Facebook's Libra cryptocurrency comes under fire from U.S. lawmakers
Facebook (FB.O) wants to build the cryptocurrency of the future, but first it has to contend with its past.
When U.S. senators gathered on Tuesday to ask questions about Libra, the proposed digital currency Facebook Inc. is developing, they took turns blasting the tech giant over years of missteps. Facebook’s failures around user privacy, the company’s immense power, and even its role in the 2016 elections were mentioned repeatedly by members of the Senate Banking Committee, whose statements reflected a near-unanimous refrain: Facebook shouldn’t be trusted to create a new global currency.
“Facebook is dangerous,” said Senator Sherrod Brown, the committee’s ranking Democrat, who set the tone with his scathing opening remarks just minutes into the hearing. Brown described the company as a “toddler” with a book of matches. “Facebook has burned down the house over and over and called every arson a learning experience,” he said.
Brown was joined by senators from both parties who expressed similar concerns. “Lots of people out there already think Facebook is too big and too powerful,” said Brian Schatz, a Democrat from Hawaii. “Why in the world should Facebook of all companies, given the last couple of years, do this?”
The vision, according to Facebook, is to create a digital currency that will lower the cost of international money transfers and help bring more than a billion people without bank accounts onto the global financial system. But after the world’s largest social network announced the plan last month, it swiftly met skepticism from a broad coalition of U.S. officials, including Federal Reserve Chairman Jerome Powell and U.S. President Donald Trump. At the same time, the company is dealing with other lingering problems in Washington, including a privacy investigation by the Federal Trade Commission that is just now coming to a close.
Answering that criticism on Tuesday was David Marcus, the executive who leads the company’s blockchain team and has so far served as the de-facto leader for Libra. Marcus spent his opening remarks trying to better explain what Libra is, and the company’s plan for how it could change the world of personal finance. He spent much of his time after that, though, defending his employer for its previous missteps, and trying to convince Congress that people will be able to use Libra without ever having to use Facebook.
“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,” he said, adding that users will be able to use the Libra currency with other digital wallets managed by Facebook competitors.
Marcus also sounded a familiar theme for the company: if Facebook does not build the technology of the future, someone else will. Marcus mentioned multiple times that he believes the U.S. should be a leader in creating a new global currency -- something that other countries will try to do without U.S. input, he added.
The company has stressed that it still has work to do on Libra, as critics have pointed out that the plans for the currency so far appear incomplete. In Marcus’s testimony, the former PayPal executive shed some light on questions about the Libra Association, saying that the proposed governing body of the new currency will elect a board and a managing director to essentially serve as a leader of Libra. Marcus also said that Facebook would institute consumer protections to prevent scams within its own digital wallet, called Calibra, including requiring a valid photo ID in order to set up an account.
But those substantive exchanges were overshadowed by Facebook’s bigger issue: That its message about the benefits of a global cryptocurrency won’t hold water for regulators if the platform is fundamentally untrustworthy. Arizona Republican Martha McSally put it bluntly: “I don’t trust Facebook,” she said. “And I am not alone.”
Marcus is set to take more questions about Libra on Wednesday, this time before the House Committee on Financial Services, where chairwoman Maxine Waters has been particularly disdainful about Facebook’s plans for Libra. Waters has called for the company to halt the project while Congress investigates.