libra association

What are the 7 Key Takeaways from Facebook's Libra Hearings?

The debate on Facebook’s Libra continues with the hearing with the Senate Banking Committee (“Senate hearing”) on 16 July and the United States House Committee of Financial Services (“House hearing”) on 17 July. Here are the 7 key takeaways from the two hearings.

Libra is centralized

Regulators believed that the composition of the Libra Association has made Libra “highly centralized”. In the House hearing, New York Congresswoman Alexandria Ocasio-Cortez (AOC) questioned if the members of the Libra Association is democratically elected. David Marcus, the Head of Calibra said that the members are not elected but was governed by membership standards. When AOC realized the investment of $10 million as the criteria of founding members, she concluded Libra as “a currency controlled by an undemocratically-selected coalition of largely massive corporations.”

With regards to the eligibility of using Calibra and Libra, Marcus responded to Representative Sean Duffy’s question that anyone can use Calibra and Libra in jurisdictions where Facebook operates after they performed KYC procedures. However, when Marcus was asked by North Carolina Representative Alma Adams on whether any user can become a node on Libra blockchain, he denied and said that only large corporations with blockchain technology or finance backgrounds can become a member of the Libra association and a node on the Libra blockchain.

With the lack of decentralization, Representative Warren Davidson slammed Libra in the House hearing suggesting Libra falls in the same category as a run of the million sh*tcoins.

Can Facebook protect data privacy with its notorious track record?

In the Senate hearing, Ohio U.S. Sen. Sherrod Brown commenced with the poor history of Facebook in privacy protection, saying “Facebook has demonstrated scandal after scandal that it doesn’t deserve our trust.” Such skepticism continued in the House hearing, where committee chair Rep. Maxine Waters condemned Facebook with a “demonstrated pattern of failing to keep consumer data private on a scale similar to Equifax.” For example, Facebook purportedly influenced the 2016 U.S. Presidential elections by allowing malicious Russian state actors to purchase and target ads.

The discussion switched to data portability. Sen. Warner questioned if Facebook allows data portability in wallets.

“If a Facebook user wishes to use a wallet other than Calibra, will you make it easy to allow the export of other data?”

Marcus answered that Facebook will facilitate data export for wallets other than Calibra, and he hedged the same commitment for Whatsapp and Messenger. He added that the Calibra network will separate social and financial data and they will impose the highest privacy standard to earn people’s trust Sen. Warren expressed her concern on Facebook’s ability to monetize personal data among platforms. Senator McSally followed up on this and stressed that there are no grounds for committees to trust Facebook with “the track record of failing and violating and deceiving in the past”.

In the Senate hearing, Senator Robert Menendez asked if Facebook will inform users in 48 hours in cases of the data breach. Marcus replaced “48 hours” with “a reasonable length of time”.

Why Switzerland?

Both hearings questioned the registration venue for Libra Corporation. In the Senate hearing, committee chair Mike Crapo wondered why Libra Corporation is registered in Switzerland but not the U.S. Marcus replied that Libra Corporation will also register with U.S regulators in the future.

The committees are clearly not satisfied with what Marcus said in the Senate hearing. Representative Patrick McHenry raised similar concerns and Marcus explained that Switzerland is an “international place” to conduct businesses. He further addressed Representative Josh Gottheimer’s concern that the choice of Switzerland has nothing to do with evading U.S. regulations.

Several lawmakers also worried about the threat of Facebook’s Libra towards the dominance of USD. Marcus stated that the reserve is 50% backed by USD, with the Euro, the British Pound, and the Japanese Yen included as the collateral.

How about KYC and AML?

In the Senate hearing, Senator Cortez Mastro, former District Attorney of Nevada seek Marcus’s commitment to the compliance of AML and sanction laws. Marcus highlighted that they are working to comply with FinCEN regulation.

In the House hearing, Rep. David Scott explicitly expressed his concern on how Facebook Libra complies with KYC, AML and ensures the safety of the existing financial system. Marcus replied that they will launch AML guidelines to satisfy the needs of AML, KYC, and counter-terrorist financing. With regards to potential illegal activities on Libra blockchain, Marcus believed that this can be improved by system design and proper KYC controls to ensure on and off-ramps are properly regulated.

Can Facebook protect consumer’s funds on Libra?

Senator Tester questioned Libra’s ability to protect consumers against loss of funds or fraudulent purchases, along the line of credit cards or the FDIC.

While Marcus claimed they will try their best to resolve those issues as soon as possible, Tester stressed that proper solutions must be in place before Libra goes live.

Representative Carolyn Maloney asked Marcus if he would at least promise to conduct a pilot test before the full launch of Libra. She assumed the pilot test would involve less than 1 million users and overseen by the Federal Reserve and the Securities and Exchange Commission (SEC). Marcus did not provide a clear response and merely stated that they will work closely with regulators.

Is Libra public good?

AOC asked Marcus if Libra is a public good. Marcus claimed that “sovereign currency should remain sovereign” and said he is not in the position to decide whether Libra is a public good.

Praise for Bitcoin?

House minority leader Kevin McCarthy told CNBC that unlike Trump, he likes Bitcoin and the security of blockchain technology. He believed that lawmakers are skeptical about Facebook’s Libra because Libra is centralized, which can threaten the safety of the financial system. Lawmakers are not hostile towards cryptocurrency, he added.

Final words..

We believe there are some questions not properly answered in both the Senate and House hearings, such as the main reason for Facebook launching Libra. Going forward, the centralization of the Libra Association and the notorious history of privacy breach will be the main obstacles for Facebook Libra to go public.

Libra Association Appoints Steering Team to Oversee Its Cryptocurrency Network Development

The Libra Association has appointed a five-member technical steering team to oversee the ongoing development of the Libra project. Late last year, Libra made some important changes, including forming new firms and updating its mission to emphasize on payments instead of currency.

The five-member team

The steering committee’s role includes the coordination and oversight of the technical development and design of the Libra network.

According to the press release, Libra Association mentions that the formation of the team is part of the realization of the project’s mission to become “independent and self-governing of any single organization’s control.”

The five-committee members have been selected from the five of the twenty-one firms involved with the Libra Association.

Each member has a specific area of technical expertise. For example, Ric Shreves, Director of Emerging Technology at Mercy Corps, with a background in blockchain. Nick Grossman, Partner at Union Square Ventures, with a background in advising and leading startups, especially on regulatory, privacy, data, and security issues. Diego Monica, President, and Co-founder at Anchorage, with a background in blockchain. George Cabrera III is the Libra Core Product developer, with a 20-year background in software development. Lastly, Joe Lallouz, is the Bison Trails CEO and Founder, with a background in blockchain.

The technical expertise of the team, therefore, heavily focuses on blockchain technology. The roles of the committee include guiding the codebase development, creating working groups to fast-track research into specific issues, and directing the technical roadmap. The press release also mentioned that the committee will publish a technical governance framework within the first quarter of 2020. The framework will guide open-source developers regarding how they can propose changes on the Libra network. According to the project roadmap, the Libra network currently is in the pre-mainnet stage. A full mainnet launch is expected for later this year.

Corporate changes

Libra is making progress despite the regulatory backlash. Currently, the company’s new mission is “working with regulators, the private sector, multilateral organizations, and communities across the globe to create a more accessible, lower-cost payment tool built on the Libra blockchain, which will facilitate a more global payment system, offering financial and other services to individuals most in need of such services.”

The organization also set up two operating subsidiaries Libra Networks II and Libra Networks. The aim of the two subsidiaries is “provision of services in the fields of technology and finance including the production and development of software and related infrastructure, specifically with regards to big data, data analysis, funding, identity management, payment transactions, distributed databases (blockchain), investment activities, and other technologies.”

The three personalities managing both firms include BDO senior management executive Denis Bolvin, Libra Head of Business Development Kurt Hemecker (ex PayPal), and Libra Association COO and MD Bertrand Perez (also ex PayPal).

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Vodafone Follows PayPal and Visa to Leave Facebook's Libra Association

Facebook’s Libra faced another blow as Vodafone announced to have quitted the association.

British telecom conglomerate Vodafone is the eighth founding member to leave the Libra Association, which follows the exit of Stripe, Mastercard, Visa, eBay, Booking Holdings, Mercado Pago, and PayPal in 2019.

Vodafone’s exit is a different story

In June 2019, Facebook announced that it would launch the digital currency in partnership with other members of the association. However, the Libra project quickly faced hurdles imposed by skeptical regulators around the globe.

In October 2019, the Group of Seven (G7) warned cryptocurrencies like Libra can pose a risk to the global financial system, and they formed a task force to examine the issues. The past defecators (payment companies) left because of concerns regarding increased regulatory scrutiny that many US senators pointed out.

Vodafone’s exit is another story. The telecom giant mentioned it intends to focus on developing its own payment service, M-Pesa, further than the six African nations where it is currently available. The company said that it is not burning bridges as it is open for possible “future cooperation” with Facebook.

A Vodafone spokesperson said, “Vodafone Group has made the decision to withdraw from the Libra Association. We have mentioned from the beginning that Vodafone’s focus is to make a genuine contribution to extending financial inclusion. We remain completely committed to the goal and feel we can make the greatest contribution by focusing our efforts on M-Pesa (mobile payments platform).”

Dante Disparte, the head of communications and policy for the Libra Association, mentioned, “The representation of the association members may change over time, but the design model of Libra’s technology and governance ensures that the Libra global payment system would remain resilient.”

What’s next for Facebook Libra?

This is not a disaster for Facebook’s Libra Association. The Libra Association plans to add members later in 2020, with a current waiting list of more than 1,500 companies.

However, this is still not a resounding vote of confidence in Libra’s success. Vodafone thinks that Libra stands a better chance of doing it alone, and the association must work much harder to satisfy other partners to stay onboard as Libra prepares for its anticipated launch.

Initially, the members were expected to run nodes to assist in facilitating transactions on the Libra network and contributing about $10 million to get Libra going. Spotify, Lyft, Coinbase, and Uber, etc. are the initial founding members in the Libra association.

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Shopify Becomes Member of the Libra Association

Canadian multinational e-commerce company, Shopify, has joined the Libra Association. Shopify will be teaming up for the formation of a global payment network within the Libra Association.

The Facebook-led Libra Association has acknowledged that the Canadian e-commerce giant would be a significant partner in the actualization of the crucial economic participation necessary for Libra to become a reality.

Shopify stated that its move to join the Libra network is based on the firm’s desire to address the unsolved challenges facing cross-border payments. Shopify said: “As a partner of the Libra Association, we’ll work together to develop a payment network, which makes money easier to access and supports consumers and merchants everywhere.”

Shopify does not provide direct support for crypto payments. However, it enables its merchants to accept cryptocurrencies via payment methods through CoinPayments Beta, GoCoin, Coinbase Commerce, and Bitpay.

The firm said that its mission is focused on making commerce better for everyone, and to accomplish that, it devotes lots of time in determining how it can improve commerce in different parts of the world where banking services are not readily accessible to the general population. The company admitted that as online commerce continues growing, it is easy to forget that “the value exchange and payment of goods are not a solved problem.” It revealed that much of the financial infrastructure around the world was not built to handle the needs and scale of online commerce.

Shopify’s statement revealed that improving financial inclusion, “is the reason why we made a decision to become a partner of the Libra Association. This is the step we will be taking to be part and parcel of tackling this global problem.”

Since its launch, Libra cryptocurrency has attracted lots of criticism from policymakers and regulators worldwide. Seemingly due to the intense scrutiny, Libra Association so far has lost eight of its co-founding members, including Mastercard, eBay, Visa, Vodafone, Mercado Pago, Booking Holdings, PayPal, and Stripe, which were meant to be part of the Libra project.

Since the withdrawal of the eight founding members, Shopify is the first organization to join the association. The company is a multinational commerce platform with more than one million businesses in about 175 countries. It is, therefore, poised to bring a wealth of expertise and knowledge to the Libra project.

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Libra Faces Competition as Celo Foundation Hands Out First Grants Expanding the Use of its Platform

Libra has been facing some competition as the Celo Foundation has awarded its first grants of $700,000 in total to 13 projects that expand the use of its platform. The goal of the Celo Foundation Grants Program is to provide support for projects that are “committed to building a financial system that creates the conditions of prosperity for everyone.”

The foundation’s blog announcement stated that especially in the time of crisis during this coronavirus pandemic, it is important for everyone to have an opportunity to impact communities in need and provide them with the resources and relief they may need.

The grants went to three types of projects including those creating tools expanding access for the vulnerable and needy communities, those educating the Celo community, and strengthening the Celo platform.

The Celo Foundation also recently launched out an “Alliance for Prosperity” and has welcomed 50 members. The Foundation uses blockchain technology to create a decentralized and open-source platform to enable financial tools accessible to anyone with smartphones.

The Alliance for Prosperity includes the Andreessen Horowitz which funded Celo, Coinbase Ventures, Anchorage, Bison Trails–all of which are also members of the Libra Association. This may potentially create a conflict of interest in the long run regarding the choice they make in promoting their portfolio companies and the integration into their products.

The Celo network has differentiated itself from other blockchains as it has been able to enable payments with its Celo Dollar stablecoin which could be directly sent to a person’s phone number rather than an address.

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Libra Adds New Nonprofit Member Heifer International to Tackle World Hunger and Poverty After Enduring Months of Regulatory Scrutiny

The Libra Association has welcomed a new member, Heifer International, a nonprofit organization aimed to tackle world hunger and poverty. The addition of Heifer International brings the tally of members in the Libra Association to twenty-three.

Around 780 million people in the world live in extreme poverty and spend less than $1.90 per person per day. A third of children who live in low to middle-income countries suffer from chronic malnutrition, as the adults may not have access to nutritious food due to insufficient income levels, leading to a child death rate of 45 percent due to malnutrition, according to the World Health Organization, 2018.

Heifer International works with some of the world’s poorest farmers, providing them with access to new markets and sustainably increase production. The United Nations Food and Agriculture Organization estimates that less than 10 percent of these farmers can have access to credit. With around 1.7 billion adults in the world remain unbanked, and after surviving months of intense backlash by global regulators, Libra could take supporting financial inclusion to the next level.

Announced in a blog post, Heifer International CEO Pierre Ferrari indicated that the Libra project “has the potential to deliver a low-cost, more accessible and more connected global financial system.”

Last week, Facebook made an announcement regarding new updates to its whitepaper, to move away from its original plan of a permissionless digital currency, to a coin that would be subject to foreign exchange controls and regulations.

Libra has applied for a payment system license from the Swiss Financial Markets Supervisory Authority (FINMA), to be able to allow the Libra payments system to be used publicly. One of the major updates of the Libra whitepaper is that it explicitly mentions the limits of what users are able to do on the network, including balance and transaction limits, and the network would only be accessible to regulated crypto firms in the beginning.

Although Libra hopes to work with as many central banks as possible, for jurisdictions whose currency has not been added to Libra’s stablecoin backing will be unable to use it.

Libra Appoints New Chief Compliance Officer, Third C-Suite Executive Appointed with a Strong Compliance Track Record

The Libra Association appointed Sterling Daines as its new Chief Compliance Officer (CCO), who is currently the Managing Director and Global Head of Financial Crime Compliance at Credit Suisse.

He is expected to leave his position at Credit Suisse and join the Libra Association later this year. Prior to Credit Suisse, he was the Managing Director and Deputy Head of Financial Crime Compliance at Goldman Sachs and has worked as a consultant to the US Department of Justice and the Financial Crimes Enforcement Network (FinCEN).

“I am pleased to join the Libra Association as it works to transform the digital payment space to empower billions of people,” said Daines in a press release shared with Blockchain.News. “A critical element of achieving this mission is to ensure we are building a safe, compliant, and reliable platform for all users, which I look forward to significantly contributing to.”

Libra gets appointed first CEO, Stuart Levey

The Libra Association appointed its first CEO, Stuart Levey, the Chief Legal Officer at HSBC Holdings. Levey will be overseeing the Libra digital currency and payments system and holds a strong compliance track record and is expected to join Libra in the coming months. However, HSBC has not shown the same upright compliance record.

Levey is also expected to “combine technology innovation with robust compliance and regulatory framework.” The Facebook-led project has invited scrutiny from global regulators, with concerns over its threat to national sovereignty with its potential launch. Many of Libra’s original members, including Vodafone, PayPal, and Visa have also chosen to leave the association.

Three C-suite level executives have worked or consulted in the Department of Justice, coincidence?

Robert Werner, the General Counsel at the Libra Association was also appointed a month earlier. Regarding the addition of Sterling Daines to the team, he said, “I am thrilled that Mr.Daines will be joining the Libra Association as our Chief Compliance Officer. Mr. Daines is a world-class compliance leader and will bring critical expertise to the project.”

Werner has previously worked in the Justice Department’s Office as the Legal Counsel where he advised the Attorney General and White House Counsel.

Prior to joining HSBC, Libra’s appointed CEO Stuart Levey has served as the Principal Associate Deputy Attorney General at the US Department of Justice and has served as the Associate Deputy Attorney General.

Although Sterling Daines has not worked directly at the US Department of Justice, he has served as a consultant to institutions including the Justice Department and FinCEN.

Libra Association Appoints Former Homeland Security General Counsel to Head Its Legal Services

On 26th August 2020, Libra Association has announced the appointment of Stevan Bunnell to replace Robert Werner as the new general counsel.

The Libra Association has appointed Stevan Bunnell, the former general counsel for the US Homeland Security Department as its new top lawyer. Before this appointment, Bunnell co-chaired data privacy-focused legal firm O’Melveny & Myers since 2017.

Robert Werner Happy with His Departure

Bunnell’s appointment comes after Robert Werner, Libra’s former general counsel, stepped down from the position. As per the report, Werner made the decision to resign the position of general counsel as he realized that he was not fit for the role.

According to Werner, managing the general counsel position implied that he would have to let go of his spot on the board of directors for Deutsche Bank Trust Co. He did not want to give up his responsibilities of the bank’s director. He confirmed that Bunnell would take over his role at Libra. He praised Bunnell by saying that: “Steve is an outstanding lawyer and a great guy.”

Werner joined the Libra Association during May this year. However, the Association did not publicly announce his departure as the company opted to remove him from the list of executives of the firm earlier this month. Before working for such a short duration at Libra, Werner served as the director for the Financial Crimes Enforcement Network (FinCEN). Besides this, he also served as the senior counsel to The Under Secretary of The Treasury.

Facebook Dedicated to Transforming Fintech

Bunnell’s appointment comes just two weeks after Facebook launched a new product group that intends to disrupt the fintech industry. The newly rolled out product division called F2 (Facebook Financial) is dedicated to promoting commerce and payment opportunities. David Marcus, Libra co-creator, will be the head leading the management of the division while Stephen Kasriel, Upwork’s former CEO, will serve as the vice president under Marcus.

The division’s initial task would be introducing payments into WhatsApp within some selected emerging markets such as India and Brazil. The move comes after the suspension of Facebook’s WhatsApp payment by Brazil’s regulators. In July, Brazil’s lawmakers cited concerns that Facebook may be able to break up the monopolistic dominance over the nation’s payments sector.

Meanwhile, through all the memberships of Libra Association with some of the leading firms like Uber, Shopify, Spotify, Lyft, and others, Facebook is trying to build a crypto payments network.

Blockchain Capital Joins the Libra Association as Newest Governing Member

The Libra Association has announced Venture capital firm Blockchain Capital as its newest member.

Blockchain Capital is a San-Francisco-based investment firm with deep expertise and reach in the blockchain sector. The company was founded in 2013, and since then, it has become one of the leading venture capital firms in the cryptocurrency and blockchain space. The firm has invested in more than 80 industry companies, including Bison Trails, Kraken, Ripple, Coinbase, and Anchorage.

Blockchain Capital To Assist in Building More Integrated Payment System

According to the announcement, Blockchain Capital, together with the other 26 members of the governing Libra Association, will build a “more equitable payment system” for the Libra cryptocurrency project. Blockchain Capital will be the 27th member of the governing Libra Association, which was unveiled in June 2019 with the aim of recruiting 100 members to launch a global stablecoin.

The Association stated that Blockchain Capital would assist in advising the development of its global payment system.

Dante Disparte, Libra’s head of policy and communications, said that Blockchain Capital would also make its network of industry figures and experts available for the Association’s use.

Bart Stephens, managing partner and co-founder of Blockchain Capital, said:

“We’re honored to join the Libra Association and believe deeply in the mission of creating a more equitable payment system. Leveraging blockchain technology to improve financial access and promote innovation has been at the core of Blockchain Capital’s portfolio strategy.”

Blockchain Capital, the newest member, joins the Libra cryptocurrency project three months after the Association added venture firms Paradigm and Slow Ventures and Singapore-based investment firm Temasek as its members.

Libra Scales Back Ambitions for Global Cryptocurrency

In June 2019, Facebook launched the Libra project, with several global companies such as eBay, Visa, PayPal, Stripe, MasterCard, and many more became the founding members of the Association. However, regulators and central banks across the globe had fears, saying that Libra’s original plan for a single coin backed by government debt and various currencies could erode the power and control of national sovereignties over money if widely adopted by Facebook’s 2.7 billion users.

Many of its members left Libra after the Association began experiencing regulatory pressure globally.

In April this year, the Association radically overhauled the project and formally applied for a Swiss payment license in the hope of winning regulatory approval. Since then, the Association has focused on reinforcing its staffs with high-powered leadership skills and deep expertise in traditional finance and regulatory enforcement.

A few days ago, Libra Association picked the former CEO of HSBC Europe, James Emmet, as the managing director of Libra Networks LLC. In May this year, the Facebook-backed project also appointed Stuart Levey, the former chief legal officer at HSBC, as the CEO of Libra Association.

Libra Association Appoints Former HSBC Executive Ian Jenkins As CRO and CFO Of Payment Systems

Ian Jenkins, a former HSBC executive is joining Facebook’s Libra cryptocurrency and cross-border payments project as Chief Financial Officer.

Libra Association has announced that it has hired Ian Jenkins as chief risk officer and chief financial officer (CFO) of Libra Networks to oversee a unit tasked with managing the anticipated digital currency’s payment system.

Jenkins, most recently, served as Group General Manager and Head of Business Finance of HSBC, and also has worked at Credit Suisse global financial company and Santander multinational financial services company.

Jenkins said:

“I am excited to join the Libra Networks leadership team at a time when innovation in the financial sector has the potential to empower billions of people worldwide. The Libra project is poised to transform the industry and I am looking forward to being part of this team.”

James Emmett, managing director of Libra Networks, said:

“Ian’s deep expertise in global finance, risk and strategy will be crucial in bringing the Libra vision to life. I look forward to working with Ian as we move forward to a more operational phase of the project.”

Libra Association has appointed many senior executives since submitting its application for a Swiss payment license in April; several of them are specialized in financial compliance and have ties to U.S authorities and government.

In May, the Libra Association appointed HSBC’s former legal chief Stuart Levey, formerly a U.S Treasury official during the Bush and Obama administrations, as CEO of the association itself. In June, Libra project named Credit Suisse’s former head of financial crime compliance Sterling Daines as Chief Compliance Officer of Libra Association. Last month, the association hired former HSBC Europe CEO James Emmett as managing director of Libra Networks.

Libra Project Faces A New Global Opposition

Opposition still seems to continue mounting against the launch of Libra cryptocurrency. On Tuesday, October 13, a draft of the G7 statement announced that the financial leaders of the seven largest economies in the world would oppose the launch of the much-awaited, controversial Libra stablecoin.

In the draft, Central bankers and finance ministers of Italy, Japan, the United States, the United Kingdom, Germany, France, and Canada have said that there would be no launch of stablecoin such as Libra coin and others until proper regulations are put in place. While the G7 statement highlighted that digital payments could potentially remove high costs and inefficiencies and improve access to financial services, such payments services must be properly regulated. The draft said that regulation and supervision are essential to avoid undermining of consumer protection, cybersecurity, privacy, financial stability, and taxation.