Facebook’s plans for a new online currency received a deeply skeptical welcome on Capitol Hill on Tuesday, as a top executive of the social media giant fielded a slew of questions about the trustworthiness and transparency of Libra, the company’s proposed private new money.
David Marcus, who is spearheading Facebook’s digital currency push, told a Senate Banking, Housing and the company was open to regulation and oversight of Libra, adding lawmakers should not lose sight of the benefits the new currency could bring.
“Wouldn’t it be easier and safer if people can securely and inexpensively receive money transferred through their smartphones?” Mr. Marcus asked the Senate Committee on Banking, Housing, and Urban Affairs. “That’s what Libra is about, developing a safe, secure, and low-cost way for people to efficiently move money around the world.”
“We know we need to take the time to get this right,” he added.
But there were many rough moments for the Facebook executive, as legislators already concerned about Facebook’s power, reach and long record of security lapses warned that the company could not be trusted to run Libra responsibly.
“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 Ohio Sen. Sherrod Brown, ranking Democrat on the banking panel. “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 hardworking Americans’ ability to provide for their families.”
Mr. Brown called Facebook “dangerous,” adding it takes a “breathtaking amount of arrogance” for the company to decide to run a global cash payment system.
Facebook officials describe Libra as a new kind of global currency, not residing as old crumpled bills but as new digital money kept in a virtual wallet called “Calibra.” The new currency would be backed one-for-one by real assets — a basket of currencies from all over the world, including the euro and British pound.
It would be governed by the Libra Association, a group of 100 member companies who have an equal vote in decision making. Companies so far involved include PayPal, Visa, Spotify, Uber and Lyft.
But Facebook officials acknowledge they have more ambitious goals — to create a new kind of money to aid those without access to traditional banks and financial institutions. Regulators such as Federal Reserve Board Chairman Jerome H. Powell have said the Libra idea is intriguing but that the company will need to do far more work to refine its concept and explain how the cryptocurrency can be shielded from fraud and abuse.
Several lawmakers said Facebook’s own record undermined its claim to the fiscal high ground. Asked repeatedly about Facebook’s work toward fixing or resolving past problems, the answer from Mr. Marcus was usually a variant of “We’ve worked hard” to address the issue.
Republican Sen. Martha McSally said she worried many of her Arizona constituents would be at risk of being scammed by the newfangled currency, adding she didn’t trust Facebook because of repeated privacy violations and “repeated deceit.”
Not all of the reception was negative.
“Despite the uncertainties, Facebook’s stated goals for the payments systems are commendable,” committee Chairman Mike Crapo, Idaho Republican, said in opening the hearing. “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.”
Senator Tom Tillis, North Carolina Republican, said he believed that the U.S. can set a standard to protect customers while leading the way in digital currency, while also voicing concerns about privacy, protecting data and Facebook’s power in the marketplace.
“I believe that the United States can either follow some other jurisdiction on pursuing this or by far we can lead it,” he said. “So, I think it’s worth you all doing this.”
Added Sen. Pat Toomey, Pennsylvania Republican, “To strangle this baby in the crib is wildly premature.”
Mr. Marcus was pressed repeatedly for more information on Libra and the proposed association to oversee it, and was asked if Facebook was prepared to meet the high regulatory and oversight requirements if it moves ahead.
“We’re committed to working until we satisfy all concerns that meet the regulatory bar before we proceed,” Mr. Marcus said.
As the hearing was wrapping up, Mr. Brown predicted the market — not the government — will prove Libra’s biggest hurdle.
“Your biggest problem is that people don’t trust you,” he said.
Copyright © 2019 The Washington Times, LLC.