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tv   Washington Journal Chris Brummer  CSPAN  August 23, 2019 7:15pm-7:45pm EDT

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♪ -- watch live coverage on sunday at 1:30 on c-span or listen life on the c-span radio app.
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national copyright cable satellite corp 2019] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> good morning. >> good morning. in the best possible way what is facebook trying to do and why? very interesting questions. the simple answer is that they are trying to create a digital that people can use cross borders, and a digital currency means not necessarily a government currency, but their own private currency that people can use and ship to one another in different parts of the world. reasons why they are doing this is a little bit complex, because no one knows exactly -- they have certainly xplicitly said that they want to, and i'm reading this because think it's useful for your listeners to hear, to enable a simple global currency and infrastructure that empowers billions of people.
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ut there are some financial motives as well. >> and so, as far as the current system, what would facebook's others do not? >> so facebook is planning to this global currency, and y doing so, establish a consortium of different kinds of larger global technology of anies and a couple nonprofits and the global the libra, called libra rough this association they are trying to a platform really that would enable different kinds of globalr this new private and also to help to based in the book keeping on that currency. mple i saw, ifi
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wanted to send money to another foreign country that doesn't have a strong banking system, this would alleviate that. guest: that is the goal, the concept. sending money across borders is extremely sensitive. fees.ld be enough in the concept or idea of a faster, cheaper global payment system is one that a lot of people have been very interested in. there are real goals and benefits particularly for people who don't have access to those kinds of banking services. from there was pushback the white house itself about this. what is the concern from everyone involved? guest: that's really interesting. the pushback was bipartisan, different sources of emphasis. a lot of people on the democratic end, republicans as well, were concerned about
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consumer protections, money laundering. cryptourrency's use graphic techniques, there is behind those transactions -- anonymity behind those transactions. there is a line ofent -- a new argument from the president saying is this an american device? is this something that is good for the united states? there are a variety of interests. host: if you want to ask questions about this idea or this concept from facebook, republicans,for 202-748-8000 for democrats, for independents.8-8002
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let's hear from steve nguyen. -- steven mnuchin. [video clip] guest: a consortium of 28 businesses announced it is developing a cryptocurrency called the libra. the treasury department has expressed very serious concerns that libra could be misused by money launderers and terrorist financiers. bitcoinrrency such as have been exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, extortion, ransomware, illicit drugs, human trafficking. many players have attempted to use cryptocurrency to fund their maligned behavior. this is a national security issue. the united states has been at the forefront of regulating
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entities that provide cryptocurrency. we will not allow digital passage service providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of illicit activities. host: pull something from that. what is he saying? guest: the concern coming out of the treasury department is one of financial crime. that bad guys can use the proceeds from their illicit activity and abscond away with those proceeds. he's taking aim not only at libra but at other cryptocurrency as well, like bitcoin, which is the most common cryptocurrency. he's taking aim at all cryptocurrencies saying we are going to start stepping in and thet trying to regulate intermediaries to ensure some i
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quit -- to ensure some market integrity. people can hide their money via these cryptocurrency's -- via these cryptocurrencies. host: you invest in bitcoin and it grows in value. does libra have that feature? guest: they are entirely different concepts, even though both raise a certain kinds of money laundering concerns. entirelys decentralized. the processet into of memorializing these transactions, creating a node on the network. it is not only cross-border but it's hard to censor, it's hard to unwind transactions off the bitcoin block chain. libra is highly centralized. facebook for the moment is driving the bus. it says maybe in a year or so,
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they may end up handing the baton to the libra association writ large. so far, there are 28 entities. it is different from a world of far-flung nodes you see in a bitcoin decentralized universe. they are very different concepts, even though they can both raise different kinds of red flags depending on the jurisdictions in which they are operating. likely regulated jurisdictions can create a portal for illicit funds. host: on the topic of jurisdiction, does the u.s. congress have a say or oversight over such a thing? guest: the challenge of financial technology is they fit in the gaps of different regulatory rules. it's hard to define, for example, how should one classify bitcoin? even if you do classify it as
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something, do the rules relating to that something -- are they up-to-date enough to deal with the risk bitcoin poses? facebook'se, currency of the libra, many say this looks and smells like an exchange traded fund or etf. the structure for how this is done, creating this portfolio of assets where i give you my money, i get libra in return, that money i'm giving you is deposited somewhere and invested somewhere else, this looks a lot like an etf. the word used to describe the different into mary's and facebook -- intermediaries and facebook's own description, it literally takes the words used to describe
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etf's. if you call it an etf or a security like a stock or bond, do the rules in place speak to this? that is something congress is trying to grapple with. host: mark in hollywood, florida. go ahead. caller: good morning. sayingn to what you are and i've been telling friends and family for a decade that the world is going to be moving towards centralized electronic money. there are a lot of risks in this as well. for example, you are not going to have any anonymity anymore. everything is going to be electronic. it's going to be centralized eventually. this sounds like a world currency, which i'm not in favor of. anytime you consolidate power
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and the currency into a global currency, which is what everything is being pushed to, there's some negatives to that for the people. if you get that one centralized sudden -- is all of a there is a term that has power corrupts and ultimate power corrupts ultimately -- you run into problems. host: we will let our guest answer. guest: that is a great observation. becauselly a red flag it is facebook in particular that is bringing about this particular idea or facebook has been the face of this particular venture. one of the concerns is, number one, what happens when you have a company that already has a lot of data -- facebook is a data company -- now wanting to
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reinvent itself and make itself a financial services company? facebook has created a code co-idiary called -- colibra.ry called what are your transactions in the wallet? they promised there will be some strong safeguards to prevent that sharing of information. concernses privacy because they were just fined $5 billion for privacy violations. what happens when you have a major technology company also going into finance? as you mentioned, that anonymity that people have always assumed to be inherent in a lot of cryptocurrency transactions, it
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is not quite as anonymous as people thought. you still track transactions, even if you don't know exactly who a person is. once that person jumped out of the cave into the light and try to liquidate their ies, theyrenc reenter the regulated financial system. the treasury department has crated techniques to identify people at that pressure point. this is larry in minneapolis. republican line. caller: thank you, c-span. chris, i was wondering, don't you think for central governments, this kind of thing is their worst nightmare? what central government wants to give up control of the payment
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system, the currency? wouldn't it have a data devastating effect on the ability for government to raise money? i almost think when they talk about money laundering and all these things as the reason -- what happens now with the current currency and payment system -- this is almost like a nuclear option to them. because of that, i don't see central governments allowing these kinds of initiatives to come to full bloom. i would be interested in your thoughts on that. guest: what a great question. one of the best vehicles for money laundering is cash. that is quite anonymous. significanten a amount of discussion as to whether or not particularly libra could create all kinds of
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challenges for central banks in part because the way in which they are creating the currency is they are saying we will have this libra and we will back it with government currency and government securities. it depends on what currencies are in that basket. of waysimagine a number in which there could be a run on the currency. i will give you a simple example because it is something everyone can understand. weht now, facebook is saying are not going to track your financial transactions, how you spend your money. we will keep that information separated from our data that we keep about you in terms of how you use facebook as a platform. imagine if people have tons of facebook orey learn another member of the libra association can access that
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information in the never one runs to the door and tries to sell their libra -- and then every wine runs to the door and tries to sell their libra -- and then everyone runs to the door and tries to sell their libra. banks are wary of this. particularly central banks in developing parts of the world. although they've said the major goal is to increase access for these banks, the country with india, has said they don't want it. it could threaten their own monetary sovereignty. have theoment, we global currency, but if you have a weaker currency, you can imagine all kinds of potential instability where people decide to buy or sell your currency if
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it's included in the basket. twitter -- ifoff we have those means of transferring funds electronically, why the need to add this to the group? guest: there was a congressional hearing just this week. one of the comments or one of the ideas expressed was, you facebook isnow, trying to come up with a technological solution to this remittance problem. it is so expensive to send money overseas. it takes so long for money to clear in the united states. if you get a physical check and you want to deposit it, it could take 4-5 days to clear. you can get into problems and that cap. -- in that gap.
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, theynate banking hearing said it is a policy problem. things the fedin should do to accelerate payments and begin to crack the oligopoly on cross-border fees that are being charged. host: this is chris bremmer from georgetown university joining us. matthew from pittsburgh. go ahead. caller: good morning. i think the cryptocurrencies are somewhat like a religion. i've tried to do some research into cryptocurrency and i don't find anything that backs this. nothingnothing hard, tangible. this currency could be valued whatever they decide to make the
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price, it seems that's what they can come up with. seemsd be wrong, but it to me every time i try to get some research to see what is this cryptocurrency based on, i find there's nothing there but thein air. guest: you are not the only one to have made that particular critique. it is very important to distinguish cryptocurrencies and emphasize two things. number one, how they are structured can be very different. the libra cryptocurrency is backed by something. it is backed by other currencies, national currencies and government securities. it will have something there. it can introduce exchange risk. then you get into something like said, bitcoin is
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self-referential. the value is determined by demand. useful and can be used in lots of different places and the technology behind a lot of these could do currencie -- , the cryptocurrencies block chain, that's pretty interesting stuff. how it program money and is spent and when it is spent, there could be useful applications there. cryptocurrencies are very different and people are trying to figure out what constellation of features will be regulatory compliant and have a real-world use value for people whether it's payments or processing
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transactions, memorializing different relationships. that conversation has become quite technical. host: from chicago, marcia, independent line. caller: i might have missed out a bit on the conversation. i'm a bank employee. deposits?this affect the bank could lose a lot of interest money on these deposits? guest: what an interesting question. was whyhe first issues getting into the financial services business? it's quite interesting. i had the example of when you dollars, money in u.s. get libra coin in return, that
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money has been put into a bank account or some sort of government security, notice when i give you that dollar, i is a customer and not receiving interest on that money and ,nstead, the money generated facebook or the investors are able to earn returns on the money given to them. deposit no interest subject to some kind of foreign exchange risk. it is true that from the customer standpoint, you are not going to be able to get interest-earning. the libra, association will be able to earn therest off of the float, money that has been given to them. the consumer will not. host: will the stakeholders be
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required to put in some sort of cash to get this started? guest: each of the members have been required to put in $10 million. that has not yet happened. the agreements between the 28 members, it is still somewhat tentative. that is the expectation. that is the floor and other members are urged to contribute more money. filingsook's latest with the ftc. , they recognized that this is attracting much more scrutiny on capitol hill and with the ftc and international regulators and they have signaled that this whole project could cost a lot more than they had anticipated. because of the scrutiny they are receiving and the extra steps
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they may have to take to ensure the project is safe and sound. host: if facebook itself is part of the initiative, does it get more say because they are the founders? guest: right now, yes. until they decide to pass off the baton, facebook is driving the bus and is able to shape and fashion this libra ecosystem in a way that suits its interests. i assume they will negotiate with those on board with $10 million for how they shape out the margins of that system. once they go live, facebook has memberst each of the 27 and ultimately 100 members will have an equal say. even when they invest more money, the amount of say for each of those members will be capped.
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if one always query member builds more infrastructure -- each of these members have this investment opportunity where they can build different apps, one could argue that facebook could build a whatsapp,using through its messenger system, if more of the transactions are going for your infrastructure, that could give you more defective control over the factotum -- de facto control over the system. caller: facebook intends for this digital currency to be global. i'm wondering what the implications are for those living in the third world who don't have access to electricity, let alone electronic devices. guest: that also is a wonderful question and a very interesting
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question. premise has been we will create this global currency as a means of increasing financial services and access to financial services for people in developing countries. in many parts of the world, particularly developing countries, people tend to have cell phones. you can jump over a stage of development by leveraging the fact that they have cell phones and they can use their cell phone as a bank. it is an important thing to emphasize. if you can use your cell phone and get online, maybe that is an access portal to financial services. includingf reasons, , inregulatory concerns order for this to likely work, you will have to set up an account, people will need to
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have some indication as to what your identity is. if it is an etf, you will have to go through a broker. whatu don't have a bank, is the likelihood that you will have a broker-dealer? in partstical leaders of emerging economies are very skeptical of the project, in part because they are concerned that by introducing this currency, it could end up messing up their monetary systems and domestic economies. if you can create a portal for cross-border -- could it come back to haunt those people, widely destabilizing their local economies? host: is there a rollout date? guest: there was a very ambitious rollout date. in number of members of congress
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-- a number of members of congress have asked for a moratorium until they hold all the regular tory compliance. -- until theyory hold all the regulatory c-span's washington journal, love every day. oming up, the twisted life of david carr. he'll be on to talk about the russia's influence in american politics. state university professor discusses the history of the first africans arriving virginia 400 years ago. in 1619. e sure to watch c-span's washington journal live at 7:00
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eastern saturday morning. join the discussion. ♪ > today democratic representative seth -- announced presidential bid francisco.h in san here are his remarks. dnc.ello, thank you so much for having me here for today. and for all that you do. i have only been in this race since april. i one of the alaskan dates to in. but i couldn't be more proud of hat our team has accomplished over the last few months. we've been challenging donald weakest, as e's commander-in-chief. and showing this country that are the party of america strong overseas and safe here at home. to take backnning

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