Senators from both parties questioned at a hearing Tuesday why Americans should trust Facebook’s new digital currency system with their paychecks given the social media giant’s repeated data privacy scandals.
Libra, a cryptocurrency under construction by a Facebook subsidiary called Calibra, was announced in May to a blast of bipartisan incredulity by lawmakers and the Trump administration. Critics asked how the company could ensure that Libra, which is designed to be anonymous, could be prevented from being used by money launderers, traffickers or terrorists.
But Tuesday’s hearing before the Senate Banking Committee was as much about Libra as it was a bipartisan prosecution of Facebook as a whole.
David Marcus, the head of Calibra, constantly sought to reassure senators that Facebook would not launch Libra Wallet, its payment system, until regulators are satisfied with its compliance to federal regulations. But he was repeatedly met with disbelief, disapproval and, at times, outright sarcasm.
“Facebook has demonstrated, through scandal after scandal, that it does not deserve our trust, and that it should be treated like the profit-seeking corporation it is, just like any other company,” said Ohio Democratic Sen. Sherrod Brown, the panel’s ranking member.
“It takes a breathtaking amount of arrogance to look at that track record and think, you know what we really ought to do next?” Brown continued. “Let’s run our own bank and our own for-profit version of the Federal Reserve for the world.”
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When Marcus told Brown that the company chose to base its cryptocurrency firm in Switzerland because the neutral country is an international finance hub, and not to “evade” U.S. laws and regulations, Brown said Marcus was “delusional.”
But Marcus insisted that “trust is primordial” at Calibra and the Libra Association, the 100-member nonprofit that will oversee the banking operations. Because Facebook is only one of the 100, Marcus said, users would not have to trust Facebook to trust Libra.
“We’ve made mistakes in the past,” he said. “We’ve been working hard to get better.”
The hearing came days after news broke that the Federal Trade Commission recently voted to slap Facebook with a $5 billion fine because of the 2018 Cambridge Analytica scandal, in which information on 87 million Facebook users was accessed by a third party. The penalty would be the largest-ever levied against a technology company by the FTC.
Several senators invoked an oft-repeated mantra of Facebook chief executive Mark Zuckerberg — “Move fast and break things” — and asked whether the company’s foray into digital currency would result in negative consequences for the U.S. financial system and for consumers.
“It isn’t our intention to move fast,” Marcus told New Jersey Democratic Sen. Robert Menendez.
Marcus said he agreed with concerns raised by Treasury Secretary Steven Mnuchin, who on Monday questioned how Calibra would prevent use by criminals, and Federal Reserve Chairman Jerome Powell, who criticized the company in congressional testimony last week.
“If those concerns are not addressed and the regulatory oversight is not appropriate, we will not launch [Libra] until it is,” Marcus said.
Only a couple of senators took a generally positive stance toward Libra. Sen. Patrick J. Toomey predicted the service could lower transaction fees and foster other innovation in banking.
“It strikes me as wildly premature for us to come to the conclusion that we have to act now to prevent what could be a very constructive innovation in financial services,” the Pennsylvania Republican said.
The panel’s chairman, Sen. Michael D. Crapo expressed a litany of concerns about Libra but called its vision of offering capital to individuals without bank accounts “commendable.”
“According to the World Bank, 1.7 billion adults remain unbanked, but two-thirds of them own a mobile phone or otherwise have access to the internet,” the Idaho Republican said. “If done right, Facebook’s efforts to leverage existing and evolving technology and make innovative improvements to traditional and nontraditional payments systems could deliver material benefits.”
Marcus’s testimony will continue on Wednesday before the House Financial Services Committee.
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