Facebook says it will launch cryptocurrency after regulatory concerns 'cleared up'

Facebook says it will launch cryptocurrency after regulatory concerns 'cleared up'
© The Hill photo illustration

The head of Facebook's cryptocurrency project is expected to tell Congress this week that the company will launch its digital coin after related regulatory concerns are "cleared up."

David Marcus, in advance testimony released Monday, said the launch of Facebook's digital coin known as Libra would be preceded by the "broadest, most extensive and most careful pre-launch oversight by regulators and central banks in [financial technology's] history."

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Marcus made the remarks in his written testimony posted to the Senate Banking Committee's website ahead of Tuesday's hearing, when he is set to testify about Facebook's cryptocurrency and data privacy plans.

Facebook has said Libra will be launched by next year. But its announcement last month spurred a backlash, particularly on Capitol Hill, and has financial regulators raising their eyebrows.

Federal Reserve Chairman Jerome Powell last week said Facebook’s proposed cryptocurrency project poses “serious concerns," warning the company against a “sprint toward implementation.”

Libra would allow users to send and receive money by exchanging a proprietary cryptocurrency backed by dozens of major corporations, including Facebook, Uber and Mastercard.

While Libra will be controlled by a Swiss nonprofit separate from Facebook, the company will operate a virtual wallet called Calibra that is operated by a Facebook subsidiary. The Calibra wallet will be one of multiple digital wallets that will be on the Libra blockchain.

Marcus, in his prepared remarks, emphasized that Facebook will not have total control over the project.

"Overseeing the Libra Blockchain and the Libra Reserve will be a significant undertaking and responsibility," Marcus wrote. "No single organization can, or should, be solely responsible for it. We believe a cooperative approach is both warranted and necessary."

Some lawmakers have already raised concerns that Libra could suffer from the same issue as other forms of digital currency — many have pointed out that cryptocurrency is commonly used in financing terrorism and in money laundering.

According to Marcus, the Libra Association, which is set to be overseen by Swiss financial regulators, is committed to dedicating "considerable technical expertise" to combating illegal uses of its cryptocurrency.

Marcus also said the Libra Association plans to register with the Treasury Department's Financial Crimes Enforcement Network as a money services business.

"We recognize the authority of financial regulators and support their oversight of this project," Marcus wrote.

The testimony previews some of what Marcus is likely to say as he faces a grilling by House and Senate lawmakers this week. A group of House Democrats has already called for Facebook to halt its Libra plans until the regulatory concerns can be worked out, and Powell said the Federal Reserve has launched a working group to assess the potential regulatory concerns around Libra.

Updated at 6:12 PM