Libra Marches on Following the Association’s First Member Meeting

The Libra Association – a consortium of companies who governs over Facebook’s proposed stablecoin Libra – held its first meeting on Monday in Geneva, Switzerland.

Following the meeting in Geneva, the twenty-one organizations formally signed the Libra Association charter as well as named its board of directors and formalized the consortium’s executive team.

As such, the five-member board is comprised of Calibra cofounder David Marcus, Andreessen Horowitz general partner Katie Haun, Xapo CEO Wences Cesares, PayU general counsel Patrick Ellis, and Kiva chief strategy officer Matthew Davie. PayPal veterans Bertrand Perez, Dante Disaprte, and Kurt Hemecker will comprise the Association’s executive team.

Most major decisions will require a majority vote of the ruling council, whilst proposed changes to membership or management of the reserve must pass by a two-thirds majority.

In addition to Calibra, the association consists of Coinbase, Xapo, Anchorage, Bison Trails, Creative Destruction Lab, Andreessen Horowitz, Thrive Capital, Ribbit Capital, Union Square Ventures, Breakthrough Initiatives, Illiad, Vodafone, Farfetch, Uber, Lyft, Kiva, Mercy Corps, Women’s World Banking, Spotify and PayU, according to a press release.

The news follows a string of significant departures of major companies such as Visa, PayPal, MasterCard, Stripe, eBay and Booking from the Facebook-led stablecoin project. Most announced their withdrawals from Libra citing concerns over the regulatory backlash faced by the project.

Still, according to the Libra Association more than 1,500 institutions have expressed interest in joining the project, with 180 meeting the organization’s membership criteria. In June, Facebook claimed a consortium of 100 companies would back the cryptocurrency project at launch.

However, the association shared no updates regarding those plans nor the exact launch date. Although Facebook initially targeted an early 2020 launch date, recent statements by CEO Zuckerberg have put this timeline into doubt.

Meanwhile, financial regulators around the globe have expressed their opposition to the project, citing fears that Libra could destabilize the global monetary order. Ministers in France and Germany stated they were against Libra and India announced that Libra may not even be legal in the country. Most recently, U.S. Rep. Maxine Waters (D-Calif.) called for a moratorium on the project until all regulatory questions could be cleared.

However, Calibra’s Marcus has claimed that these fears are misplaced. He recently testified before the U.S. Congress, trying to dispel the concerns of both the Senate Banking Committee and the House Financial Services Committee.  Mark Zuckerberg is also slated to testify about the project before the House of Representatives Financial Services Committee.

Despite regulatory backlash, the Libra Association remains optimistic about going forth with the project. Dante Disparte, the head of policy and communications at Libra Association, stated that the recent flight of major backers is “a correction; it’s not a setback.” Nonetheless, he admitted that any delay to the launch will be a result of its regulatory issues, rather than technical concerns.

Facebook Hires Lobbying Firm to Support the Libra Launch

Social media giant Facebook has hired a Washington-based lobbying firm in an attempt to influence U.S. lawmakers over its Libra cryptocurrency project, according to a report from O’Dwyer PR.

Citing lobbying registration documents filed with Congress, the report revealed that FS Vector will now support the social media giant on issues related to blockchain policy.

Founded last year, Washington-based FS Vector is an advisory firm that specializes in regulatory compliance, public policy, as well as business strategy for the fintech, cryptocurrency, blockchain and financial services sectors.

According to the report, FS Vector partner John Collins will lead the Facebook account. Prior to this job, he served as former vice president of international policy at the American Bankers Association’s international subsidiary, the Bankers Association for Finance and Trade. He also worked as Senior Professional Staff for the U.S. Senate Committee on Homeland Security and Governmental Affairs and led Congress’ first work into digital currencies in 2013.

FS Vector joins a number of other lobbying companies, which include the Sternhell Group, the Cypress Group, Davis Polk, Baker Hostetler and the OB-C Group. Facebook has also recently hired UK Standard Chartered lobbyist Ed Bowles as its London-based director of public policy.

Earlier this month, the social media behemoth also hired Susan Zook of Mason Street Consulting, a former aide to Senator Mike Crapo (R-Idaho), the chairman of the Senate Banking Committee – to lobby for Libra.

The news follows as Facebook is getting pressure from U.S. lawmakers over its planned global cryptocurrency project. Primarily, lawmakers are concerned over user privacy and trust, especially since the company has been previously found violating user’s privacy.

Facebook formally disclosed the details of the Libra initiative in June, which could potentially bring the world’s “unbanked” billions into the digital economy by allowing anyone to safely buy, sell or send money to others via Facebook. The proposed digital currency, which has yet to meet regulatory approvals, is set to launch sometime next year.

Meanwhile, Facebook‘s recent visit to Switzerland’s financial authorities has received even more scrutiny from U.S regulators, such as the firm has notably chosen to register the Libra Association in Switzerland.

At a hearing before United States House representatives in mid-July, chief of Facebook’s Calibra wallet service David Marcus had claimed that the choice had “nothing to do with evading regulations or oversight,” arguing instead that the jurisdiction is an international hub conducive to doing business.

Also in July, U.S. lawmakers drafted a bill – “Keep Big Tech Out Of Finance Act” – which aims to prohibit large platform utilities from being a financial institution or being affiliated with a person that is a financial institution, and for other purposes.

Facebook’s Reputation Proves to Be a Roadblock for Libra

The focus of the hearing between Facebook’s David Marcus and the Senate on the Libra cryptocurrency was trust—or the lack thereof.

David Marcus, the head of the blockchain division at Facebook, testified before the Senate Committee on Banking, Housing, and Urban Affairs to clarify issues around Libra, the cryptocurrency Facebook revealed last month.

Libra Under Fire

Marcus’ testimony was arranged after Libra attracted national scrutiny from several divisions of the United States government. The Federal Reserve Chairman, Jerome Powell, stated that Facebook should halt development until major concerns around privacy and money laundering are addressed.

The committee has been unrelenting in criticizing Facebook for its previous scandals. Incidents such as the Russian election meddling and Cambridge Analytica dominated the hearing. Making matters worse, this week the FTC approved a $5 billion fine on Facebook for mishandling users’ data. Senators have clearly stated that Facebook is hard to trust right now.

“I don’t trust Facebook, and it’s because of the repeated violations of user privacy and repeated deceit, and I am not alone,” stressed Arizona Republican Martha McSally. “The core issue here is trust.”

Marcus tried to address the claims, noting that Facebook is not the sole member of the so-called Libra Association backing the cryptocurrency and that other members — including the likes of PayPal and Visa — would minimize the company’s influence over the network.

“Facebook is just one vote among many,” he told the Committee.

Facebook Has Trust Issues

The Senators were not convinced. Facebook’s market power, vast resources, 2 billion user base, and founding role in Libra would make it trivial for the company to heavily influence the payment system.

Unlike other hearings, those on the Committee appeared relatively knowledgeable about the potential of distributed ledger technology. Senator Thom Tillis, a Florida Republican, added to the positive sentiment towards crypto, saying the United States should take a leading role in setting cryptocurrency regulation.

However, there is still uncertainty around the securities classifications, tax treatment, and legal status of cryptocurrencies in the United States. This allows other jurisdictions such as Malta and Switzerland to be at the forefront of the cryptocurrency industry.

Nevertheless, the Senate Committee was more concerned about the trustworthiness of Facebook over the threat that Bitcoin, or any other payment network, poses to the U.S. financial system.

As Senator Brown effectively summarized:

“Why with all of your problems should we trust [Facebook] with something as important as a worldwide currency and the damage that can come from it.”

Facebook Unveils Its Cryptocurrency – Libra

After months of anticipation, Facebook has unveiled its cryptocurrency – Libra. The social media giant has released the white paper for the cryptocurrency and blockchain-based financial infrastructure project.

Multi-Asset Stablecoin

The aim of Libra is to provide users across the globe with easy access to financial infrastructure with seamless transactions with low fees. According to the paper, Libra will operate on the native and scalable Libra blockchain, and be backed by a reserve of assets designed to mitigate volatility fluctuations.

Reserves, which back Libra, will consist of a collection of low-volatility assets like bank deposits and government securities in currencies like USD, GBP, EUR, and JPY. Libra is not pegged to a single currency and does not have a fixed value in any fiat currency.

Libra will also issue a security token called Libra Investment Token as a way to fund incentive programs and cover operating costs. They will be only available to accredited investors as securities. Holders can earn potential profits from interest on the reserves.

Governed via Libra Association

While the reserve assets are held by a geographically distributed network of custodians in order to maintain a degree of decentralization, the reserve is managed by the Libra Association, which is the only party able to mint and destroy the coin.

Libra’s governing body, the Libra Association, is a non-profit based in Geneva, which will eventually have 100 geographically diverse founding members. The current founding members include Uber, PayPal, Visa and investment house Andreessen Horowitz (a16z).

Among the payments giants, a number of NGOs are involved in the Libra Association, including Creative Destruction Lab, Kiva, Mercy Corps and Women’s World Banking. To become a Social Impact Partner, participating non-profits must have a five-year track record of poverty alleviation work, including digital financial inclusion initiatives in the field and an operating budget of greater than $50 million.

Calibra – The Wallet

Besides Libra, the currency and network, Facebook has also unveiled Calibra – the digital wallet for the network. As part of its services, Calibra intends to follow various anti-money-laundering and know-your-customer regulations in the jurisdictions in which it conducts business.

Calibra registered as a money service business with the U.S. Department of Treasury and is now working to acquire money transmitter licenses in U.S. states that treat digital currencies as the equivalent of money.

Libra cryptocurrency and the underlying blockchain network are set to launch next year. The testnet will be released in the coming weeks. The developers will be able to build, provide feedback, and take part in a bug bounty program.

Facebook’s Stablecoin is Part of A Larger Network Payments Project

Facebook’s rumored stablecoin will be at the center of a new payments network, according to a report by The Wall Street Journal.

Project Libra, as the blockchain initiative is called within the company, will reportedly involve a stablecoin backed by fiat currency. Citing people familiar with the plans, the publication revealed Facebook was currently talking to major payment networks Visa and MasterCard about potential support.

Along with Visa and Mastercard, Facebook has also reportedly talked with financial services firm First Data Corp. Facebook wants to raise up to $1 billion in funds from these firms in order to act as collateral to back the stablecoin that will be used within the payments network.

The social media giant is also in discussions with e-commerce companies, looking to raise funds and to gather acceptance for the planned stablecoin, according to the report. The company is considering connecting the coin to Facebook’s ads engine, rewarding users for viewing ads and then purchasing goods, similar to how loyalty points rewards work.

Moreover, Facebook aims to eliminate the card processing fees, generally around 2–3 percent, paid by merchants on every transaction to banks and payments processors.

Previously, reports indicated the social media platform may first deploy the payment solution in the Indian market to let users transfer money via the fiat-pegged cryptocurrency on WhatsApp, the messaging app Facebook acquired in 2014.

Barclays analyst Ross Sandler recently estimated that Facebook’s cryptocurrency project could generate anywhere from $3 billion to $19 billion in additional revenue by 2021.

Facebook had initially set up its blockchain division in 2018, allegedly to explore the technology. Since then, the company has been expanding its team with new high profile hires. Currently, it has around 22 open positions related to blockchain, including legal experts, data engineers, marketing managers and more.