Facebook’s Libra cryptocurrency had its first big regulatory test on Tuesday when Calibra head David Marcus appeared before the Senate Banking Committee. It didn’t go well.
One senator said Facebook was “delusional” to want to create its own cryptocurrency. Senators from both parties were concerned about the risks of what would in theory be a widely used currency that could lack meaningful regulation.
Their criticism ranged from issues with Facebook’s less-than-stellar reputation for how it treats user data to worries about how scammers could use Libra to bilk people out of their savings.
“Like a toddler who has gotten his hands on a book of matches, Facebook has burned down the house over and over, and called every arson a learning experience,” said Sen. Sherrod Brown (D-Ohio), the ranking Democrat on the committee. “We would be crazy to give them a chance to experiment with people’s bank accounts, and to use powerful tools they don’t understand, like monetary policy, to jeopardize hard-working Americans’ ability to provide for their families.”
Marcus’ prepared statement laid out a framework for how Libra would work under existing U.S. regulations, including how states could regulate digital wallet apps.
Facebook envisions Libra as its own currency that will be headquartered in Switzerland but used worldwide through wallet apps. Facebook’s own app, Calibra, would presumably have a significant advantage over others since it would be built into properties it owns, includinfg Facebook, Messenger, WhatsApp, and Instagram. But lax regulation in the market for digital wallets could push people – and their data – to unsavory wallet apps.
“I don’t trust you guys,” said Sen. Martha McSally (R-Arizona), who was concerned that Facebook would share users’ payment data. “Instead of cleaning up your house, you are launching into a new business model.”
Facebook has said that it would only share data on payments with third parties if a user consents, and Marcus said there would be a wall between Facebook’s social side and Libra’s finance side, adding that the company knows it has to “earn people’s trust for a very long period of time.”
“The way we’ve built this is to separate social and financial data,” he said, “because we’ve heard loud and clear from people that they want those two data streams separate.”
A Facebook spokesperson told Digital Trends that the company was happy with the hearing and that lawmakers raised thoughtful questions about issues that Libra’s founders would needed to work through when trying to innovate the financial sector.
Marcus himself called the hearing “thoughtful” in a series of tweets on Tuesday afternoon.
The conversation was thoughtful and highlighted important issues we, and the @Libra_ Founding Members, will need to address. I want to reiterate here what I said before the Committee: We will take the time to get this right.
— David Marcus (@davidmarcus) July 16, 2019
And we will not launch until we’ve fully addressed regulator concerns. We also recognize that for the Calibra wallet trust is essential. I’m looking forward to speaking with the @FSCDems tomorrow.
— David Marcus (@davidmarcus) July 16, 2019
Marcus is unlikely to face a friendlier audience on Wednesday when he appears before the House Banking Committee, where Democrats are considering a bill to ban big tech from the finance industry, according to The Verge.
Both parties have become skeptical of Facebook – it’s one of the few issues Congress can agree on. The social media company is also facing pressure from President Donald Trump, who recently attacked Libra. Treasury Secretary Steve Mnuchin said Monday that he had “very serious concerns” about Libra.
The Federal Trade Commission also recently approved a $5 billion fine over Facebook’s treatment of private data during the Cambridge Analytica scandal.
A Facebook spokesperson said that the company had no more news to share about its launch plans for Libra, which is slated to become available in 2020.
In all, it’s looking increasingly likely that Libra might be delayed beyond its planned 2020 launch – if it even launches at all.
- A.I. doesn’t usually forget anything, but Facebook’s new system does. Here’s why
- Trump says he’ll ban TikTok from the U.S.
- Facebook rebrands its cryptocurrency wallet as Novi
- Facebook Libra vs. Bitcoin
- Facebook-backed Libra cryptocurrency is scaling back its plans