David Marcus, head of Facebook’s blockchain subsidiary Calibra, testifies before the Senate Banking, Housing and Urban Affairs Committee on “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations” on Capitol Hill in Washington D.C., the United States, on July 16, 2019. U.S. senators on the Senate Banking Committee used the stage of a hearing Tuesday to grill Facebook executive David Marcus on the controversial Libra cryptocurrency the social network giant plans to unveil next year. (Xinhua/Liu Jie)
WASHINGTON, July 16 (Xinhua) — U.S. senators on the Senate Banking Committee used the stage of a hearing Tuesday to grill Facebook executive David Marcus on the controversial Libra cryptocurrency the social network giant plans to unveil next year.
Senator Sherrod Brown, an Ohio Democrat and the committee’s ranking member, fired one of the fiercest criticisms against Facebook before Marcus was given the chance to deliver his oral testimony.
He argued that given its track record of “creative disruption that doesn’t actually create anything,” Facebook can’t be trusted to step into the money transmitting business.
“Facebook is dangerous,” Brown said. “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.”
In his prepared remarks, Marcus, head of Facebook’s blockchain subsidiary Calibra — which is in charge of the digital currency project — pledged that Facebook will not offer Libra until it has “fully addressed regulatory concerns and received appropriate approvals.”
In an effort to assuage the lawmakers, Marcus said the time between now and Libra’s scheduled launch in 2020 “is designed to be an open process and subject to regulatory oversight and review.” He later repeated similar assertions several times when challenged by senators who by and large appeared immensely dubious and perplexed about the project.
Noting that Facebook in the past had failed to prove itself trustworthy, Brown said in his opening statement, “we would be crazy to give them a chance to experiment with people’s bank accounts, to use powerful tools they don’t understand like monetary policy to jeopardize hardworking Americans’ ability to provide for their families.”
Senator Martha McSally, an Arizona Republican, in an exchange with Marcus told the executive she doesn’t trust Facebook, “because of the repeated violations of users’ privacy and repeated deceit, and I am not alone,” she said.
Marcus, in response, said it’s fair for people to question Facebook’s commitment to improving users’ privacy. When he tried to further explain the company’s efforts, McSally interrupted and said she didn’t “want to get into the technical stuff.”
Senator Brian Schatz from Hawaii also pressed Marcus by asking him which of the scandals engulfing Facebook over the years the company has fixed. Those alleged misdeeds, according to Schatz, include failure to ensure cyber security, breach of users’ privacy, creating loopholes enabling foreign interference, spreading extremism, as well as disseminating false news.
Facebook announced its Libra plan last month in a white paper, a move that instigated a burst of skepticism from government officials. Senior officials have weighed in recently as well.
Treasury Secretary Steven Mnuchin said Monday that digital currency “is indeed a national security issue” in that it could be misused by money launderers and terrorist financiers.
President Donald Trump tweeted Thursday that Libra has “little standing or dependability,” and that Facebook must be subject to regulations obeyed by other banks if it seeks to become a bank.
Echoing the U.S. president’s comment, Federal Reserve Chairman Jerome Powell said Wednesday the “many serious concerns” that Libra raises “should be thoroughly and publicly addressed before proceeding.”
In answering a question from Senator Mike Crapo, Marcus said although the Libra Association, the body that runs Libra, is headquartered in Geneva, Switzerland, the decision is not made with the intent to evade U.S. supervisory oversight.
He said the Libra Association, a non-profit one joined by 28 powerful U.S. companies including MasterCard, Visa, PayPal, Ebay and Uber, will still register with the Treasury Department’s Financial Crimes Enforcement Network. “As a result, we will have oversight by U.S. regulators.”
Crapo, an Idaho Republican and chairman of the Senate Banking Committee, noted in his opening remarks that Facebook has over two billion active monthly users and access to vast amounts of personal information. Given the prospect of social media platforms gaining more financial information, Crapo said, “Congress needs to give individuals real control over data … and implement an enforcement system to ensure the (data) collection process is not abused.”
Crapo told Marcus that the United States adopts a “sectorial approach” whereby different regulatory bodies are responsible for regulating and supervising data- and data privacy-related economic and social activities. He asked Marcus how federal regulators should oversee cryptocurrency transactions.
“All I can say today is that we are committed to working until we satisfy all the concerns and meet the regulatory bar before we proceed,” Marcus replied, adding that Facebook has not only been engaged with U.S. regulators, but also been working “collaboratively” with a working group within the Group of Seven global major economies that is scrutinizing Libra.
While most of the senators challenged Marcus with tough questions, there were voices of support.
“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,” said Senator Pat Toomey, Republican from Pennsylvania.
Toomey said he believes there are “tremendous potential benefits in blockchain technology and cryptocurrencies,” echoing Crapo, who said if done right, Facebook’s effort to improve existing payment systems “could deliver material benefits.”
Toomey called for a “prudent approach” that takes into consideration both the benefits and risks associated with Libra. “To announce in advance that we have to strangle this baby, I think, is wildly premature.”