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Altcoin News: The Main Theses of the Libra Cryptocurrency Hearing in the US Senate

July 17, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

Facebook will only integrate its own Calibra cryptocurrency wallet into Messenger and Whatsapp applications and will refuse similar third-party initiatives. This was announced by Calibra head David Markus during today’s hearing of the US Senate Committee on Banking, Housing and Urban Affairs write TechCrunch.

Libra will be compatible with other wallets, thanks to which users will be able to transfer their funds between them and, if desired, switch completely to a competitor’s solution. At the same time, restricting integration into Facebook’s own products can give the company a tangible advantage over banks, PayPal, Coinbase and any other potential wallet developers.

Other theses voiced by Markus during today’s hearing:

  • The U.S. should “absolutely” lead the world in rule-making for cryptocurrencies
  • The Libra Association chose to be headquartered in Switzerland “not to evade any responsibilities of oversight” but since it’s where international financial groups like the Bank for International Settlements, though Calibra will be regulated by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network
  • “Yes,” Libra will comply with all U.S. regulations and not launch until the U.S. lawmakers’ concerns have been answered
  • “You will not have to trust Facebook” because it’s only one of 28 current and potentially 100 or more Libra Association members and it won’t have special privileges
  • “Yes I would” accept compensation from Facebook in the form of Libra as a show of trust in the currency
  • It is “not the intention at all” for Calibra to sell or directly monetize user data directly, though if it offered additional financial services in partnership with other financial organizations it would ask consent to use their data specifically for those purposes
  • Facebook’s core revenue model around Libra is that more online commerce will lead businesses to spend more on Facebook ads
  • When repeatedly asked why Facebook is pushing Libra to happen, Marcus noted that blockchain technology is inevitable and if the U.S. doesn’t lead in building and regulating it, the tech will come from places “out of reach of our national security apparatus,” raising the spectre of China

At the same time, Marcus did not give a direct answer to the question of whether Facebook will collect data on Calibra transactions, for example, when a user purchases goods from third-party companies that they can find through a social network. Marcus only noted that Facebook will allow users to pay for goods with credit cards and other tools along with Calibra. Thus, even if Facebook does not know how much cryptocurrency the user stores in his wallet, the company can still get information about the amount paid and the purpose of the transaction.

Answering the question about how much Facebook spent on creating Libra, Marcus said that his company did not make such assessments. He also did not explain to one of the senators why the Libra Association is called a non-profit organization if it is going to pay a percentage to its members.

In addition, Marcus could not fully clarify how Facebook will resist fraud with Libra if the company is not going to actively exclude questionable developers from the process, which could potentially lead to a repetition of the situation with Cambridge Analytica, only this time the attackers will steal users’ money, not their data.

The head of the project said that US residents are likely to be provided with American versions of Libra wallets, which will implement the necessary protection mechanisms. Libra also intends to educate users on how to avoid fraud. At the same time, Senator Kirsten Cinema stressed that low-income users, to whom Libra will be oriented, as a rule, do not have sufficient knowledge and will be especially vulnerable to the actions of intruders.

Senator Robert Menendez asked whether the Libra Association would block assets if it turned out that they were linked to terrorists. Marcus replied that Calibra and other custodial wallets storing user assets on their side could do this, and regulated channels could prevent Libra from being converted to Fiat. This answer, however, does not exclude the possibility that the Libra Association will not be able to stop transfers of terrorist organizations between non-case wallets, especially if the authorities of the countries where such organizations operate refuse to intervene.

Overall, the hearing turned out to be surprisingly orderly, notes TechCrunch. Many senators demonstrated deep knowledge of the principles of Libra functioning and asked the right questions. Marcus was ready to give answers to most of them, with the exception of Facebook’s investment in Libra and the protection of user data when carrying out transactions outside the social network services. A number of key concerns, such as money laundering and the financing of terrorism, related to all technology and cannot be resolved even with the strict rules of Libra.

Author: Marko Vidrih

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