attorney General Josh Stein also warned about tech monopolies:

“I’m increasingly concerned about the way the internet has come to be dominated by a few major tech companies. When companies in any industry get too big and too powerful, they can use that power to harm their consumers and to damage markets. We need to protect competition in markets so that consumer benefit from choices, so that their privacy is protected, and to ensure that the next generation of tech innovators aren’t snuffed out by their powerful competitors.”

All told, almost all the attorneys general promised Facebook a fair process.

Tommaso Mancini-Griffoli from IMF Pitches Synthetic Central Bank Digital Currency

In a presentation entitled “The Future of Money: The Impact of Digitization, including “social coins” on Currency, Payments and Markets, Tommaso Mancini-Griffoli, Deputy Division Chief in the Monetary and Capital Markets Department from the IMF pitched the concept of a “synthetic CBDC” (Central Bank Digital Currency).

The concept of a CBDC has been around for some time. In 2016, the Bank of England discussed the concept in a working paper published on the “Macroeconomics of Central Bank Issued Digital Currencies.”

More recently, the current Bank of England Governor Mark Carney proposed a global digital currency or “Synthetic Hegemonic Currency.”

Today, Mancini-Griffoli is pitching a “synthetic CBDC” or sCBDC – a form of public-private partnership that bridges the gap between companies seeking to benefit from a digital currency and a central bank that seeks to maintain control of monetary policy.

The concept is of heightened importance due to corporations like Facebook seeking to launch its own non-sovereign global currency Libra. Facebook is recognizing the benefits of creating a low friction, low-cost digital form of payment (stablecoin) which can be utilized regardless of a geographic location.

Most central banks have been slow to embrace the idea of a CBDC with some currently experimenting with the concept.

Of note, is the fact that China has jumped to the head of the queue as the government is expected to launch its own CBDC within weeks (and not years). China’s ambition is to replace the dollar as the reserve currency of preference for the world.

Mancini-Griffoli approach has merit and is something that policymakers should review. Government officials need to recognize the benefits of updating existing payments and remittance systems while being sensitive to the impact on traditional banks (such as the outflow of deposits). Perhaps, the sCBDC is the missing piece of the crypto-puzzle.

Chinese Internet Giant Tencent Says Facebook’s Libra Stablecoin Might Pose A Threat to Other Digital Payments Platforms

Shenzhen-based Tencent, an internet service portal that provides mobile, telecom, and online advertising services, has stated that the proposed launch of the Facebook-led Libra project could pose a threat to existing digital payment platforms.

Tencent’s management noted in a recently published blockchain whitepaper that the Facebook-backed Libra stablecoin project appears to be “bold and radical,” however, it’s actually a “prudent and rational” business move for the social media giant.

The Libra cryptocurrency might quickly gain significant market share in areas that do not have a stable local currency, or in jurisdictions where people do not have access to modern banking  services, the whitepaper stated. It added that this would be direct competition that Chinese firms might not be able to replicate.

The paper further noted:

“Any internet company that has a relatively mature digital payment system, such as WeChat Pay and Alipay, would be threatened by the stablecoin if it is ever launched.”

China’s central bank has been developing its own sovereign digital currency for the past few years. Since late 2017, the nation’s government has also banned all fiat-to-crypto trading activities in mainland China. 

Tencent and Alibaba, which runs WeChat Pay’s primary local competitor Alipay, are not involved in any crypto-related projects.

Tencent’s social media platform WeChat has more than 1 billion active daily users. The firm’s digital payment service WeChat Pay is among China’s leading companies, along with Alipay, a mobile payment platform owned by the Alibaba Group.

Alipay and WeChat’s management have said that a firm stance must be taken against digital currency exchanges that attempt to use their payment services as a gateway for Chinese customers’ fiat on-ramp in a peer-to-peer or decentralized manner through over-the-counter (OTC) trading.

WeChat Pay’s management noted:

“[We] do not support crypto trading, and the platform has never been open to any crypto category. We welcome users to report on any crypto trading on our platform and proactively collaborate with authorities to crack down on such activities.”

Alipay also confirmed via Twitter that it has banned crypto trading. The company’s tweet was directed at Binance when the Malta-based exchange launched OTC trading that lets Chinese traders exchange digital assets with a counter-party and handle payments through P2P transactions on Alipay.

Alipay stated:

“If any transactions are identified as being related to bitcoin or other virtual currencies, Alipay immediately stops the relevant payment services.”

Mark Zuckerberg Takes a Beating on the Hill While Launching Defense of Libra & Facebook’s Past Actions

Mark Zuckerberg, CEO of Facebook, spent over 6 hours today testifying in front of the powerful House Financial Services Committee. While his prepared remarks foreshadowed his defense of Facebook’s Libra stablecoin, little can prepare you for the onslaught of questions delivered by every single Committee member.

In opening remarks, Committee Chairwoman Maxine Waters stated:

“Mr. Zuckerberg, each month, 2.7 billion people use your products. That’s over a third of the world’s population. That’s huge. That’s so big that it’s clear to me and to anyone who hears this list, that you believe that you are above the law, and it appears that you are aggressively increasing the size of your company, and are willing to step on or over anyone– including your competitors, women, people of color, your own users, and even our democracy– to get what you want. With all of these problems I have outlined, and given the company’s size and reach, it should be clear why we have serious concerns about your plans to establish a global digital currency that would challenge the U.S. dollar. In fact, you have opened up a serious discussion about whether Facebook should be broken up.”

Waters peppered Zuckerberg with statements regarding questions on diversity and inclusion, protecting consumers and election influencing.

“I have come to the conclusion that it would be beneficial for all if Facebook concentrates on addressing its many existing deficiencies and failures before proceeding any further on the Libra project,” stated Waters.

It doesn’t help that 47 state Attorneys General are looking into the possibility of anti-trust violations regarding Facebook.

Ranking Member on the Committee, Patrick McHenry, was a bit gentler with Zuckerberg as he is more sensitive to fostering innovation and the US’s competitive position in the tech world. McHenry described the hearing as American innovation being on trial.

“This is not just about Libra, not just about some bad housing ads, and maybe not really about Facebook at all,” said McHenry. “You are here as one of the titans of this new era that we call the digital age. And fair or not, you are here today to answer for it.”

McHenry admitted that he has plenty of qualms about both Facebook and Libra but if history has taught us anything, ” it is better to be on the side of American innovation and competition,” said the Congressman.

McHenry has expressed his concern that the US has a response to China’s fast-emerging payment ecosystem with dominant platforms such as AliPay serving 900 hundred million users. Zuckerberg said that while we debate these issues the world isn’t waiting. China is preparing to launch something similar within the next few months, said Zuckerberg, referencing China’s forthcoming Central Bank Digital Currency (CBDC).

“I actually don’t know if Libra is going to work,” admitted Zuckerberg, while emphasizing the fact that Facebook is just a single member of Switzerland based Libra Association.

Addressing an ongoing concern about what Facebook would do in light of the regulatory pressure. Zuckerberg said that Facebook will not be part of launching the Libra payments system until US regulators approve.

Mchenry noted that today 6 of 10 top internet companies are now Chinese. 10 years ago they were all American firms.

“I view the financial infrastructure in the United States as outdated,”  said Zuckerberg.

“…why not just do a Facebook version of Alipay?” asked McHenry – a valid question.

Congresswoman Maloney asked Zuckerberg if he would seek the approval of all the US financial regulators which may regulate Libra. In the US, there could be a dozen or so federal regulators that have some oversight over the proposed crypto as the US has the most byzantine and costly financial services regulatory environment in the world.

“Probably all of them for different things,” Zuckerberg said.

Congresswoman Velazquez queried Zuckerberg on the integration of Facebook and Instagram, something he previously told the European Commission he would not do. She did not receive an acceptable response as she highlighted the fact that actions speak volumes and words not as much.

Congressman Brad Sherman, a longtime critic of crypto who frequently calls Libra a “Zuck Buck,” told the committee that cryptocurrency doesn’t work and Libra would interfere with the US dollar being the sole reserve currency in the world.

“you are going to be making powerful burglary tools,” Sherman told Zuckerberg.

The discussion swung back and forth from there.

Most Democrat members of the committee attacked Facebook for its past transgressions (ie Cambridge Analytica) while accusing Facebook of being tone-deaf to the poor and unbanked masses. “They need pesos and dollars where they can buy something” first instead of Libra.

Every single member had their say with some hammering Zuckerberg with accusations that clearly made Zuckerberg uncomfortable.

Zuckerberg did admit that the Libra Association could continue its mission without Facebook’s participation if US regulatory approval is not forthcoming but it would be a surprising move if Libra persisted minus its creator and visionary.

So where to next?

Zuckerberg will most certainly spend a good amount of time evaluating the hearing and determine the next steps. As many of the specific details of the stablecoin remain unknown, there are several options for the Libra Association to adjust its crypto to a point where it may satisfy not just US regulators but global officials. One possibility is for Libra to peg itself to a single fiat currency as opposed to creating a non-sovereign global cryptocurrency based on a basket of fiat and other more secure assets.

In the end, Facebook may be compelled to concede defeat if it doesn’t propose something that is more acceptable to policymakers.

Bitcoin Tanks as Zuckerberg Talks Up Libra

During a 6 + hour hearing today, Mark Zuckerberg defended both Libra and Facebook in general in front of the influential House Financial Services Committee.

During the day shares in Facebook (NASDAQ:FB) rose by over 2% as the market rose overall but also, perhaps, boosted by positive sentiment from Zuckerberg’s testimony and responses to the many probing questions.

Meanwhile, the most popular crypto Bitcoin – tanked.

Bitcoin is trading at a multi-month low of $7531 a drop of almost 8% during the day.

Some of the chatter revolved around a perception that Libra may, someday, replace Bitcoin’s top spot in the virtual currency world.

Others believe it is just more opportunistic trading in a highly volatile market that is not for the faint of heart.

Bitcoin hit its all time high in December of 2017 when it traded at around $20,000 per BTC. During 2019, Bitcoin hovered around $3500 per BTC only to regain its footing and jump to over $12,000 per BTC. Bitcoin supporters like to point to its performance in contrast to more established metrics such as the S&P 500. But then, in the end, it all depends on when you got in.

Here is Mark Zuckerberg’s Prepared Testimony for House Financial Services Committee Hearing

Mark Zuckerberg, the CEO of Facebook, will testify in front of the US House Financial Services Committee tomorrow in what will be a closely watched political event. Zuckerberg will be defending Facebook’s attempt to create a global non-sovereign cryptocurrency called Libra. The stablecoin has come under intense scrutiny and a growing number of public officials have raised the concern that Facebook may gain the power to undermine government-issued money – a power no official desires to relinquish.

In advance of the Hearing, Zuckerberg has posted his prepared testimony which is typically an unabridged version of what he will publicly state. So what does Zuckerberg have to say?

You may read it all below, but Zuckerberg will level a strong defense as to why the US and the rest of world, dearly need to be saved by Libra.

Zuckerberg states:

“The financial industry is stagnant and there is no digital financial architecture to support the innovation we need. I believe this problem can be solved, and Libra can help.”

And if we do not innovate, or allow Facebook to do so, we (the US) are at risk of conceding financial might to China:

“China is moving quickly to launch similar ideas in the coming months. Libra will be backed mostly by dollars and I believe it will extend America’s financial leadership as well as our democratic values and oversight around the world. If America doesn’t innovate, our financial leadership is not guaranteed.”

Zuckerberg also admits that Facebook is looking at other ways to provide financial services to its portfolio of digital products taking a page out of big tech platforms in China.

“At Facebook, we’re also exploring other ways of giving more people access to financial services,” says Zuckerberg.

Zuckerberg promises that Libra is not an attempt to create a sovereign currency – even though the crypto will not be government-controlled.

Zuckerberg then burnishes Facebook’s mission and states they “have a responsibility to ensure that the products and services we build are used for good.”

The Hearing will be a must-see, Congressional event. It will be live-streamed on the Financial Services Committee site beginning at 10AM ET.


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US House of Representatives: Legislation Prepared to Designate Stablecoins as Securities

Draft legislation has been posted on the US House of Representatives, Financial Services Committee website that may designate “stablecoins” as securities.

Sponsored by Representative Sylvia Garcia, the ‘‘Stablecoins are Securities Act of 2019″ would mandate that stablecoins are investment contracts and thus are regulated under existing securities law. Stablecoins would then fall under the bailiwick of the US Securities and Exchange Commission (SEC).

The bill would target stablecoins where:

“The market value of such digital asset is determined, in whole or in significant part, directly or indirectly, by reference to the value of a pool or basket of assets, including digital assets, held, designated, or managed by one or more persons.”

The bill may be viewed as directly targeting Facebook’s attempt to launch Libra, a stablecoin that would be managed by a group of people, IE the Libra Association, and the assets would include a basket of fiat currencies as well other securities such as government bonds.

The legislation, as the language stands today, would allow the SEC to craft specific terms for “managed stablecoins” and “digital assets.”

While the language of the bill may put some stablecoins at risk the SEC has already indirectly messaged that Libra may be regulated as a security. Although exact details of the makeup of Libra have not been released and may change, if the digital asset generates interest for the founding members, most likely it would fall under the regulatory portfolio of the SEC.


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Report: JP Morgan Chief Now Says Facebook’s Libra Will “Never Happen”

Jamie Dimon, CEO of JPMorgan Chase, has called Facebook’s go at issuing a cryptocurrency for in-app payments, Libra, “a neat idea that’ll never happen.”

Dimon made the comments last Friday while speaking on a panel with Morgan Stanley CEO James Gorman.

The two were featured at a conference hosted by the Institute of International Finance in Washington, Bloomberg reports.

Dimon also gave a nod to JP Morgan’s “stablecoin” product, JPM coin, and said Facebook is far from the first firm to venture into the field of stablecoin creation.

“Stablecoins” are a type of cryptographic digital coin meant to facilitate rapid interbank and cross-border transfers.

Though partly inspired by the rise of phenomena like Bitcoin, stablecoins are designed not to fluctuate in value and are typically pegged to a real-world currency such as USD.

Facebook says it plans to “back” all Libras in circulation by maintaining equivalent reserves in a basket of currencies and short-term bonds held by the company.

Facebook has vowed to push on with Libra despite an unprecedented critical outcry from global regulators regarding the financial stability and regulatory risks of the project.

Regulators have expressed concerns about the company’s poor civil track record when it comes to regulating nefarious activity on its platforms, including distribution of child pornography and proliferation of hate speech, including false claims that led to massacres in Myanmar.

Regulators are also concerned that rapid adoption of in-app payments among the platform’s 2.4 billion users could lead to a devaluation of small local currencies and could provide new channels for illicit finance on a scale never before seen.

The project took a few body blows last week when Mastercard, Visa, Stripe, and eBay all exited the Libra Association, a Geneva-based non-profit intended to oversee the project.

The payments companies backing Libra are all believed to have received stern letters from US lawmakers warning of close scrutiny of their businesses if they began facilitating payments to Libra before regulators’ concerns had been assuaged.

Dimon appears to believe Libra’s prospects have worsened since he made remarks about it back in July.

At that time, Dimon told analysts on a conference call not to “spend too much time” considering Libra and said he believed the project was still years away from being realized:

“To put it in perspective, we’ve been talking about blockchain for 7 years and very little has happened…We’re going to be talking about Libra three years from now…”