[inaudible conversations] the hearing will come to order. today we will receive testimony from david marcus head of libra at facebook.

on may 9 senator brown and i sent a letter shortly after it was reported that company was recruiting financial institutions and online merchants to launch a cryptocurrency based payment system using a social network. we asked space bar for more information how the system would work, access and use of consumer financial information and facebook's access to use of information on individuals or group of individuals for credit or insurance or housing i appreciate facebook's response last week. shortly after the letter was sent facebook formally announced its intention to launch the payment system libra and issued a white paper providing information on the project. since then us and global regulators have taken notice including the federal reserve, reserve, uk financial conduct authority and a stability board, g7 and

others for the last week during the federal reserve's semiannual monetary policy report to congress chairman powell raised concerns of the potential to incite money laundering and financial stability problems and expressed concern over customers privacy. yesterday secretary - - t12 has very serious concerns libra could be misused brick of the bank of england governor said libra if it achieves the ambition would be systemically important and as such to have higher standards of regulation and consumer protection and address issues raising from anti- money laundering to data protection and operational resilience concerns include but not limited to how the payment system will work, managed and how libra association and

facebook will all interact. what consumer protections will apply and what protections for consumers from fraud or failure and how individuals will be protected and how individuals privacy will be preserved. how the libra ecosystem interacts with the bank secrecy act and other regulations and in ways that libra could threaten financial stability and those preemptively to mitigate risk despite the uncertainty, facebook stated goals for the payment system are commendable and according to the world bank , one.7 billion adults remain unbaked and two thirds on a mobile phone or otherwise have access to the internet. if done right the efforts to leverage existing technology

to make innovative improvements to traditional and nontraditional payment systems could deliver material benefits such as expanding f access for the under banked and providing cheaper and faster payments but still libra is based on a relatively new evolving technology it is not entirely clear how existing laws and regulations apply i am interested in its implications for the protection and privacy of individuals data. facebook has massive reach and influence within society with 2 billion active monthly users and access to vast amounts of personal information including those received from users and information derived from their behavior on and off facebook. libra will only expand this speech by increasing commerce on the facebook platforms.

this raises several questions. the banking committee has held hearings on data privacy as it pertains to the european union general data protection regulation, data brokers and fair credit reporting act. giving a significant amount of user information held by the largest platforms on social media and the prospect to gain even more information , congress needs to give individuals real control over their data. europe has already done this by imposing obligations on companies to establish rights for individuals with respect to their data. we need to establish similar obligations for brokers and users and implement the enforcement system to ensure the collection process is not abused and data is adequately protected. individuals are the rightful owners of their data.

they should be granted a certain set of privacy rights and the ability to protect those through informed consent including full disclosure of the data gathered and how it is used. regulations should be clear and understandable for collectors and consumers and should not punish those who opt out of those practices. individual should have the ability to review their data and correct inaccuracies with ample opportunity to opt out to be shared or sold for marketing or other purposes. chairman powell also said the privacy rules we apply to banks we have no authority to apply to facebook or libra and added we may even need to create a new regulator to address such issues because we determine the next steps, what is clear the importance of financial innovation happens here in america. in this way the libra announcement is high in the

need for policy makers and regulators to establish clear rules of the road. during this hearing i look forward to hearing more about the facebook project, the steps it plans to take and has taken with regulators to ensure compliance and how it intends to assure individuals privacy is maintained and information protected. >> thank you mister chairman. facebook is dangerous. it may not intend to be dangerous but surely they don't respect the power of the technology they play with like a toddler who has got his hands on a book of matches facebook has burn down the house over and over and called arson a learning experience it has two competing missions make the world more open and connected, and make a lot of money as facebook attempts to serve both these missions they wreak havoc on the rest of us

there are disruption of the newspaper industry they make it easier to share what you are reading with friends at the same time they have redirected most of the media industry's profits away from actual journalist into its own coffers and have done it without the benefit of re-creating a local news desk or conducting a hard-nosed journalism that keeps politicians and business as honest or even without meeting the most basic journalistic standards. this creative disruption doesn't create anything and look at the impact the way it connects people facebook and other tech companies to reflect what we already are but that's not true. to be profitable facebook can hold up a magnifying rather than a mere like i learned in

boy scouts to use a magnifying glass to burn a hole in a piece of wood concentrating our focus on the most divisive issues pushing the most controversial to the top of the news feeds they play on people's fear and worst impulses but not based on any sort of fact. facebook does all it can to manipulate a choosers so it can direct our eyes to their ads and turn a bigger profit this is an exaggeration in fact they tested it they can manipulate our emotions with a psychological experiment more than half a million users to see if they could manipulate our moods and it turns out it can. that emotional manipulation has led to horrifying results but have to tell you what amplifying our divisions has discourse in our country not just between political parties

between half of the people or even a family member on facebook or an old classmate. look around the world un report details on facebook was used to spread propaganda in the war relating to genocide more than 600 members of the people were killed more than 700,000 refugees had to flee the country i don't think for a minute that facebook created hate. but we know there are competing missions of connecting people and turning a profit create an algorithm and business model that intensified that progress hard to remember a world without facebook or a time we had to tell our kids be careful what you do on the internet because it will not go away. what happens online has consequences. that's why it's hard to understand why he facebook doesn't seem to comprehend and

the intention out of a swiss bank account. and to say that facebook is a company but be elected mark zuckerberg with this utopian government wants to turn family and friends against each other rather than bring people together facebook has demonstrated with scandal after scandal to be treated like the profit-seeking corporation it is just like any other company they have proven over and over they don't understand the accountability they are not running a company but a laboratory no executive knowledge has been harmed by their experiments the look as

where they run their social experiments on us. they move faster broker political discourse they move force with genocide and help to undermine democracy now they ask people to trust them with their hard earned paychecks it takes a breathtaking amount of arrogance to look at that track record to think what we really ought to do next let's run her own bank and for-profit version of the federal reserve for the rest of the world understand what that inequity and inequality in the country and given the fact so many have forgotten what happened ten years ago

was tempting to think anyone could do a better job than the wall street megabanks but the last thing we need to do is concentrate even more power in huge concentration look at the record we be crazy to give them a chance to experiment people's bank accounts using tools they don't understand like monetary policy to jeopardize hard-working americans ability to provide for their families it is a recipe for more corporate power over markets and consumers fewer protections for my constituents. >> thank you senator brown you cannot proceed with your testimony. >> thank you chairman. chairman and ranking member brown and members of the committee thank you for the opportunity to appear today. i am david marcus i'm head during facebook i have been an entrepreneur aiming at improving people's lives. for many years my focus is

financial services i became the president after i started my startup moved to feist facebook five years ago to run messenger now lead our efforts for good reason testimony i describe the mechanics of libra today i will explain why i am optimistic about what libra can offer the world. before i get there want to make clear we are only at the beginning of this journey. federal reserve chairman powell has said publicly you need to be patient and thorough rather than a sprint secretary - - teetwelve reinforce those views yesterday and 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 extensive 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 currency until

we are fully addressed concerns and received appropriate approvals for quite 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 to her mom in another country of those $200.14 on average is lost in fees it can also take several days or weeks for the mother to receive the money and a delay that could be disastrous in an emergency. not to mention lines could be long or in high crime areas. doesn't have to be that way when it be easier and safer if people could securely receive the money transfer through their smart phone like they do so many others today. that is what libra is about to develop a safe and secure a low-cost way for people to efficiently move money around the world. to realize the promise facebook and 27 other organizations have founded the independent libra association

including companies telecommunications block chain and venture capital industries like nonprofits and women's world banking who are here today along with staff from the libra association. they will govern the blotchy network to administer the reserve and establish the rules of the road to prioritize consumer protection and implement safeguards that require service providers to fight money laundering. we expect the safeguards will at least meet if not exceed existing standards and improve the integrity of the global financial system. when fully formed we expect libra association to include 100 diverse members and facebook will only have one vote and will not be in a position to control the association. nora will facebook position themselves to compete with

other currencies or interfere with monetary policy brca1 fact the libra association will work with the federal reserve and other central banks to minimize the risk with their currency or interference with monetary policy this is the province of the central bank finally turning to the role to establish and realize the potential of libra to facilitate libra issues facebook has established a subsidiary offering one of many digital networks using that wallet consumers can save and spend right from their smart phone if successful facebook will benefit from more commerce over the family of apps it will be affordable and accessible and safe and secure with strong safeguards to protect users accounts and information we expect that wallet will be governed by rules and enforced by the ftc

and others and regulated by state financial regulators. we are committed to protecting the privacy of customers and the wallet will not share individual customer data with the association or with facebook except for limited circumstances mike for prod one - - fraud or committing - - cooperate with the law and we are excited for the potential and proud to initiate this effort here in the united states provide believe the lead innovation of digital currency if we don't lead others well 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 have positive change for many people and provide an opportunity for leadership consistent with our shared values broker look forward to answering your questions. >> thank you very much.

i will start off with the question that you anticipated that with regard to jurisdiction and the regulatory rules of the road. it seems to me digital technology innovation may be inevitable and could be beneficial. i also believe the united states should lead in developing with the rules of the road. you have already indicated your awareness of the secretary's remarks yesterday the statement that chairman powell gave and responses when he was here a week ago and other concerns raised by federal regulators. by setting up libra in geneva switzerland makes me wonder if the rules of the road and supervisory oversight is focused on the swiss financial market but you said it will

not offer the digital currency until we have fully address the regulatory concerns and receive appropriate approvals. my first question is do you agree the united states should lead to establish the rules of the road over similar digital currency initiatives quick. >> chairman thank you for your question. yes. absolutely i agree the us should lead and i want to reaffirm that we chose switzerland not to evade any switzerland responsibilities of oversight but they have well established international with headquarters who and wto even the bank of international settlements and despite the fact it is headquartered in switzerland will still be registered with oversight with us regulators but i completely

agree the us should be. >> i appreciate that. you have already indicated you can see in the united states you'll have to deal with sec, and some state regulators. i have been thinking about this question the united states approaches the regulation of data and data privacy with multiple regulators over different pieces of economic activity and other social activity. europe does this differently with the gd pr across sectors if you look at fsoc in the financial world the treasury, treasury, fdic, occ, cfpb and the f hfa have you analyzed in

a sectorial approach which of these regulators would have a piece to create the rules of the road if the united states stays on this approach? >> this is not for me to say of it all i can say today as we are committed to working until we satisfy all the concerns and regulatory bar is met before we proceed. those that we are engaged with with the g7 working group with the central banks looking into libra and collaborative working with them was well. >> it seems to me it seems which agencies will take a claim of what is happening.

but you will comply with all regulators quick. >> yes or. >> i have are questions i will have to submit after the hearing be told the banking committee that collects the information using for advertising and personalization briefly will you please describe the personal data collection from the platform transactions so will this information be collected for those transactions that use the libra wallet like when a product duct is bought on facebook will they allow other digital wallets to be used within his family of products? so just explain how that will work. >> chairman, one thing is important and i want to state

this very clearly. we will compete with a number of other wallets that operate on top of the libra network that network is interoperable meaning wallets can send money from one wallet to another which is not possible with the current system and as a result to earn people's trust we will have to have the highest standards with privacy and the way we have built it is financial data or account data that is collected will actually be shared with facebook and the way we built this is to separate social

do you trust this to be paid fully in your currency quick. >> i would because it is backed one for one. >> you could've said yes the beginning of the question. >> with respect and wanted to clarify were not trying to compete. >> let me finish. you said about your company that you are open to feedback about creating a new currency. i told you this is a bad idea the republican chairman has raised concerns the democratic chair the senate the chairman of the federal reserve who sat on this committee who placed numerous and serious concerns

that is not to mention the international leaders who have raised serious alarm. is there anything that elected leaders can say to convince you and facebook it should not launch this currency quick. >> senator we agree with all of the concerns the legitimate concerns raised by secretary powell and teetwelve and others this is why we released the white paper so much ahead of any public launch because we wanted to ensure we take the time to get this right and that means addressing concerns and full and ensuring there is proper oversight for this project and we are fully committed to do what it takes to get there. >> with all due respect if all of us who have seen the collective amnesia of this

congress with ten years ago in my zip code where there were more foreclosures than any zip code in the united states a decade ago, if all of us find this to be a bad idea that you should not do this launch will you still do it quick. >> what i heard from chairman powell and teetwelve and many others is that there were serious legitimate concerns arising from libra and i will commit again to do what it takes to address these concerns if they are not addressed in a regulatory oversight then we will not launch until it is. >> that speaks a lot to their accountability and their trustworthiness. >> thank you for joining us. it strikes me as wildly

premature for us to come to the conclusion we have to act now to prevent which could be a constructive innovation in financial services. i think there are tremendous potential benefits to lunch technology and cryptocurrency i can imagine clearly it could help us lower payment transaction cost and facilitate access to capital , levels of security that other forms of currency have not. limited pick up as a medium of exchange could be explained partly by the volatility and it strikes me as an interesting iteration including a mechanism to provide diminished volatilit volatility. i think we should consider the benefits as well as the risks

and take a prudent approach but to announce in advance we have to strangle this baby in the crib i think is wildly premature. let me ask a question about the ultimate motive. it seems that if this were to unfold as you described and libra was adopted there would be very valuable data. when your testimony my understanding is you notice your intention never to share that data without consent. so is that the business model and the plan at some point in the foreseeable future to seek the consent of the participants so you can commercialize the data somehow quick. >> no. this is not the intention at al all.

the plan as far as facebook is concerned to monetize this initiative is actually to enable the 90 million small businesses currently on the facebook platform and other users as well to engage in more commerce together if they engage in more commerce there would be more advertising from the small businesses with that network to be successful then over time what we hope through the libra wallet we can offer more services with existing banks and financial services companies to drive new revenue streams for the company. >> the intent is not to even seek the consent of the consumer to commercialize quick. >> i cannot think of any reason right now for us to do that.

>> my understanding is the basket of currency of liquid high quality assets to provide the intrinsic value presumably that we have more positive interest rates than negative and i think from your testimony the intent is to use that for various cost but that could become very substantial. but also described as a not for profit so it is odd for a not-for-profit to generate what could be huge income then distribute that that sounds like a for-profit. so you could pay dividends in

libra to reflect the value of the income from the underlying assets but can you explain help the tay paying and potential unlimited dividends is not a for-profit operation quick. >> yes. first i want to address the fact libra does not pay interest because it is like cash and is mainly used as a payment instrument and as far as interest of the not-for-profit question, the way it is structured it will have some income targeted toward paying the operating cost of the association and potentially returning to return all of the organizations that invest to make this happen. but the plan is not for income to be unlimited or all the

income going back to investors. we will find a way over time to create new pools of incentives that go back to people and businesses using the libra network this is part of the conversation we are having on how to manage and have appropriate oversight on the reserve with this working group the g7 organized and i believe the reserve will require a very specific oversight and regulatory framework to ensure proper management. >> thank you for being here and in front of the committee. i have a number of concerns one of them being consumer

security. the cryptocurrency like that coin is final if somebody is hacked or steals there is not much they can do about it but if somebody steals funds from a bank account or makes fraudulent charges on a credit card, the consumer is almost made whole by the institution how will libra handle that quick. >> i can speak the wallet will offer consumer protection against fraud and account recovery the same way the leading wallets today out there provide protection. >> in a situation where fraudulent charge has been made with my account, you are

saying they will make the consumer whole? is that immediate? it is not immediate. is that without question clicks so if i pull out my drivers license and the credit card falls on the ground that is my fault the bank makes it fine. but the question is is it immediate in your case quick. >> senator we will do our best to resolve those types of issues and claims as fast as possible we are investing heavily in 24/7 live customer support to ensure we can resolve those issues. >> it is critical that is resolved before it goes live. as i deposit the money into a bank i am very confident i can withdraw from the bank.

my grandfather was not that way. that's why even on these homesteads you'll find a glass jar full of money because they didn't trust the bank only when we got deposit insurance that the banks got the faith. let faith do we have in libra quick. >> thank you for your question libra will be backed one / one it is never a fractional reserve and it is designed to be stable and retain its value. >> in 2008 there was a run on the banks with big companies that went belly up in 157 banks, while moo, lehman brothers and others. nobody anticipated a run like there was. nobody. how can you assure us and

still feel confident my many was safe in my bank. how do you make those assurances when we talk about a for-profit entity you're not doing this just for the fun of it how can we be assured the money will be there quick. >> senator when it comes to libra because the reserve is not fractional the issue we have had in the event that you highlighted they didn't have the appropriate reserves but we also want the appropriate regulatory oversight that anybody has the ability to understand how big the reserve is and how many libra coins are in circulation at any given point in time but to be rest assured the value they heard on --dash they hold is

backed. >> when we met last week, by the way the reserve question has to be answered and something that is not up to you to determine what that reserve is. when times get tough, stuff happens. there has to be that kind of reliability there no different situation than the thirties because you are big enough. there has been a lot of comments about facebook today and what has happened that hasn't been meritorious and i'm being generous. it is true. and it has to do with bad actors people on facebook doing stuff all the time that have a different agenda from

mom and dad and apple pie so how we prevent bad actors from using the application? past performance with facebook has not been very aggressive let the money come in and we will worry about it later in his head pretty negative impacts worldwide how we prevent bad actors from using this and then i will shut up. >> senator when anyone opens the libra account you have to open a separate account you cannot just use your facebook account, you have to authenticate to upload your government issued identification so we will have real identity of the wallet and systems and authenticated teams to prevent fraudulent activity and requirements for money laundering and counterterrorism funding. >> this is a huge issue that

would benefit this effort doing exactly what you said. thank you and i thank you for being here. so to associate myself with some of those comments it is a good idea to explore because quite honestly cryptocurrency is a wild west not very well regulated and there are a number of examples i'm aware of where consumers lost everything with their engagement with better known cryptocurrencies out there program trying to understand the distinction if you have a transaction processing platform that several people have agreed to enter a consortium, you are not creating something at the expense of the card companies or other wallet platforms on the internet i assume they are

trusted payment platforms quick. >> yes senator i want to stress visa and mastercard are taking this journey with us as well as paypal and coin base and other wallets. but i want to stress you don't have to become a member to use libra as a form of payment. >> that is what i was trying to get at the distinction between the currency and the underlying infrastructure you are providin providing. >> that is correct what type of capital investment are you projecting i assume you have a pretty exhaustive implementation plan in place what are you looking at with the underlying infrastructure quick. >> i think that is one of the reasons facebook is

inappropriate sponsor because we have the resources to innovate we are ready to put those resources to build valuable tools. we haven't determined exactly how much we will invest. it is a process. >> it is a consortium. >> yes. every member will have an opportunity to invest and participate in funding the network. >> that would be very helpful to the committee to get a briefing that you will not hold deposits i understand what you are doing with the reserve for transactions but i think it would be very helpful for the committee and staff to understand so what i have been able to study is extremely limited and then to understand

what parts are subject to regulatory oversight for quite you want to express a concern we had a committee hearing at judiciary last week talking how social media platforms have been hijacked by criminal organizations. and i'll think anybody was implement it for that purpose that people are smart and devious so now you are looking at all the ways your payment platform like all the others could be exploited for criminal activity that's why a briefing on the full architecture and timeline or your own suggestion over the toy oversight is important we need to get that information

to the committee for those who are interested. i believe the united states can follow or we can lead and i believe the same way with the gold standard for banking system in the united states we have an opportunity to set the international standard that ultimately provide greater consumer protection for other upstart equivalents not compared to what you are doing but i do have concerns about privacy and potential exploitation but i believe the united states and our regulatory environment and the consortium is well-funded is more likely to produce a gold standard to drive down the cost of transactions and actually providing better value from that piece they are paying today look forward to this. thank you.

>> good to see you mister marcus. motivation and i'm achieved by a block chain and technology but i share the concerns of my colleagues with the enterprise as yours as we look back during the antitrust investigation of microsoft the justice department found the key strategy i call it catch and kill with other emerging technologies that could be disrupting so now we move into block chain with the ability to be disruptive so what about

those efforts with libra catch and kill? but the way the early technology for libra to put the best engineering talent with that libra network and as a result it doesn't belong to us anymore it now belongs to the community and we will relinquish our control. >> so let me follow up. facebook will not have incentives with that money making venture.

and to prohibit for those users. >> i would even go further and then. >> but the question is you didn't answer the chairman's question how do you know those existing global platforms like messenger will support third-party cracks will you at least clarify the question to say messenger will support third-party wallets? >> yes or no. >> and want to clarify. >> you didn't answer chairman crapo please answer. >> the network is interoperable those are using the libra network can send and

receive from other wallets. >> so if a user wishes to use a wallet other than libra can you make it easy for the financial data for now i want to go to another wallet will you make it easy for them to move their data and financial information to the third-party? >> absolutely. >> see you have agreed on data portability the potential interoperability with these wallet so my hope is you have the same approach when i lay out legislative for data portability on existing platform use so that will

extend your current applications as well. >> i cannot commit to other parts of the country. >> it would be really great if you can make that same commitment on the facebook basic products you have to that data portability that you are on the record there is no barriers in place. >> we believe this is primordial to move from wallet to wallet that they are good competitive dynamics so i come back to the chairman's question about the globally dominant platform in terms of what happens on messenger they will support third-party wallets. >> i want to clarify.

>> every time you start with i want to clarify it gives me pause. we have asked the question it seems pretty simple with messenger will they support third-party wallets or have incentives to push people to use that product mr. gensler mine - - calibra? >> this is a nuanced answer if your question is we will invent other wallets inside of messenger the answer is no but if you are asking if other wallets will have full interoperability that you don't have to use that to send or receive money then the answer is yes that is different than putting preferential treatment i did

not get to the question around third-party developers having concerns getting access but i think your questions is one of the reasons we need to take a great deal of time. thank you. >> thank you mister chairman. mister marcus thank you for appearing before us today i just want to take a moment with the division of banking for their forward thinking and allowing us to have innovation in the currency space. anchorage just received permission to have a south dakota chartered trust company things to the friendly climate in my state and has chosen to open the second headquarters in sioux falls south dakota the significance of this is far beyond the borders as a

model how they can study and learn about digital currencies while allowing to innovate and try out products and services i want to congratulate anchorage and south dakota. i had an opportunity to travel to africa with very small amounts of value within their own currency but on a day to day basis there are millions of people with very small incremental items on a day-to-day basis. they don't have any type of a product that works well. so can you talk about what you see in other countries for this type of a platform to allow a very simple way to transact for value received

for currency our products in exchange without the high cost of doing so? i have not heard that discussed today. >> i appreciate your question. the way anybody will use libra or the wallet of their choice will install a small app with the basic data plan and from that point on to have the ability to move from the cash economy to the digital economy and the ability to transact that only domestically but benefit from services that will be built on the libra network and as a result this is our mission and massively

lower cost for those that need it the most and also to lower access to capital with three or low cost money movement to access to capital and the barriers would be low as well. >> i thank you will have a lot of competition i think a lot of organizations understand this is the wave of the future. so how is that allowed on your platform and that is an item of discussion for some time to come. but also the regulatory laid out - - lay out the you have chosen to set up in switzerland what does switzerland offer that the united states does not? what is it about our regulatory framework that puts us at a disadvantage?

but the choice of switzerland is not to evade responsibility or regulatory oversight but we believe the global currency that is used by people around the world would benefit in a place that is home of many respected international organizations and that is where we came from. but the reality is with the current composition of the libra association members and calibra is the american subsidiary with a large company operating in the us and i think the beneficiaries of the libra network would be american companies without proper regulatory oversight in

the us. >> i think the proposal and the challenges for the exchange for services has lots of obstacles to overcome of privacy and we will look forward to observing because i really do think it's a wave of the future and we will either be responding to it are actively involved in learning from it. >> thank you very much we appreciate you being here and answering questions. this is obviously very innovative but i do have a couple of questions with the concerns that we have and as

attorney general in the state of nevada is money laundering i know there is clear oversight we have right now to address the issues of money laundering but one is terrorist financing so my question is how will the libra association be sharing or guarding against any type of money laundering activities? have you thought about that? be mckesson i care about this deeply and personally the way we think about protecting the network and terrorism funding not only moving cash transactions in the digital

world and if they move to digital it will be label and with the program as the calibra wallet is concerned for every new calibra account open there is a government issued identification and authenticate so as far as the libra network is concerned despite the fact the libra association is based in switzerland it will register with fin straw and have to comply with aml. >> dad is my next question will it fall under the bank secrecy act. >> it will not actually it

will just organize. >> was about the bank secrecy act so those that are operating under the jurisdiction and with those programs and we are engaged with treasury that the set up of the network is not only to take a step back but improve that because of the way we are implementing the network. >> see you can sign up you address many laundering issues? i appreciate you providing more transparency around that. this is a new day and age when it comes to cash carrying

around a briefcase through cash people don't do that anymore what you are creating is an opportunity for them to engage with criminal activity so to say we are complying with aml activities is one thing i want to see the specifics so i appreciate your willingness but another one that has come up is sanctions laws. the head of policy communication has asked how libra would react with the libra association in order to comply with the sanctions laws. the response the association won't interact with any

jurisdiction that will leave that to the entities that have an on and off ramp to the currency. can you clarify? how are we supposed to address one - - address this issue with sanctions laws quick. >> this is a question we are engaged with the treasury department. the one thing we estimated as we will respect the travel rule and as a result perform the right checks. as a result perform the righ . . . . those who are subject will of

course perform those functions. >> i know my time is up. if i have further questions i will some of those for the record. >> senator kennedy. >> i'm going to move fast i apologize and if advance to find her p. i will agree with the comments that senator may. we need to encourage innovation. i want to explore the underpinnings of labor. can we agree that a bigger a bir should be honest. >> yesterday. >> a banker should respect to customers privacy. >> yes of course, you're not going to engage and begin. >> can we agree that facebook knew in the spring of 2060 that

russia was attempting to facebook to disrupt the u.s. presidential election? >> senator with regards to this event we moved to slow -- >> isn't it true that the general counsel and the chief security officer knew in the spring of 2016, isn't it true that mr. zuckerberg and your cfo new in december of 2016. is it also true that you did not tell the board of directors until 2017, until september 2017. isn't that accurate? >> we definitely move to slow to recognize the activities that were happening on the platform -- >> excuse me for interrupting our only have five minutes. >> in september of 2017 when

senior management told the board of directors, facebook also issued a statement. it said the russians have tried to disrupt the election, through facebook but they only spent $100,000 and the only ran 3000 ads. that was a life was in ? >> i'm sorry senator -- >> that was a lie wasn't it? >> i do not believe it was. >> later facebook committed that the russian ads had reached 126 million people didn't they? >> i believe the people who answer the question at the time answer to the best of their knowledge at the time. >> when mr. zuckerberg was conducting his listing across the whole country, the first half of 2017, he was feeding cows in wisconsin and having inner with refugees in

minneapolis. he knew about the russian involvement didn't he? >> i do not know senator. >> he did not say anything did he? >> i do not remember the timely. >> in the spring of 2017, spring and summer our intelligence committee and the u.s. senate started investigating the russian attempts to disrupt the election through facebook. facebook issued a statement saying there was no such attempts. that was a lie wasn't it? >> i do not remember the timeline and i believe people have always answered truthfully with the information that they had at the time. >> in june of 2018, we found out that facebook was sharing using daddy with device makers. 40 of them. amazon, microsoft, samsung,

facebook did not disclose that to the user did it? >> my understanding and again, it was not my responsibility or my team that this was designed to enable the phone manufacturers for integration within the facebook products to service those consumers using devices. >> your algorithms is sucked if i watch a video on a topic i'm immediately shown a video on more extreme versions of the topic? is that correct? is. >> this is not the way that the facebook platform operates today. >> it did for a long time right? >> mark zuckerberg led through the change -- >> let's agree on this, facebook has become the major new source for many, many people, the major new source is that true? >> i don't believe it is.

i believe more and more people are interacting -- >> 50% of their users say they get their news as a primary source on facebook. is isn't true that facebook has chosen to advance a set of values in which truthful reporting has been displaced by flagrant bull [bleep] >> i can't answer the question. >> i have great respect for facebook. but facebook wants to control the money supply. what could possibly go wrong. >> senator, we will not control the currency or the association and we agree that no company should control such a net worth digital currency. >> i would like a second round

if we could. >> if we have time i will be glad to do that for senators who wish. >> senator smith. >> thank you very much. welcome. i have a lot of questions about this. you understand the level of skepticism that you see and appreciate you being here to answer questions. i want to understand a little better the association. they have you think about 100 family members who will make decisions about investment strategy and regulatory compliance and social impact gold. who is in charge ? >> senator, the way that the govern of the association works is you will have the council of 100 or more members that will make decisions and will elect

the board that will be between five to 19 members in the board will then elect a managing director in the association will have a staff to perform the governance function that it's supposed to look after. >> in the united states senate we have 100 members and it's clear who's in charge, mitch mcconnell. i am trying to understand -- [laughter] i am trying to understand -- you described a consensus, will decisions be made on a consensus basis? i understand there's a two thirds majority but help me understand how decisions get made? >> the decisions are basically

the structure of governance is one where there are certain things that should be really hard to change and those are important things to the spirit of how the network is supposed to operate in the spirit in which the reserve is supposed to operate and i believe when it comes to the reserve we will need appropriate regulatory oversight. >> would there be a constitution or a body of rules that would be agree to ahead of time that would dice the decision-making? >> yes or in public. >> how do you parse out majority rates? >> as it stands the way it is starting, every member, if we have a hundred members, it will have an equal voice at the council. >> what if there is a disagreement in minority automatically overwhelmed by the

majority? >> it will depend on the decision, not all will need majority to reach a consensus. >> it seems possible on any board they develop coalitions and it seems a big question about how every voice will be heard in this incredibly powerful association headquartered in switzerland. is this board like a corporate board, what if there was conflict of interest the develop. >> we hope we will avoid, looks of interest but again we have a lot of work to do. this is why we should the white paper early on to get the feedback and input into sure we can adjust all the concerns and get proper regulatory oversight. and part of that is going to be governance of the association.

>> i think these are important questions. we are mentioning association headquartered in switzerland would have amazing power over the financial health of this country over my constituents, i think these questions of accountability are extremely important. let me switch topics. what is a long-term business opportunity for facebook your. >> to business opportunities, one is really the ability for the 90 million small businesses and users on the platform who interact with one another. so more commerce on the facebook platform and if there is more commerce there will be more advertising revenue for facebook. that is one indirect effect. >> more commercial activity on facebook equals or money for facebook. >> yes senator. the other part of it, if we earn

people's trust and they decide to use it over time we can offer and partnerships with financial institutions and banks and other services that will be new sources of revenue. >> so getting a bigger market share. >> i'm out of time but it seems that facebook is really good at figuring out how to monetize tes test. test. any millions of activities that we do every year, for facebook to do that is capitalizing on the data and i have to say i am not reassured by your statements that you cannot see any reason right now why there would not be data sharing between the pop

forms. >> i do not trust facebook. it is because of the repeated violations of youth the user privacy. repeated deceit and i am not alone. as you know, in 2011 there was a consent decree with the federal trade commission related to the privacy practices so that is where it started with investigative bodies. it has not ended even after that. facebook is under investigation again. approved a fine of $5 billion just recently. because of the repeated violations of your users information. for example, without users permission sharing personal

profile information without software developers, selling it off again. data breaches, allegations that you repeatedly change due to privacy settings without notice. the sec of course is also investigating events around personal information from facebook. the new york state office of attorney general has an investigation to unauthorized collection of 1.5 million facebook users, e-mail, databases, on and on. there's allegation of bugs, sorry we did not mean to allow them to download photos. it is one after another after another. i do not trust you guys. instead of cleaning up your house now your launching into another business model with culebra and you have documents that talk about privacy commitment. in the privacy commitment you say you will not be sharing

account information or financial data with facebook or any third party that customer consent. how do we know this is getting changed and how do we know you will do that based on your track record of failing and violating and deceiving in the past? >> that is a fair question. i want to enter into parts. the first we have been working really hard addressing the issues. we have invested incredible resources and privacy and mark has made it atop rudy and we will continue to do that until the issues are fully resolved and addressed to satisfaction. on the lever side, we have designed this network in a way that facebook does not and will uphold the currency. there will be plenty of

competition and i want to take a moment to explain why there will be a lot of competition. first, regardless of the wallet we choose, you will be able to pay across which is currently -- >> i do not want to get into the spirit of talking about trust issues. he violated privacy in the past of a company, you continue to have issues and continue to change the privacy and rules without informing users, yet your launching a new product and claiming the privacy will be protected. how are users to no that is also not going to change and they will not be violated. that is what i'm getting at. the core issues trust. >> the point is people could get all the benefits from this without choosing wallet and i know we will have to earn people's trust for very long period of time. in order to get the benefit of

them wanting to use the wallet of any other wallet, they will have a choice. >> let me follow-up, your privacy document says it'll be transparent and choices and control and easy to find privacy control the details what that is and for what purposes. you are telling me and i think the user not be able to have consent as to the data being collected. >> i do not understand the question. >> for culebra you say in your privacy document it will be easy to understand what data is being collected. will the user have consent for their data being collected when using this. >> yes senator. >> do they have consent in order to use claybrook? >> yes senator. >> so there's really no choice. in order to use it your data has

to be proactive. there's no option to opt out. >> if you want to use the wallet you will have to authenticate and upload a government issued id and as consumers do not want this to collected in the very first step will not be able to use the service because we will be compliant to regulations. >> what is the business model of culebra, the interface of facebook and more people using it and more people stain on facebook and you can continue to collect information and selloff information. is that the business model? how will they make money? with respect, that is not what i said. >> but that section will happen. >> i will focus on the specific question yes. we have 90 million businesses, many that grow thanks to the

facebook advertising platform. they're able to reach consumers, higher and we believe if they have the ability to sell to more constituent across the facebook popper and more people have access to the services and products of the 19 million businesses there more converse -- >> i know i am over time, and that was extremely sarcastic. [laughter] >> thank you for a witness for being here. arizonans have heard a lot of promises from facebook over the years about privacy. for example, facebook promised whatsapp it would not scrape the message data to deliver targeted ads for two years later facebook broke its promise and monetize personal message data. real doubts about facebook commitment privacy arizonans are skeptical about the repose currency. the goal is to reach the un-

banked in under banked. but the important to remember that those who have not utilized bigger credit cards will be more successful to scammers. your head of product kevin neil that there are no plans to take a role in actively betting developers of wallet exchanges or other related apps. failing would expose arizona scammers. you stand by his statement? >> first i want to correct something which whatsapp is fully encrypted and facebook does not have access. to answer your question which is very important. i would say two things, one, while the libra association will not get the work developers developing we will need an association to find the right approach to ensure publishing

services on the network has controls. and one thing i want to say as well, initial literacy is important. i believe the association there will be grants and investments made into financial literacy and the wallet that his concern and not only will we have consumer protection but it will protect your constituents if they have a fraud issue but we will make sure there is appropriate education in the products from the get-go. >> that was very helpful information. but that does not address my concern. if their goal is to reach a population that are vulnerable to abuse. arizonans will be more likely choosing libra which could jeopardize the savings and financial security. while were on the subject of scams, here is the hypothetical

scenario. let's say enough developers faced impact skin utilizes an exchange based in thailand to ripoff in arizona who is using the wallet builds pain. so they steal all of the libra. that is met by an association based in switzerland. which law enforcement or governmental agency and which country does arizona call to seek cues or her legal and financial recourse in the situation. >> the answer is, your constituents will likely use an american us-based wallet provider that will have consumer protection and will make your constituents will if something bad happens to them. >> my scenario, they were using a wallet in spain, will they still have access to recourse for legal and financial problems? >> senator, it will depend on the consumer protection.

the same way today you have different consumer protection and services offered by different financial institutions and others. i believe it will be the role of the libra association to ensure this proper education so consumers can make informed choices. >> the point, despite, this is a difficult question to answer. he processed they would use an american wallet. if they were using a wallet from another country back obligates the answer for this is a challenge and arizonans deserve answers. i have national security concerns. if i grant immunity. they are not the first choice of drug cartel in human traffickers because crypto currency is not easy to use. libra is not crypto currency, it's a digital currency that promises an amenity. which raises concern about its

potential expectation for purposes per i'm concerned drug cartel at the arizona border region trying to finance operations along southern border. your testimony says you comply with the rules of the office of foreign assets control. but if one distinction person attempts to complete a transaction using libra, would you comply with the policy or would you allow a drug cartel transaction to be added? >> senator, first of all it is not an ominous so it will have a program and as far as the wall is concerned it is a result it will be very difficult to conduct on this network and you have my commitment that we will take the time before launch to ensure the network and the

ensure the network and the proper measures are taken captioning performed by vitac >> senator cotton. >> mr. marcus, thank you for your appearance and your testimony. your ceo in testimony before congress referred to silicon valley as an extremely left wing place, that's why so many center right voices have concerns about censorship on platforms like facebook, but also twitter and google and so forth. i worry about the possibility that a digital wallet and digital currency like libra could extend that into the payment system. there is reason to worry about that because democratic members of this committee have made it a habit of contacting major financial institutions and

encouraging them not to do business with, say, gun manufacturers or with government contractors who serve i.c.e. or the customs and border patrol. what safeguards, if any, will libra have to ensure that you treat on par people with views that may be disfavored and extremely left wing place like silicon valley? >> i appreciate your question, senator, and you're right that silicon valley tends to have a bias, but i want to reaffirm that facebook is a technology company where ideas across the political spectrum are welcome and treated equally, and as far as calibra and the calibra wallet is concerned, we wanted to ensure that people as long as they have a legitimate use of the product can do what they want with their money. of course, there are some restrictions and regulated

products, but my commitment to you is we will be thoughtful in writing those policies and we will be happy to follow up with you when we get closer to finalizing those policies. >> so that doesn't sound like much safeguard to me other than a commitment before you come into pressure from democrats, and just wait until tomorrow, when you go before the house financial services committee if you think the democrats on this committee have hounded banks, wait until you see what you're in for over there. i mean, so a federally licensed firearm dealer wants to sell firearms at a gun show, or maybe a neighbor wants to sell a shotgun to his neighbor, or a christian baker wants to practice his faith when he bakes his cake, or someone wants to pay a subscription to, say, breitbart instead of the "new york times," what confidence can people who have center right views have that libra is going to be available to them on an

equal basis as those who want to shut down gun retailers or shut down oil pipelines or government contractors who are working with immigrations and customs enforcement? >> senator, firearms, for instance, are a regulated product, they are already regulated and treated as such on the facebook platform, and i know it's a complicated issue and when it comes to writing this policy, again, i'm committing that we will be very thoughtful. i have to say that as far as i'm concerned personally, i believe that we should -- we should only get in the way in very exceptional cases and by being thoughtful of getting in the way of people doing what they want with their money, as long as it's lawful, but we also need to be thoughtful in how we write those policies. >> well, thank you for that commitment, and i do hope we have transparency because i assure you you will be getting letters from that side of the dais, to say nothing of the house financial services

committee democrats. just like all the major banks on wall street have been getting those letters, and for that matter your own workforce is going to bring that kind of pressure to bear on you as well. let's shift gears in the time i have left. we've heard a lot of talk about money laundering this morning as a big problem, i share the concerns we have heard this morning. money laundering is typically done by individuals engaged in criminal activities like drug trafficking, human trafficking and so forth. there is also the question of sanctions. one of the advantage of having the world's reserve currency is we have the ability to impose extremely effective worldwide sanctions, because most, if almost all transactions are dealt with in dollars worldwide. could you talk a little bit about how libra would have -- have an impact on the united states dollar as reserve currency and, therefore, on the united states government's ability to impose sanctions. this is different from money laundering by individuals, we are talking about sanctions on nation states like, say, iran

that is developing its on cry o cryptocurrency and cracking down on others specifically to try to avoid sanctions. >> senator, i'm glad you brought this up because i believe that if we don't lead in this space others will, and the same way that we will end up having two inter nets and two different infrastructures, we will have two different financial systems and two different financial networks and one will be out of reach of sanctions that are so effective in enforcing our foreign policy and preserving our national security. and this is why i believe that libra is an alternative that consumers will have the ability to use with wallets that will enforce the sanctions that are led by our national security apparatus and treasury. so i actually believe that if we stay put we are going to be in a situation this 10, 15 years where we are really going to

have half of the world that is going to operate on -- by the way, a block chain-based technology that will be out of reach from our national security apparatus. >> all right. thank you. >> senator schatz. >> thank you, mr. chairman. mr. marcus, thank you for being here. so on cybersecurity, on foreign interference, on privacy, on extremism, on fake news, is it fair to say you are still working on solving those problems as a company? >> yes, senator, we have a number of issues that we're hard at work solving. >> so you are working on solving those problems, they are not fixed yet, correct? >> some of them are and a lot deserve a lot more work. >> which ones are? >> i'd say some of the issues that we had in the past. >> right. cybersecurity, foreign interference, privacy, extremism, fake news. which ones of those have you fixed? >> well, you know, for instance, senator, the issue that happened back in the day with cambridge

analytic that cannot happen again. >> not which ones have you made significant progress. have you fixed any of those? >> i would say that all of them will always require a great deal of work. >> so let's just pretend it's the two of us having a conversation. my question is this: what do you say to someone who says maybe before you do a new thing and an enormously important thing, you should go ahead and make sure you've got your own shop fixed. so what do you say to that? >> senator, i believe that the status quo is really a huge burden on so many people around the world when it comes to financial -- >> you are making an argument for cryptocurrency generally, you are making an argument for this proposition generally. the question i have is facebook has a lot of problems. you guys have had a rough couple of years. so the question is why are you moving on to a new and challenging thing, other than

the grandiosity of silicon valley which causes you to get bored with your only thing and try to move into a new line of business. so the question is not would it be great to eliminate credit card fees. the question is not should the united states lead in this area. the question is why facebook and why before you fixed your other stuff? >> senator, i believe it's important that we continue to innovate on behalf of the people we serve and the same way that we've been able to bring communication prices down with our messaging app because now anyone with a $40 smartphone can actually communicate for free with the world. we want to continue innovating on behalf of the very people we serve and we hope that we can do the same thing for them when it comes to access to modern financial services. >> do you have specialized expertise with anti-money laundering sanctions, prudential regulations, protecting financial information, preventing discrimination and other violations of consumer financial laws? >> senator, i do, and my team does as well.

>> not you personally. does facebook have that? >> senator, through the team that i've assembled, yes, now -- now it does. >> within facebook? >> senator, within -- >> i'm not talking about the consortium. >> senator, within calibra which is the subsidiary that it created, it has the proper know-how to operate -- >> so you -- for this? >> yes, senator. >> okay. does your consortium have bylaws? >> senator, the charter of the association is in the process of being ratified by its members and it will be made public. >> so that's a no? >> senator, when we launched the website and white paper in june 18 we have guidelines, but the reason that we didn't want all the other members to sign an existing bylaw or charter is we wanted them to take part in

writing it because, again, we don't want to control the network and we think it's important that those decisions are made collegially with the other co-founding members. >> so what i'm hearing -- and they are terrified to talk about this publicly -- is that members of the consortium actually have lots of questions, too, similar to the questions that are being offered on this dais, but -- and they have great reservations about moving forward but they don't want to be left out because of facebook's market power. and so how do you address the bigger question -- not just the one that i asked earlier about you not having fixed your own shop before you move into currency, which seems just on the face of it to be nuts, how do you answer the question about size and power and the idea that lots of people out there think facebook is already too big and too powerful and now you're going to get into currency. so how do you address that question? >> senator, we answer that question with the very setup

that we have at the libra association and the way that this network is not only governed, but the way that we will have to face tremendous competition on top of this network with other companies that already have a lot of existing financial accounts that are already kyc, that are already operating that have trust. so you have companies like paypal and others that will, of course, collaborate, but compete with us. >> i guess you haven't just -- and i appreciate this, but you really haven't answered the most basic question of all which is why in the world should facebook, of all companies, given the last couple of years, do this? >> senator, because we have the ability and the means to innovate on behalf of the people we serve and we shouldn't -- we shouldn't stand back and wait to do it if we can help the very people that we want to serve because we have the resources and the engineering talent, i believe we should. >> because of your size.

>> senator, because of our resources and our engineering talent. >> because you are so big that you should get bigger? >> that's not the point i was making, senator. >> thank you. >> senator menendez. excuse me, you're right. senator jones. >> thank you. mr. marcus, i want to talk about quickly back to some of the money laundering issues that i've got real concerns about. i understand that calibra is committed to verify users and those kind of things, but for money laundering purposes if you've got a worldwide issue and you've got partners all over the world, how are you going to get your partners to verify these third-party products and how are we going to prevent this money laundering? i think that that's a major concern. how would you -- how are you going to deal with your partners? >> senator, first i want to

commit that we will not launch until we've satisfied those concerns with treasury and other regulators around the world in how the network is configured and it operates, but more practically the way that the network is going to operate is that all the on and off ramps will be regulated and will have proper kyc and aml. as a result activities such as money laundering, terrorism funding, will have an opportunity to be monitored and the intention here is really not for the efficacy of these programs to take a step back, quite the opposite. we believe that we can help improve the efficacy of these programs and we will work hard to make that happen because this is something that i care deeply about. >> well, i appreciate that. i do have some concerns about that because as senator brown said earlier, we've seen facebook run into problems in their platform time and time again on any number of issues and i think senator brown's

comments was it's just another learning experience, but at some point if things continue and especially with a currency like this, if all of a sudden this operates and you continue to see all matter of criminal activity and money laundering, at some point an innovative prosecutor is going to look across the table and say you, sir, are contributing to this. you are an aider and abetter. are you prepared for that down the road if you don't do your job and this currency is used to facilitate human trafficking, drugs, fraud, things like that, are you prepared for facebook and all of your calibra and libra users to be looked at as criminal defendants? >> senator, we are prepared to take the amount of time that will be required to ensure that those things don't happen and that we improve on the efficacy of these programs. >> all right. >> we really don't want this creation to be a tool for these types of activities and this is why this time before launching we're taking so much time and

sharing our plans early on and have started this long consultative phase. >> i didn't mean to imply my question that you intended to do that, i also know that there's unintended consequences and if things don't go right at some point somebody has got to step up. thank you for that. the other thing i want to talk about briefly is taxes and how some of this will be taxed. as you know, the current irs law streets digital currency as property, which means under current law every single transaction or purchase made with libra will be a taxable event. that the transaction will be taxable. so many businesses in the current crypto space now help their customers comply with tax laws by submitting detailed list of transactions to both the irs and the consumer, similar to how stock brokers might send both a customer and the irs a 1099-b. so does facebook plan on recording and reporting all libra transactions directly to the irs and to consumers to

ensure that they fulfill their tax requirements? >> senator, this is an important issue and the way that we're approaching this is two folds. one is libra, unlike other digital currencies out there, will not be volatile to the dollar. so as a result the variations in prices between the dollar and libra will be very, very minimal, but as far as the calibra wallet is concerned we will, of course, provide all tools to consumers so that they can report their taxes without the hassle of having to record all transactions on their own. >> well, but that -- so do i understand you're saying that you will provide that to the customer, but that you would not propose providing that to the internal revenue service? is that how i understand, that you're just putting the burden on the krnconsumer and the custr

to comply with internal revenue service regulations. >> my understanding of this matter is that is a decision in the hands of the irs and today the irs -- it is my understanding that they require consumers to report, but we would be happy to work with the irs to make it easier for consumers or to reach a di minimus determination for libra and other digital currencies in order to avoid the burden for consumers. >> i think from the money laundering aspect, criminal activity and the internal revenue service are two big things that you have to -- hurdles to overcome and it's going to take some time i think to get past all that. thank you for your testimony. >> now senator menendez. >> facebook ceo's mark zuckerberg once said that his model was move fast and break things, several of my colleagues

have referred to it. i only have five minutes which is not nearly enough time to list all the things that facebook has broken. i've highlighted some on the poster behind me. the underlying theme here, this is a company that does not think through the consequences of its actions and with nearly 2.4 billion active users when facebook breaks something it has serious consequences. so i've been listening in and out between the meetings i have had in my office to some of your testimony, mr. marcus, and basically the theme of your response to many of my colleagues, particularly on data protocol si, is trust us. well, trust is something you earn and facebook certainly hasn't earned it. so it's not enough to say that you will keep the calibra data separate. i'd like to know how exactly will you keep libra data separate from your social media data. >> senator, thank you for your question. i want to also say that in the case of libra, we're most

definitely not moving fast and i want to reiterate my commitment that we will not move to launch or to offer libra as a currency or on facebook's platform before -- >> just answer my question right now. how specifically are you going to keep the data separate? >> so the way that we keep the calibra data separate from the rest of facebook is that actually within our infrastructure we have separated the data from the rest of facebook's infrastructure and data in order for it not to get co mingled with the rest of the data. >> even though in your user agreement you say that you're going to -- may very well share aggregate data with facebook. >> aggregate data that we may use on the calibra wallet side, nonidentifiable data to understand how -- >> that's the beginning of

opening up the door. let me ask you this, if there is a commingling of data, purposeful or not, can you commit to this committee and the public that you will notify users and the proper authorities within 48 hours? >> senator, i commit that we will naturally notify users that would have been affected by this, but first and foremost, we want to make sure that it never happens. >> i know, but if it happens, i'm saying whether purposeful or not, things seem to happen at facebook, will you commit to notify both the users and the public within 48 hours of your finding of it? >> senator, i commit that we will inform users and the public if such thing happened within a reasonable time frame. >> so that could mean a whole bunch of things. let me ask you this, i have been the author and architect of many of the sanctions regimes we have leveled against rogue regimes, iran, venezuela, cuba to mention

some. many of us are concerned about how those countries and how criminals can use libra to evade u.s. sanctions under money laundering laws. last year the treasury department for the first time identified and published digital currency addresses associated with two iranian-based individuals who help exchange bitcoin for iranian cyber criminals that use ransomware to extort millions of u.s. dollars from over 200 victims. if libra was used for a similar transaction, would the libra association, the group that validates libra transactions, freeze the assets of such sanctioned individuals? >> senator, first i really want to stress the fact that if we don't lead others will and as a result the transactions that you highlighted and listed will happen on a network where we will have no jurisdiction and no reach and no ability to have

any -- exert any control for national security purposes. as far as libra is concerned, naturally because libra despite the fact that it will be headquartered, will be registered with fin sin, we will collaborate, we will have an aml program and will ensure that on and off ramps are properly regulated and as a result those types of activities should be extremely hard to -- >> but my core question is being -- having that individual identified to you, the type i just described, would you freeze the assets of such a sanctioned individual under your system? >> senator, the way that this would happen and the way that the system is currently contemplated, it would be the role of the big custodial wallets operating on top of the libra network like the calibra wallet and many others to block access for funds for those addresses, as well as all of the on and off ramps that would

prevent those addresses to convert to -- >> let me ask you one other question. i have a whole bunch of them, but i will submit them for the record. this doesn't assuage my concerns as it relates to the very sanctions that we have worked in a bipartisan basis to pass. so would the libra association -- what would they do if u.s. regulators wanted to enforce sanctions on certain individuals, but other global regulators did not? how would the association determine which set of rules to comply with? >> senator, that's a really good question and one that we're in active discussions with a number of regulators, including treasury. my understanding of this and the way that we're currently thinking about this is that actually the way to properly police and control the network is through, one, the on and off ramps and, two, to all of the

wallets that will be regulated. >> i'm going to take you at your word that you're not going to act before you have all these questions resolved because, if not, what libra could be is the wild west of cryptocurrency where, you know, money laundering, criminals and countries seeking to avoid u.s. sanctions could be their resolve. and we just can't have that. >> i agree, senator. >> senator van hollen. >> thank you, mr. chairman. welcome, mr. marcus. one of the benefits of going last is you get to hear -- you get to hear your colleagues' comments so i'm going to make a couple comments i hadn't planned to make otherwise. number one, senator kennedy rightfully pointed out facebook's failings in the face of russian interference in the 2016 elections. i know you're working hard to remedy it. i frankly wish the united states congress was working to remedy it as well. we have a bill in this committee, bipartisan bill, called the deter act that would

say to putin or anybody else that wants to interfere in our 2020 elections that they will pay a certain and very high price. so i hope, mr. chairman, that we will move on that. we have to get to the bottom of 2016, but my goodness we should be working on a bipartisan basis to protect our elections in 2020 and we have a means to do that. secondly, i heard a hint of this whole idea that facebook and other social media companies are conspiring against right wing voices. in fact, four days ago we had the president of the united states have what he called a social media summit at the white house where he summoned some of the most right wing extreme social media voices and peddled this idea that had president's own twitter account was somehow being blocked and limited. yet within the last 48 hours we've seen what a gross task lie

that was. this was a president that just spewed force all sorts of racist comments over the last 48 hours, and it does highlight the challenge social media companies have in trying to make sure that they monitor community standards to prevent incendiary comments that can cause harm or danger and at the same time allow freedom of voices on the internet. i hope we will get away from this nonsense that we often hear from the president and others about this kind of biassed senatorshsen censorship and i hope we will have more voices exercising their first amendment rights to speak out against the president's racist comments. third, realtime payments, i'm looking forward and enjoyed this discussion here. every time the chairman of the federal reserve, chairman powell has come before this committee and others i have asked them why it is the united states government is so far behind our european partners and many

others in realtime payments. the fact that we don't have a system in this country that can clear realtime payments is today costing millions of americans billions of dollars and they should -- they should accelerate their efforts and get it done and i personally do not think we should hand that over to a consortium of the biggest banks in the country. so let's talk about the conversation here today specifically. i understand your point, saying that weather you trust facebook or don't trust facebook, that's not a big issue with respect to the libra association. i have questions and concerns and you've heard some today about the libra association itself because what's different from things like bitcoin -- bitcoin, you know, the uncertainty around bitcoin, the uncertainty of its value, the wild fluctuations in my view mean it's not going to be put into widespread use, whereas the whole goal here is to have

billions of people around the world using this new point. i mean, that is the goal, is it not? >> it's really to help the very people who don't have access to current financial services. >> but the idea is billions of people and because this is now going to be tied to other currencies and supposedly be more stable it will be in very widespread use. so there are huge concerns because this in my view obviously has lots of questions that need to be vetted and the organization itself, the libra association, you say you don't have to trust facebook, but you do have to trust the libra association and they're doing something very different, they're creating a new currency that is intended to be used by billions of people and i think there are lots of questions that you still need to answer regarding that structure. i mean, i think people will conjure up the james bond movie and that organization spectre, and i think you're really clear

about how this is going to be a transparent association and be accountable in all the ways that have been discussed today, then it's not a question of whether people trust facebook or not, it's a question of whether people trust this international -- this organization by private -- run by private companies and my view is when you're talking about a world currency that's going to be potentially used by billions of people, i'm not sure there's sufficient accountability that you could build into that system that would answer all the concerns. but i look forward to the continuing conversation. >> thank you, senator. >> thank you, mr. chairman. >> thank you. senator kennedy has asked for a second round and senator brown and i will both go with another round of questioning and i think that will be it. we may have another senator or two show up. so with that, senator kennedy. >> mr. marcus, i want to follow

up on senator cotton's concerns, and i think the basis for his concern is we can agree on this, i think, that facebook is not really a company anymore, it's a country. i mean, you've got 2.2 billion people that use it. i don't see anything in your -- in the documents that i've seen that would prevent the members of calibra once libra is prevalent throughout the world saying, you know, we don't -- we don't believe in abortion rights and we have the transaction data of all these people, so we're just going to say if you believe in abortion rights you can't use libra, or vice versa. and you could make that assessment on the basis of any person's position on socioeconomic issues. i think you need to address that. let me ask you a question about,

again, there is a big issue on trust here. in may of -- a couple years ago, i think it was 2016, there was an article appeared that quoted news curators at facebook, they were in charge of the trending news section. do you know what i'm talking about? >> yes, senator. >> right. i don't think you have it anymore. but they testified that they had been instructed by the management of facebook to suppress news stories of interest to conservative readers, even if they met the qualifications of trending. and they stated that they were told to suppress news stories about cpac, mitt romney, rand paul, werner, walker, chris kyle, ted cruz, articles from news mack, articles from the

washington examiner. one of the curators even kept a log. is that true? >> senator, i wasn't part of that team and i was not -- i'm not aware of how it functioned, but that product doesn't exist anymore. >> okay. well, the news curators also told that they were instructed to include in the trending news section articles from certain publications whether they were true or not, and two of those publications were cnn and "new york times." is that true? >> senator, again, i wasn't involved and this was not my product team and it might have happened even prior to my time. i do want to say, though, that facebook really is a technology platform that is neutral when it comes to -- >> i'm familiar with facebook. let me ask you one other question. the news curators said they were told by management not to ever put in an article in the trending news section about facebook. is that true? >> again, senator, this was not

my team and i'm not aware. >> okay. is there any data that facebook has on its customers, if you will, that on principle facebook wouldn't monetize? >> senator, the way that the data is used on facebook, when it comes to monetization, is enabling better ads, to serve better ads to people that are personalized. >> i get that. i'm sorry to interrupt you, but i get that. but is there any data that on principle facebook would say we're not going to -- we're not going to make money on this, this crosses the line? have you ever thought about that? >> senator, it's not about making money, but as far as calibra is concerned -- >> it's not about making money? >> senator, we don't typically

look at data in a way that is to make money, it's just to improve the service, including improving the quality of the ads -- >> i'm going to stop you now, mr. marcus, because you're telling me that money is a secondary concern at facebook? don't you have shareholders? >> senator, we do, but i believe that it is important that we first and foremost serve our customers and the way we have done it with messaging apps notably without monetizing them yet is a testament to what we can do to lower costs for people when we have the opportunity. >> last question. i have 19 seconds here. i've got to ask this, if this is true. do you know these people, sheryl sandberg, elliott is that raz or monika bickert. >> i do, senator. >> is it true that mr. zuckerberg told them to meet several times and consider shutting down men candidate

trump's facebook website in 2016 because mr. zuckerberg disagreed with his views on immigration? is that true? >> senator, i'm not aware. >> you just don't know? >> i do not know, senator, but it would surprise me, but i'm not aware. >> okay. last question, i promise. i've heard -- i've seen this description before and i want your thoughts on it. if you and i interface on facebo facebook, there are really not just two participants, it's you, you, it's me and it's facebook. is that an accurate description? is that nothing is private? >> except on messaging platforms, notably on what's app that is fully end to end encrypted in this case it would be just the two of us, senator. >> and this really is my last one. if libra catches on and let's say 200 million people are using

it, somebody is going to have the data on all of the financial transactions that those 200 million people have consummated, which is going to indicate what they're buying, what they're not buying, what their likes are, where they like to shop, just a treasure trove of information. you're telling me that nobody in calibra is going to attempt to monetize that? >> senator, when it comes to the libra association they will not have any personal identifiable data and as a result they will have no way to -- >> somebody will have the data. who will have the data? >> the wallets that have provide the services will have the data for their own wallets and i can -- >> so you're telling me nobody is going to monetize that data? >> as far as the calibra wallet we don't intend to -- >> but isn't it the case that at some point those consumers are going to be sent an email saying, do you care if we share your data and the details are

right here, click on this and it's going to refer you to a ten-page single-spaced disclaimer written by the lawyers in which you could hire a dead body and nobody would ever find it and they're going to start doing it. isn't that what's going to happen? >> no, senator. >> thanks, mr. chairman. >> thank you. senator brown. >> thank you, mr. chairman. mr. marcus, thank you for sitting here through this. i normally don't respond to uber partisan comments from colleagues but i would just ask that the republican committee staff to let senator cotton know that every letter to facebook from this committee, from any of us on this committee, has come at least from the committee have been jointly signed by senator crapo and me and i think that's important to know. you've seen, mr. marcus, it's clear from this hearing the distrust of facebook is a pretty universal feeling here. you heard senator kennedy say it, senator mcsally, senator

smith, van hollen, schatz and me and others. that is an issue you need to deal with. and i want to just read back what you said to me about trust. you said, senator, you heard it directly from mark and i will reiterate this, that trust is per moored y'all and i responded i didn't hear it from mark and you responded trust is per moored y'all, we have made mistakes in the past and are working on -- >> i know what the word trust means, i know what the word per moored y'all means. what the hell does that mean. you said and apparently mark zuckerberg said although we found no record that he said it. i believe you said he said it. what does it mean? >> senator, it means that we need to continually -- we need to continue to do better in serving the customers, the users we're serving and we will do what it takes to earn their trust and that's definitely the case as well for libra and the

calibra wallet. >> and this is the same mark zuckerberg that once called people who trust him with their data dumb and the next word starting with an "f" i can't say in this committee. this is the same mark zuckerberg who said that. 4,000 emails -- i have over 4,000 emails, pictures, addresses, people just submitted it, i don't know why they trust me and then he said dumb and a profanity. so why -- i just -- and then i hear you quoting him and then you saying yourself that trust is per moored y'all and the definition is from the beginning of time. your biggest problem is that people don't trust you. so what am i to take from this? >> that we need to continue working very hard to ensure that we are deserving of trust. >> but why would you lead with trust is per moored y'all, it's so much in your dna that you can always trust us, but then just play out one after another times

that you deceived, undermined, betrayed that trust. again, senator schatz said over and over why with all of your problems should we trust you on something as important as a worldwide currency and the damage that can come from it? >> senator, this is why we've set up libra the way we have which is we will not control it and we will be one among 100 different participants that will govern over the network and the currency. as a result we will have to earn people's trust if we want them to use our products and services on top of the libra network because they will have plenty of choice with established companies that have a lot of trust. >> you trust us to believe that statement when you say one of

100 but you are the only one that has access to 2 billion people. the george orwell people, some people are created for observing wall than others. there are 100 players but nobody is like you as the preeminent player. >> senator, i do want to address this because i believe that there might be some misunderstanding on how the people on the facebook wallet, the calibra wallet, will have to onboard. we will not have the ability to onboard all people using our products automatically, naturally, we will not even use facebook log in. people will have to onboard, create a new account with calibra, upload their government-issued id and as a result there is going to be a lot of friction and we will have to make very strong commitments so that people trust us and we

will have to honor those commitments for a very long period of time to earn people's trust because while we do that you will have other wallets that already have a number of customers that they can enable libra for immediately and we are not in that position. as a result we put ourselves in a position where we will have to work very hard to earn people's trust to use our products and services. >> pretty hard to trust when there is so little contrition, responding to senator kennedy about the 2016 election or what you've done to the media in this country, to journalism and what you've done according to the united nations into myanmar. pretty hard for us to trust you with a worldwide currency that you're setting up in switzerland. >> senator, i believe that the status quo is not working for so many people, that it's time for new progress to happen in financial services for those barriers, for so many people that are left behind to be lower and for costs for so many people

to be also lower and that's why we are deciding to take the lead on this and then relinquish this lead. >> martin luther kir. chairman,d trust facebook, it's pretty clear there's almost nobody on this committee that does. thank you. >> thank you, senator brown. i will ask my final round of questions right now. mr. marcus, i've stated in a number of our previous hearings that ensuring that individuals have real control over their data is critical and the united states does not have in my opinion adequate assurances in its law. i talked about that with you in my first round of questions. imperson'm personally convincede need to -- if we don't -- we have a second to recall approach, as a indicated and i think we have to have a more comprehensive broad-based approach at least for the basic rights. europe and the gdpr does have

such a rule. that guarantees individuals with the right to information about the access to their personal data which i believe means they should have access -- they should be notified when their data is being collected, what data is being collected and given rights at that point to opt out or in and there should be corresponding responsibilities. does libra and its associated third-party developers like calibra, do they anticipate being captured under gdpr at this point in time? >> chairman, it will really depend on the jurisdiction of different wallets, but as far as the calibra wallet is concerned, we will definitely have the highest standards when it comes to privacy and as soon as the privacy policies and commitments are written, you have my commitment that we will share those with you. >> all right, thank you. and let me get into that a little bit in the last part of my questions here.

as i understand it using the block chain technology results in a limited amount of personal private data actually being collected. you've indicated that a person would have to provide their government-issued id and then i assume -- and please correct me or help me understand this -- from that point calibra would have their id. they would know the basic set of facts that's on their government id and i assume that id -- or that information is connected to some kind of a code data or something that's used in the block chain. is that correct? >> no, senator, actually the block chain will not include personally identifiable data. >> but would calibra have the ability to connect a block chain to the user of that block chain? >> senator, it will depend on whether the transaction has been initiated from a calibra

customer or not. >> okay. and if it was initiated by a calibra customer, would calibra, then -- calibra would then know the identity of the person using -- or engaging in that transaction, in that block chain? >> yes, senator, because they would be using our product. >> and what else would calibra know in terms of what other data would calibra be able to use if it wanted to? >> senator, the mind-set in which we're establishing the product and the privacy of the product is that it will only collect the information that is required to offer the service, but also to keep accounts safe, which is, of course, really important when it comes to money and especially because we will have strong customer protection programs so we will need to protect accounts and data, relevant data is actually quite

helpful in protecting consumer' accounts. >> tell me what some of that relevant data is. let's say it was a retail purchase. does that mean that the item purchased is a part of that data? >> senator, that would really depend, and i don't believe that we need that information, for instance, either for the purposes of securing accounts or other purposes. >> so i've been told that the block chain technology actually allows an enhancement of privacy protection. do you believe that's the case, the use of block chain technology actually reduces the potential for the abuse of collection -- collecting data on individuals? >> senator, yes, typically it enables people to use software that they can run on their own and as a result they can be their own sovereign, if you

will, of the data that is used, and then it's a question of choice for consumers. on one side they can have consumer protections and on the other they can be self-sovereign, but there are opportunities with block chain technology to enable people to own their own data. >> so in comparison, leaving the libra proposal out of the question now and just looking at the technology issue of block chain technology versus, say, the current transactional technology that we use for credit card transactions or bank account transactions, check transactions and what have you, if we were to see a move in -- globally into use of block chain technology for currency transactions, would that be -- would that represent an opportunity to enhance personal privacy? >> senator, it can be if

implemented the right way, yes. >> all right. i'm going to want to learn a lot more about that, maybe you could give me some of your information on that. all right. before we gavel to close i want to reiterate my belief that it's critically important that policymakers and regulators understand the rules of the road as this project continues to develop. to the extent that gaps within the existing u.s. authority become apparent, it's worth examining whether new or clarifying legislation is warranted to ensure that u.s. regulators are not unfairly being relegated to the sidelines in assessment and oversight of this project and others like it. that concludes the questioning for today's hearing. for senators who wish to submit questions for the record, those questions are due to the committee by tuesday, july 23rd. mr. marcus, we ask that you respond to those questions as promptly as you can. and, again, thank you for being here. >> thank you. >> this hearing is adjourned.

>> thank you, chairman. [inaudible conversations] [inaudible conversations]

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waiting for the judiciary committee meeting to begin, starting 10:00 a.m. eastern or about there this morning. the chair of the committee, lindsey graham of south carolina, and ranking member dianne feinstein of california will be hearing this morning from fbi director christopher wray about oversight of the fbi. expecting this to start shortly.