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tv   Bloomberg Markets Americas  Bloomberg  July 16, 2019 10:00am-11:01am EDT

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,onnie: 10:00 a.m. in new york i'm vonnie quinn. welcome to "bloomberg markets," we have more economic data coming out. housing data. national association of homebuilders housing market index coming in at 65, one better than 64. better data according to the national association. business inventories coming in on the mark at 0.3%, just down from last month, 0.5%. june industrial production and retail sales. markets in general, another big day for bank earnings. not much movement in the s&p, above the 3000 mark. a few drags on it.
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banks mixed. carmax, the worst performer. 2.13%, crude up to oil below $65 a barrel. trucking index, s&p, best performer today, more than 8% up. that is relieving investors. european markets now. a better day in europe. the dax up a quarter of 1%, cac upup 6/10 of 1%, ftse 100 for tenths of 1% -- 4/10 of 1%. questions about
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barbary moving over. first quarter doing well in china. that stock is up 13%. thank earnings season, j.p. banks, wells fargo, -- reported earnings this morning. let's bring in our investment banking reporter. it seems pressure on margins not affecting banks much. reporter: it is affecting them in that wells fargo revised projections downward and the lowest net income in three years. there's will come down contingent on how many rate hikes there are. jamie dimon is saying it is like wind blowing. investors are following the news well. vonnie: what are we seeing in terms of indications for u.s. consumer? reporter: so far so good. jp morgan's long growth
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swelling, close to 7% last year. jamie dimon in particular was bullish on u.s. consumer. goldman sachs pouring in. still optimism. citigroup yesterday with shining results. vonnie: thank you. we will be back with you. we want to get to washington dc. facebook's foray into crypto hotly debated, before the social network even launches libra. david marcus spearheading the move, appearing before the senate banking committee today on capitol hill, that hearing just beginning, let's take you there now. >> -- in consumer protection. it must address issues ranging from anti-money laundering the data protection to operational resilience. concerns include but are in no way limited to how the payment system will work, how it will be managed and how libra, the libra
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association and facebook will interact. what consumer protections will apply? potential implications for consumers with respect to loss from fraud or project failure? how individuals will be protected and how privacy will be preserved? how the libra ecosystem interacts with the bank secrecy act and other existing anti-money laundering regulation and ways libra could threaten financial stability and the steps that could be taken preemptively to mitigate risk? despite uncertainties, facebook's stated goals for the system are commendable. according to the world bank, 1.7 billion adults remain unbanked. 2/3 of them on a mobile phone or have access to internet. if done right, facebook's efforts to leverage existing and evolving technology and make
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innovative improvements to traditional and nontraditional payment systems could deliver material benefits, such as expanding access to financial systems for the under banked and providing cheaper and faster payments. based on aa is relatively new and continuing evolving technology in which it is not entirely year how existing -- clear how existing laws and regulations apply. i am interested in the implications for protection and privacy of individuals data. facebook has massive reach and influence within society with over 2 billion active monthly users and access to vast amounts of personal info, including that which is received directly from users and information that can be derived from their behavior, both on and off facebook. expand thisnly reach by increasing commerce on facebook platforms.
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this raises several questions. the banking committee has held hearings on data privacy including, as it pertains to european union general data regulation production and the fair credit reporting act. given the significant amount of user info held by the largest social media platforms and the prospect of gaining even more financial info, congress needs to give individuals real control over the data. europe has already done this by imposing obligations on companies and establishing rights for individuals with respect to data. we need to establish similar obligations for data collectors, brokers and users and implement enforcement systems to ensure collection process is not abused and data is adequately protected. individuals are the rightful owners of their data. they should be granted privacy
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rights and the ability to protect rights through informed consent, including full disclosure of data being gathered and how it is being used. regulations should be clear and understandable for both collectors and consumers and should not punish those who opt out of collection practices. individual should also have ability to review data, correct inaccuracies and have ample opportunity to opt out of it being shared or sold for marketing and other purposes. chairman powell also said last week the privacy rules we apply to banks, we have no authority to apply to facebook or libra. he added we may even need to create a new regulator to address such issues. as we determine the next steps, what is clear is the importance that financial innovation happens here in america. in this way, libra announcement has heightened the need for policymakers and regulators to
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establish clear rules of the road. during this hearing, i look forward to hearing more about the project, steps facebook plans to take and has taken with regulators to ensure compliance with all laws and regulations and how it intends to ensure individuals privacy is maintained and information is protected. senator brown. chairman.ou, mr. facebook is dangerous. now, facebook may not intend to be dangerous but surely they do not respect the power of the technologies they are playing with like a toddler who has gotten his hands on a book of matches, facebook has burned down the house over and over and called every arson a learning experience. facebook has competing missions. make the world more open and connected. make a lot of money. facebook attempts to serve both missions, they wreak havoc on
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the rest of us. look at their version of disrupting the newspaper industry. facebook has made it industry to -- has made it easier to share what you are reading with friends, and they have redirected most media profits away from journalists and into its own coffers without the benefit of re-creating a local news desk, without conducting hard-nosed journalism that keeps politicians and businesses honest and without meeting even the most basic journalistic standards. this kind of creative disruption that does not actually create anything is just disruption. look at the impact the profit motive has had. facebook and other tech theanies will tell you internet holds up a mirror to society and reflects what we already are. that is not true. to be profitable, they have the algorithm to hold up a magnifying glass to society, rather than a mere, kind of like
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alearned in boy scouts to use magnifying glass to burn a hole in a piece of wood. pushing the most controversial opinions to the top of the newsfeeds, usually those are posted to play on fear and worst impulses but they may not be based on any sort of fact. facebook does all it can to manipulate billions of users so and turn act ads bigger profit. this is no exaggeration. facebook tested whether it could manipulate our emotions. the corporation ran a psychological experiment, more than half a million users, to see if it could manipulate our moods. turns out, it can. that emotional manipulation has led to horrifying results. i do not have to tell you what amplifying our divisions has done to discourse in our country, not just between political parties. i bet half the people in this room at least had to block an
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old high school classmate or family member on facebook. look around the world. more troubling. u.n. report details how facebook was used to spread propaganda in myanmar that led to genocide. the first month of violence, more than 600 members of the rowing a were killed, more than 7000 refugees had to flee the country. i don't think for a minute facebook created hate. we know that they have competing missions of connecting people and turning a profit created an algorithm and business model that intensified it. it is hard to remember a world without facebook, a time before we had to tell our kids, be careful what you do on the internet because it will not go away. today we expect everyone to know that what happens online has consequences off-line. it is common sense. that is why it is so hard for us to understand why facebook, the company that ushered in the revolution, does not seem to
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comprehend its actions have real-world consequences. they don't seem to understand why their intention to run their own currency out of the swiss bank account, the topic of today's hearings, has been met with such fears opposition -- fierce opposition. mark zuckerberg said facebook may be more like a government than it is a company. no one elected mark zuckerberg. what kind of dystopian government wants to turn families and friends against each other rather than bring people together? maybe i should not answer that. facebook has demonstrated through scandal after scandal it does not deserve our trust. it should be treated like a profit-seeking corporation it is, just like any other company. mr. zuckerberg and executives have proven over and over they do not understand governing or accountability. they are not running a government. for-profitnning a laboratory.
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no facebook executives have been harmed by the facebook experiment. look what has happened everywhere facebook has run social experiments on us. the motto is, move fast and break things. they have. they moved fast and broke political discourse, journalism, helped incite genocide, helping to undermine our democracy. facebook asks people to trust them with their hard-earned paychecks. it takes a breathtaking amount of arrogance to look at that track record and think, you know what we really ought to do next? let's run our own bank and our own for-profit version of the federal reserve, and let's do it for the whole world. i understand given the financial crisis and given the massive inequity and unfairness to workers in our country and given the fact that so many in this body have forgotten what happened 10 years ago, it is
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tempting to think anyone could do a better job than the wall street megabanks. the last thing we need is to concentrate even more power in huge corporations. look at facebook's record. we would be crazy to give them a chance to experiment with people's bank accounts, to use powerful tools they do not understand, like monetary policy, to jeopardize hard-working americans ability to provide for families. this is a recipe for more corporate power over markets and consumers and fewer and fewer protections from constituents. >> thank you, senator brown. we will now proceed with your testimony, mr. marcus. you may proceed. >> thank you, chairman. chairman, ranking member brown and members of the committee, thank you for the opportunity to appear before you today. my name is david marcus. life i have been an entrepreneur, building products aiming at improving people's lives. for many years, my focus has
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been financial services. i became paypal's president after it acquired my start up and i moved to facebook five years ago to run messenger and more recently to lead blockchain efforts. in my written testimony i describe the mechanics of libra. today i want to explain why i am optimistic about what libra can offer the world. before i get there, i want to make clear, we recognize we are only at the beginning of this journey. federal reserve chairman powell has said publicly that the process for launching libra needs to be patient and thorough rather than a sprint to implementation. secretary mnuchin reinforced those views yesterday. we strongly agree with both of them. we will take the time to get this right. we expect the review of libra to be the most expensive ever. we are fully committed to working with regulators here and around the world and let me be clear and unambiguous, facebook will not offer the libra digital
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currency until we have fully addressed regulators concerns and received appropriate approvals. i would like to start by sharing the vision for libra. it is intended to address an important problem. imagine a daughter who wants to send money home to her mom in another country. $14 on$200 she sends, average will be lost because of fees. they can take several days or weeks for the mother to receive the money, a delay that can prove disastrous in emergency. not to mention, lines may be long and collection points may be in high crime areas. it does not have to be that way. wouldn't it be easier and safer if people could securely and inexpensively receive money transfers through their smartphones just like they do for so many other things today? that is what libra is about, developing a safe, secure and low cost way for people to efficiently move money around the world. to realize libra's promise, facebook and 27 other organizations have founded the
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independent libra association, these include companies and payments, technology, telecommunications, blockchain, as well as nonprofits, like women's world banking, who are here today along with staff from the libra association. the libra association will cover the blockchain network and administer the libra reserve. they will establish the rules of the road and will prioritize privacy and consumer protection. it will implement safeguards that require service providers in the libra network to fight money laundering, terrorism financing and other financial crimes. we expect safeguards will at least meet if not exceed existing standards and improve integrity of the global financial system. when fully formed, we expect the libra association to include 100 verse members, facebook will only have one vote and will not be in a position to control the association. thewill facebook or association position themselves
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to compete with sovereign currencies or interfere with monetary policy. in fact, the libra association will work with the fed and other central banks to minimize the risk of any competition with currencies or interference with monetary policies. these areas are properly the province of central banks. finally, i would like to turn to facebook's role in establishing and realizing the potential of libra. to facilitate the use, facebook has established a subsidiary that will offer one of many digital wallets on the network. using the wallet, consumers will be able to save, spend and send libra from their smartphone. if this is successful, facebook will benefit from more commerce across the family of apps. it will be affordable, accessible and safe secure with strong safeguards to protect accounts and info. we expect the wallet will be governed by rules administered or enforced by oh fact and the
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fcc. it will be regulated by state financial regulars. it is committed to protecting the privacy of customers, the wallet will not share individual customer data with the libra association or with facebook, except for limited circumstances such as preventing fraud or criminal activity and complying with the law. i'm excited about the potential libra holds and i'm proud to have initiated the effort in the u.s. i believe if america does not lead innovation in digital currency, others will. if our country fails to act, we could soon see a digital currency controlled by others whose values are dramatically different from ours. i believe libra can drive positive change for many people and can provide an opportunity for leadership, consistent with our shared values. i look forward to answering your questions, mr. chapman. >> thank you very much, mr. marcus. i will start out with the
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question. you anticipated it. jurisdiction,, frankly, and the regulatory rules of the road. it seems to me digital technology innovations like this may be inevitable and could be beneficial. i also believe the u.s. should lead in developing what the rules of the road should be. you have indicated your awareness of secretary mnuchin's remarks yesterday, the statement that chairman powell gave in response to this committee when he was before us a week ago, and other concerns that have been raised by federal regulators. by setting up libra in geneva, switzerland, it makes me wonder whether the rules of the road and supervisory oversight will be focused more on the swiss financial market supervisory authority.
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however, in your testimony you stated that facebook will not offer libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals. do you agree with me that the united states should lead in the oversight of digital currency initiatives? >> thank you for your question. yes, absolutely. i agree the u.s. should lead. i want to reaffirm that we chose switzerland, not to evade responsibility for oversight but rather because it is a well-established international place with headquarters for who, factbis, and despite the that libra association will be headquartered in switzerland, it will register and will have oversight from u.s. regulators.
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i completely agree with you, chairman, the u.s. should lead. >> i appreciate that. you see thatcated in the u.s., you will need to fac and state regulators. of. approaches regulation in a multiplecy way, with different regulators over pieces of economic and social activity. europe does this differently through gdpr, where it is a broad-based rule across sectors. if you look at the financial world, we have the treasury, the cfpb,he sec, the occ, the the ncua, the cftc, the fha. my question is, have you
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analyzed and determined in our sectoral approach to regulation, which of these regulators would have a piece of creating the rules of the road, if the u.s. stays on this sectoral approach? >> chairman, this is not for me to say. all i can say today is we are committed to working until we satisfy all concerns and regulatory records, and meet the regulatory bar before we proceed. in u.s., there are a number of regulators we are engaged with and we are engaged with the g7 working group including the finance ministries and central banks looking into libra. we are working collaboratively with them as well. >> thank you. understand, you cannot tell us which agencies are going to take a claim to
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some piece of what is happening with the establishment of libra. you have committed you will comply with regulatory requirements of all u.s. regulators? >> yes, sir. >> let me go quickly to one more question. i have a lot of them. i will have to submit some to you after the hearing. you recently told the banking committee, facebook collects data from transactions occurring on platform and use it for advertising civilization. please describe the personal data collection from on platform transactions? will this type of info they collected for on platform collections that use the libra wallet? when a user buys a product on facebook through libra, will facebook allow other digital wallets to be used within the family of products? explain how that will work. chairman, one thing is important.
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i want to state this very clearly. the wallet compete with other wallets that will operate on top of the libra network. the libra network will be interoperable. while it's can send money -- wallets can send money, one to the other which is not possible with the current system. to earn trust, we will have to have the highest standards when it comes to privacy. the way we built libra is, no financial data or account data collected to offer service will be shared with facebook. the way we have built this is to separate social and financial data. we have heard loud and clear from people they do not want those types of data streams connected. this is the way the system is designed. for transactions that would happen on any family of apps,
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the same way an emergency completing a transaction -- any merchants completing a transaction, we will offer the option to pay with credit cards, debit cards, other wallets as well as with the libra wallet. >> thank you, senator brown. chairman.ou, mr. i would point out, you are the only one with the reach of 2 billion people. facebook has a long track record of abusing users trust. you know that, mr. marcus. until recently, you headed the messaging team, allowing other companies like netflix and spotify and the royal bank of canada access to read facebook users private messages. be clear about what went on with facebook. they told us they were keeping our data safe when they were allowing other companies to sift
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through private messages. you had to shut down those programs after huge backlash. over and over, facebook has said, just trust us. every time americans trust you, they get burned. facebook told the fec in 2012, it would stop abusing data and fineweek got a $5 billion for violating that agreement. you have even run psychological experiments on users. sitting here today, mr. marcus, after all the times facebook has abused the public's trust, and you know that, do you really think facebook should trust -- you really think people should trust facebook with their hard-earned money? >> senator, you heard it directly from mark and i will reiterate, trust is -- >> i did not hear directly from mark. i am hearing from you. >> we have made mistakes in the past. we have been working and are continuing to work hard to get better and we have invested in a
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number of programs, notably on privacy and integrity and other issues. i want to answer your question directly for libra. the reason we designed libra in such a way that facebook will be one among 100 different members of the libra association and will have no special privilege, means you will not have to trust facebook -- >> mr. marcus, you know better than that. you know only facebook has access to 2 billion people. to say that you are just one of many assembly not true, after people's five it messages have been stolen and sold, you have let russian bots try to throw the 2016 election, with no contrition, after you have abetted genocide in foreign countries, do you really think people should trust you with their bank accounts? i think that is delusional. let me ask a related question. if you think hard-working family should trust facebook's monopoly
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money, i would like to see how much you and your company trust it. you get a paycheck in dollars, i assume, you get good compensation in facebook stock. will you pledge today in this committee you and your team who are working on this project will accept 100% of your salary and other compensation in this facebook currency? >> senator, libra is not designed to compete with -- >> that is not the question. will you accept all compensation in this new currency that you want us to trust you so much? >> senator, libra is not meant to compete with bank accounts. we will, for instance, not pay interest. like digital cash -- >> that is avoiding the question. do you trust your currency so much you and your team are willing to see 100% of your compensation be paid to you in the currency?
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it could be if you decided it could. >> if your question is, whether i would trust my assets in libra, the answer is yes, i would. >> my question is, do you trust us enough to make your compensation paid fully in your currency? >> senator, i would, because it is backed one-for-one. >> you could have said yes at the beginning. >> senator, with respect, i wanted to clarify we are not trying to compete with banks. >> let me finish with the last question. you said you're open to facebook about your company creating, you have said you're open to feedback about your company creating a new currency. i have told you i think this is a bad idea. the republican chairman of this committee has raised concerns. the democratic chair, maxine waters, has demanded you give up on this project. the chairman of the federal reserve sat this committee last week and voiced numerous and
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serious concerns. even the president of the united states has told facebook to back down, not to mention the many international leaders who have raised serious alarm. marcus, anything, mr. elected leaders and experts can say that will convince you and facebook that it should not launch this currency? >> senator, we agree with all the concerns, very legitimate concerns raised by chairman powell, secretary mnuchin and many others. this is why we released our white paper so much ahead of any public launch. we wanted to ensure we take the time to get this right and getting this right means addressing concerns in full and ensuring there is proper regulatory oversight for the project and we are fully committed to doing what it takes to get there. >> with all due respect, if all of us who have seen the collective amnesia of this
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congress in terms of what happened 10 years ago in my zip code in cleveland, when there was more foreclosures than any other in the u.s. a decade ago, if all of us find this to be a bad idea, think you should not do this launch, are you still going to do it? >> what i heard, senator, from chairman powell, secretary mnuchin and others is that there were serious legitimate concerns arising with libra and i will commit again to do what it takes to address concerns and if those concerns are not addressed, if the regulatory oversight is not appropriated, we will not launch until it is. >> that speaks a lot, mr. chairman to their accountability and their trustworthiness. >> senator jimmy. >> thank you for joining us. it strikes me as wildly
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premature for us to come to the conclusion that we have to act now to prevent what could be a constructive innovation in financial services. i think there are tremendous benefits in blockchain and cryptocurrency. i can imagine and it is clear they could help us lower payment transaction costs, facilitate access to capital, provide pseudonymity, levels of security that other forms of currency pickup as amited medium of exchange might be explained partly by the volatility of cryptocurrency and here we have what strikes me as an interesting iteration maybe including a mechanism to provide aminished volatility which is basket of currencies. i think we should be exploring this in considering benefits as well as risk and take prudent
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approaches but to announce in advance we have to strangle this baby in the crib is wildly premature. let me ask a question, mr. marcus, about the ultimate motive of this. it seems to many of us that if this were to unfold as you and libraand calibra were adopted widely there would be valuable data about payments. in your testimony, you have said it is your intention never to share, for calibra, never to share that data without consent. is it the business model, the plan, to at some point in the foreseeable future seek consent of participants so you would be able to commercialize that data somehow? mr. marcus: senator, no, this is not the intention at all.
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the plan as far as facebook is iscerned to monetize calibra to enable the 90 million small businesses currently on the facebook platform and the many users on the platform as well to engage in more commerce together and if they engage in more commerce, there will be more advertising for those small businesses. havinguld be a first by calibra and libra be successful. over time, what we hope is that through the calibra while it, we can offer more services with existing banks and service companies to drive new revenue streams for the company. toator: the intent is never see consent of consumer with regard to that payment data? mr. marcus: senator, i cannot think of any reason right now for us to do this. thetor: my understanding is
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basket of currencies invested in liquid high-quality assets used to provide intrinsic value of berency, there would presumably income from that. we have a lot of negative interest rates around the world. let's assume we have more positive than negative. that generates revenue stream. from your testimony, the intent is to use that to cover various costs. at some point that could become substantial. i saw a reference to paying out dividends to the founders, the original investors, but this is described as a not-for-profit. it strikes me as odd for a not-for-profit to generate what could be huge income and then distribute it to investors. that sounds like it is for profit. one possibility is you could pay dividends in libra to reflect
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the value of income from underlying assets but could you explain how paying potentially unlimited dividends to the investor is not-for-profit operation? mr. marcus: yes, thank you. first, i want to address the fact that libra does not pay interest. libra is like cash. it is mainly going to be used as a payment instrument. as far as interest and not-for-profit question goes, the way this is structured is that it will have some income that is targeted toward paying the operating costs of the association and potentially returning some return to all of the organizations that will invest in the ecosystem to make it happen. the plan is not for income to be and to be you know,
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all the income, going back to investors. obviously we need to find a way over time to create new pools of incentives that go back to people and businesses using the libra network and this is part of the conversation we are notably having on how to manage the reserve and returns and how to have appropriate oversight on the reserve with this, uh, working group, that the g7 organized with central banks, finance ministries. i believe the reserve will require very specific oversight and regulatory framework in order to ensure proper management. senator: thank you. >> senator tester. senator: thank you. appreciate you being in front of the committee. i have concerns, a number of
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concerns, one of them being consumer security. cryptocurrencies like bitcoin, transactions are final. if someone gets hacked, if someone steals bitcoin, there is not much i can do about it. on the other hand, if someone steals funds from a bank account or makes fraudulent charges on a credit card, the consumer, for the most part, almost always is held whole by the institution. how will libra handle theft? mr. marcus: senator, i can speak let, whichlibra whilal will offer a consumer protection against fraud and account recovery in the same way the leading wallets and financial services provide protection. senator: in a situation where fraudulent charge has been made with my account, you are saying
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calibra will make the consumer whole? mr. marcus: correct. senator: is that immediate? be without will it question? what i am asking is, i pull out my drivers license and my credit card falls out, that is my full but when they take that credit card to cleveland and by hoverboard's with it, the bank always makes it fine. the question is, and it is immediate, will it be immediate in your case? bestarcus: we will do our to resolve those types of issues and claims as fast as possible. we are investing heavily in 20 47 live customer support when it toes to the calibra wallet resolve those issues. senator: it is critical that that is resolved before it goes live. when i deposit money in a bank, i am very confident i can withdraw it from that bank.
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ok? my grandfather was not. even on these homesteads, everyone will find a glassed are full of money. they did not trust the banks. it was only when we got deposit insurance that the banks had the kind of faith -- what kind of faith that we have in libra? mr. marcus: thank you for your question, senator. libra is going to be backed by a reserve, one-for-one, so it is not ever going to be fractional. as a result, it is designed to be stable and retain value. senator: i got that. 2008, there was a run on the banks. there were big companies that went belly up including 157 banks, lehman brothers, bear stearns and others. no one anticipated there would be a run like there was. no one. how can you assure us, and by
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the way, i still felt confident my money was safe in my bank, how can you make those assurances? how can you do it when we are profit entity,or you are not doing this just for the fun of it, how can we be assured our money is going to be there? mr. marcus: senator, when it comes to libra, because the reserve is one-for-one and not fractional, the issue we have at any events you highlighted were because some of the institutions didn't have appropriate reserves and we also want the appropriate regulatory oversight to injure anyone will have the ability to understand how big the reserve ifand how many libra coins, you will, are in circulation at any point in time to rest assured that the value they hold is backed at any point in time with the same amount in the
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reserve. senator: when we met last week, thanks for coming in, by the way, the reserve question has to be answered, it has to be something, by the way, that is not up to you guys to determine what that reserve is. when times get tough, stuff happens. ok? that kind ofbe reliability. situation, like in the 1930's, because you are a big outfit. let me, there has been a lot of comments about facebook today brought up about some of the stuff that has happened on facebook that has not been meritorious. i am being generous. it is true. it has to do with bad actors. quite frankly, there are people in facebook doing stuff for the time -- all the time that have a different agenda than right and
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good and mom and dad an apple pie and chevrolet. how will you prevent bad actors from using the application? the past performance with facebook has been not that aggressive. let the money come in. we will worry about it later. it has had negative impacts on a lot of stuff worldwide. how will you prevent bad actors from using this? then i will shut up. mr. marcus: senator, when anyone will open a calibra account, you will need to open a separate account, you can use -- you cannot just use your facebook account -- you will have to authenticate and upload your government issued id. we will have real identity on top of the calibra wallet and systems and a dedicated team to prevent fraudulent activity and of course to meet requirements of anti-money laundering and counterterrorism funding. senator: it is a huge issue.
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it would benefit this effort if facebook did a better job right now of doing exactly what you said. senator: thank you for being here, mr. marcus. first off, i would like to associate myself with some comments. it is a good idea for us to explore this. quite honestly, cryptocurrency is still a wild wild west not well-regulated. there are a number of examples i am aware of where consumers have lost everything with their engagement with some of the better-known cryptocurrencies. i'm trying to understand the distinction. you're going to have transaction processing platform that several people have agreed to enter a consortium, i assume that is the intent to use the platform, you are not creating something at the expense of credit card companies or other platforms on the internet. is it a facilitator for them?
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yes, senator. i want to stress both visa and mastercard are taking this journey with us, as well as paypal and coinbase and and a number of other wallets. i also want to stress you do not have to become a member to accept libra as a form of payment or to build services on the network. senator: there is a distinction between currency, libra, and the underlying infrastructure you are providing to facilitate payments. correct? mr. marcus: correct. senator: now to something. what kind of capital investment are you projecting if you are hoping to launch next year? i assume you have an exhaustive implementation plan in place. what kind of capital investment are you looking at the underlying infrastructure? mr. marcus: senator, that is one of the reasons why facebook is
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in the appropriate sponsor position. we have the resources to innovate and we are ready to them to valuable tools for people. we have not determine exactly how much we will invest. this is a process. senator: the consortium would be a part of the investment? mr. marcus: yes, every member will have an opportunity to invest and participate in funding the network. senator: something that would be helpful for this committee and other members is to get a briefing on the entire stack. he said repeatedly you are not a bank. you're not going to all deposits. you cannot have a run. i think it would be helpful for the committee members and staff to understand, so i briefing of that type, what i've been able to study on the internet is
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fairly limited in terms of understanding the stack and what parts of the stack should be subject to regulatory oversight. i want to express a concern. we had a committee hearing on judiciary last week talking about how social media platforms have been hijacked by transnational criminal organizations, pedophiles, sexual predators. people are smart and devious and they hijack. i hope as part of your implementation, you are looking at all the ways your payment platform, like all others, could be potentially exploitive for criminal activities. the briefing on the fuller architecture, the implementation timeline and your own suggestion on where regulatory oversight would be pretty important, to make sure you create a trusted platform, we need to get that
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info to the committee and members who are interested in digging in. i believe that if the u.s. can either follow some other jurisdiction on pursuing this or we can lead it and i believe in the same way that we have the gold standard for banking in the u.s., we have an opportunity to set international standards that will ultimately provide greater consumer protections for a lot of the other upstart equivalent, not exactly equivalent, architecturally to what you're planning on doing. i think it is worth you all doing this. i have concerns about privacy, potential exploitation of the platform but i believe the u.s. and our regulatory environment and consortium well-funded is more likely to produce a gold standard, something that does drive down cost of transaction, actually providing better value for people who have the least amount of money to pay the fees. i look forward to seeing this
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develop. mr. marcus: thank you. >> senator warner. senator: thank you. good to see you, mr. marcus. i am all for financial innovation, i am intrigued by blockchain. i share a lot of the concerns my colleagues to. -- do. during thek antitrust investigation of microsoft during the 1990's, the justice department found a key strategy microsoft used, called internally, embrace, extend, extinguish. i callrategy was used, it catch and kill, it has been a methodology facebook has used effectively buying up or copying other emerging technology that may be disruptive to your dominance. we move into blockchain which has the ability to be disruptive. why should we not be facebook's
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efforts here with libra and calibra simply as another manifestation of catch and kill? mr. marcus: i'm glad you asked the question. the way we have developed the technology, the early technology for libra is that we have invested, we have put our best engineering talents in building the codebase, the technology for the libra network, then what we did is we open source itd. it is not belonging to us anymore. it belongs to the community. they will help build the code and we will really wish control -- we will relinquish control over the codebase and the profit. senator: let me follow-up. will you commit facebook will not develop preferential incentives that unfairly tie calibra, which is to be your moneymaking venture, two other
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facebook products as a way of prohibiting or, libra users to use wallets other than calibra? mr. marcus: i would even go further, which is that, not only have we started the technology and shared it in open source but the network -- senator: the question is, incentives within your existing products. you didn't answer the chairman's question. with your dominance, how do you make sure you're already existing global platforms like whatsapp and messenger will actually sue or third-party -- actually support third-party wallets. will you clarify that facebook -- yes or no? mr. marcus: i would like to clarify -- senator: please answer my question. mr. marcus: the network is interoperable, meaning people who are using the libra network
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from within whatsapp will be able to send and receive from other wallet, not calibra wallets. wishes to useuser a wallet other than calibra, will you make it easy to allow exports, financial data and -- if theyra data want to go to a different one, will you make it easy for them to move their keys, data, finance info, all over to that third-party? mr. marcus: absolutely, senator. senator: you have agreed on data portability, potential interoperability, so my hope will be you have that same approach when i lay out my legislation for data portability and in operability on existing platform use. i hope your commitment on
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calibra will extend to your current applications as well. can i get a commitment? mr. marcus: i cannot commit for other parts of the company -- senator: it would be great if you would make that commitment on facebook basic products, because if we want to bring in competition, you have to have that data portability, at least on calibra, you are on the record as making sure you will put no barriers in place to moving from one wallet to another. mr. marcus: we believe this is primordial for the libra network. consumers have the ability to toe from wallet to wallet make sure there are competitive dynamics that work in favor of consumers. senator: i will come back again to the question about your globally dominant platform. in terms of whatsapp and messenger, they will support third-party wallets other than calibra? mr. marcus: i want to clarify --
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senator: every time you start with, i want to clarify, it gives me a great level upon. we have asked the question. answer me simple. whatsapp and messenger. globally dominant products. will they support third-party wallets or will they have incentives that will push people to simply using the facebook product, calibra? mr. marcus: so this is why i want to clarify, senator, if i may because it is nuanced. if your question is whether we will embed other wallets in whatsapp and messenger, the answer is no. if you asking whether other wallets will have a full interoperability, meaning you do not have to use the calibra wallet inside whatsapp and messenger to send or receive money to people using the calibra wallet inside whatsapp and messenger, the answer is yes. senator: embedding is different than putting preferential
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treatment, i'd did not get the questions surrounding third-party developers having concerns about getting access, but again mr. chairman, some of your questions, is one of the reasons we will have to take time to work this there. thank you. you.or: thank mr. marcus, thank you for appearing before us today. i want to take a moment to commend the south dakota division of banking for their forward thinking and the willingness to allow fo innovation. thanks to the business friendly climate in my state, anchorage, which is a silicon valley buck company, has chosen to open a second headquarters in sioux falls, south dakota.
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banking should serve as a model for how governments can learn about digital currencies, while also allowing companies like anchorage to innovate. i want to congratulate anchorage. welcome to south dakota. i'm curious. i had an opportunity to travel watch what is going on with the challenges there with small amounts of value within their own currencies. on a day-to-day basis, there are millions of people that look to buy small, incremental items on a day-to-day basis. they do not have any type of product out there today that works well that is internationally based. can you talk a little about what you see in other countries, the direction they are going and what the opportunities are for this type of platform to allow a simple and inexpensive way to
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ornsact her value received currencies or products or commodities in exchange without high cost of doing so? i haven't heard that discussed. mr. marcus: i appreciate your question. the way anyone in the world will have the ability to use libra, using the wallet of their choice, will be to install a small at on a $40 android device with a basic data plan, and from that point on have the ability to move from the cash economy to the digital economy and benefit from the ability to transact domestically and internationally at low or no cost and benefit from services that will be built on the labor network by other companies as well. as a result, we hope, and this is our ambition, that we can lower the barriers for access to modern financial services and
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massively lower-cost for people who needed the most. in the and potentially lower access to capital because if you have a global platform that enables free or low-cost money movement, then access to capital should be barriers wille lower, as well. senator: i think there will be a lot of organizations that understands this is the wave of future. i think the questions have been fair with regard to the different applications and how they would fit on your platform and be allowed. with it also comes kind of the regulatory layout you work within. you have chosen to set this up in switzerland. what did switzerland offer that the united states did not, and what is it about our regulatory framework that puts us perhaps at a disadvantage?
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mr. marcus: the choice of switzerland is not to evade responsibility or regulatory oversight. it was because we believe that a global, digitally native currency, that will be used by people around the world would benefit from being headquartered in an international place that is also the home of inspected organizations. that is where we came from. the reality is if you look at the current composition of the libra association of members, those are mostly american companies. calibra is an american subdued of america,ue every and will be operated in the u.s.. i think the beneficiaries, in terms of companies of the libra network will likely be american companies under the american


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