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MIKE ROUNDS conamr TES: winounos sae cov Wnited States Senate acer aneeone WASHINGTON, DC 29510 October 17, 2019 Nathan MeCauley President Anchorage Trust Company P.O. Box 89313 Sioux Falls, $.D. 57109 Dear Mr. McCauley: | write regarding concerns recently expressed by a number of my colleagues about involvement in the Libra Association, which was formed to develop a new eryptocurrency known as the Libra. It is profoundly disappointing that my colleagues chose to address your peers in such an ominous tone, which I fear may put a chill on innovation in the long run, 1 believe that there is promise in cryptocurrencies and digital payments, but regardless of how one views such technologies, itis clear that the United States is falling behind in this space. By 2022, digital wallets — the same kind of product through which consumers will transact Libra ~ will comprise less than 10 percent of U.S. consumer in-person point of sale payments. Contrast this with Africa, which in 2017 already had 100 million active mobile money accounts that were used by one in ten Africans. Recently the number of active mobile money users in Africa has been growing by more than 30 percent annually. Other parts of the world are also dwarfing American innovation in payments technology. In the People’s Republic of China, more than 80 percent of consumers used mobile payments last year compared to 10 percent in the U.S. Furthermore, over a 10 month period last year, the U.S. saw a dollar volume of mobile payments transactions that was less than 1 percent of the volume of similar transactions in China. With the payments industry still in its infancy in our country relative to the rest of the world, it puzzles me that my colleagues would react with such hostility to the creation of Libra, ‘Technologies like Libra also have the potential to help unbanked and underbanked consumers right here at home. According to the Federal Deposit Insurance Corporation’s latest survey of unbanked and underbanked American consumers, 6.5 percent of households in the U.S. are totally unbanked and 18.7 percent of households are underbanked. Given the ubiquity of cell phones and internet connections, digital currencies and digital wallets have a role to play in reducing these numbers. Above all, it would be unfortunate to shun a new solution that could connect more of the most vulnerable Americans to our financial services system. ‘A number of senators have also correctly highlighted the challenges that lower income ‘Americans face when waiting for payments to clear, The Federal Reserve (Fed), which put a damper on the development of a private sector real time payments solution by announcing FedNow, is itself still years away from a fully-operable real time payments processing solution, Innovation in the digital currency space could help bridge this gap. Given the length of time it will take for the Fed to finish FedNow, the Libra Association should not wait to see if recent conversations about a Fed-run digital curreney come to fruition. The negative reaction to Libra and its potential to benefit consumers across the globe is particularly puzzling considering the antiquity of the legal framework governing cryptocurrencies and digital assets in the United States. As it stands, we have no clear legal way to ascertain whether a cryptocurreney is a security. What legal foundation we do have for these types of questions is rooted in the Securities Act of 1933. That law was written more than half a century before computers and the internet were created, more than two decades before Hawaii was admitted to the Union, a decade before the jet engine was developed, and in a period of time in which 90 percent of rural America lacked electricity ‘Numerous companies who are active in the cryptocurreney space have told me that due to the archaic and inflexible nature of our regulatory and legal system, itis easier for them to operate and even incorporate overseas. That is incredibly disheartening to hear and should be unacceptable to every member of the Senate. If we want America to retain its pioneering edge in the digital space, Congress and our regulators need to look into the mirror and ask ourselves how long we're willing to wait while other countries run circles around the United States, Some concems that my colleagues have identified could be rectified by a number of existing legislative proposals. For example, I share concerns about the dangers posed by digital currencies when it comes to money laundering, criminal activity and the financing of terrorism, and I appreciate your acknowledgement of these risks. I also agree with the need for innovators in the digital currency space to comply with anti-money laundering rules. Expanding the federal government's anti-money laundering and crime fighting jurisdictions to include digital currencies would be a sensible way to resolve fears about anti-money laundering controls. Your early efforts to construct an anti-money laundering plan in absence of the government’s jurisdictional clarifications deserve commendation. T recognize that there are clear rules of the road that need to be followed with the development of new technologies like Libra. By no means would I advocate for any members of the Libra Association to get a shortcut or free pass around any of those rules. At the same time, the demands of a few of my colleagues should not be viewed as defining federal policy when comes to innovation in digital currencies. That is not healthy for innovation and, fundamentally, is not how our republic should work. I am encouraged by your entrepreneurial spirit and the entrepreneurial spirit of the other members of the Libra Association. The slow and deliberate approach taken by the Association is appropriate, and I appreciate the Association’s dialogue with Congress and with our regulators. While the Association is still in the process of standing up its governance framework and its operating rules, it would be a shame to lose the progress you have already made in creating Libra, I hope you persevere and that your decision to move forward is based on your sound business judgement. , ‘Your willingness to take risks in an effort to improve the lives of Americans and our neighbors across the globe is one of the hallmarks of what makes our country great. I look forward to hearing more about your future developments in this dynamic business arena, Sincerely, M, Hotes Fase M. Michael Rounds United States Senator ce: Katie Haun, Partner, Andreessen Horowitz Joe Lalluz, Chief Executive Officer, Bison Trails Jamie Hutchinson, Breakthrough Initiatives David Marcus, Co-Creator and Head, Calibra Jim Migdal, Head of Business Development and Institutional Sales, Coinbase Sonia Sennik, Executive Director, Creative Destruction Lab David Grunwald, Vice President of Innovation, Farfetch Jérémie Sitruk, Group Treasurer, Iliad Matthew Davie, Chief Strategy Officer, Kiva Ashwin Raj, Vice President of Payments, Lyft Jeremiah Centrella, General Counsel, Mercy Corps Patrick Ellis, General Counsel, PayU Sawyer Williams, Ribbit Capital Sandra Alzetta, Viee President and Global Head of Payments, Spotify Ryan Pripstein, Head of Research, Thrive Capital Peter Hazlehurst, Head of Payments, Uber Fred Wilson, Partner, Union Square Ventures Jaime Abril, Principal Manager of Fintech Partnerships, Vodafone J. Thomas Jones, Executive Vice President, Women’s World Banking Wences Casares, Chief Executive Officer, Xapo