UPDATE: July 15, 2019: Facebook has said it will wait to launch Libra until it works with regulators and Congress to address concerns, according to prepared testimony released Monday by the Senate Banking Committee.
"I expect that this will be the broadest, most extensive, and most careful pre-launch oversight by regulators and central banks in FinTech's history," David Marcus said. “We know we need to take the time to get this right."
Maxine Waters, D-CA, the chairwoman of the House Financial Services Committee, sought such an assurance in a July 2 statement. She has since released draft legislation seeking to bar tech firms with more than $25 billion a year in revenue from establishing and operating alternative trading systems. The bill would also fine such companies $1 million a day for operating a banned financial service.
David Marcus, the head of Facebook's Calibra digital wallet, is set to testify in front of the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. Lawmakers in both major political parties have expressed concern such a currency wouldn't be adequately regulated, and that Facebook's 2.4 billion-person reach could create a data-privacy nightmare.
The cryptocurrency market will be following the proceedings closely — and valuations may vary widely. The price of a bitcoin fell below $10,000 today, a 23% drop in value over the past five days, according to Coindesk. Bitcoin's value tends to drop ahead of cryptocurrency-related hearings, past data shows. But if Marcus performs well at the hearing and Libra’s future looks bright, the crypto market is likely to surge.
Facebook once again faces scrutiny since CEO Mark Zuckerberg testified last year on the company's social responsibility in connection with the Cambridge Analytica scandal. Cambridge Analytica mined Facebook user data to influence voter opinion ahead of the 2016 election. Several campaigns for the 2020 presidential vote are already underway.
Marcus should expect questions regarding consumer protection, money laundering and financial stability, Federal Reserve Chair Jerome Powell told a congressional committee July 10. "These are concerns that should be thoroughly and publicly addressed," Powell said, adding that it is in regulators' best interests to take their time with Libra. Facebook had said it intends to launch the cryptocurrency in 2020.
Republicans and Democrats both expressed concern ahead of this week's testimony.
"Allowing big tech companies to take over the payment system or position themselves to influence monetary policy would be a huge mistake and is surely a threat to our democracy," Senate Banking Committee ranking member Sherrod Brown, D-Ohio, said during Powell’s appearance.
"Facebook Libra's 'virtual currency' will have little standing or dependability," President Donald Trump tweeted July 11. "If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, National and International."
The Fed has met with Facebook representatives and has set up a working group to focus on the unanswered questions. It is "coordinating" with colleagues in other regulatory agencies and other central banks around the world, Powell said. "We do support responsible innovation in the financial services industry as long as the associated risks are appropriately identified and managed," he said.
Facebook has stressed it won't exhibit sole control of Libra. That would fall on the independent Libra Association, a consortium of 28 companies and nonprofits that includes Visa, Uber, PayPal and Spotify.
And, for his part, Marcus responded to questions from the Senate Banking Committee in a letter last week, saying the company needs governments, central banks and regulators involved to properly launch the digital asset and Facebook "can't do this alone."
"We want, and need, governments, central banks, regulators, non-profits, and other stakeholders at the table and value all of the feedback we have received," Marcus wrote.