Facebook Inc.’s controversial Libra cryptocurrency project encountered a blistering reception from the Senate Banking Committee Tuesday morning despite assurances from the social-media giant that it will comply with banking regulations and offer secure transactions.
“Facebook is dangerous,” ranking committee member Sen. Sherrod Brown, D-Ohio, said, offering a litany of its disruptive impacts on society, media and politics. “Facebook has demonstrated, through scandal after scandal, that it does not deserve our trust.... We would be crazy to give them a chance to experiment with people’s bank accounts.”
The hearing, the first of two on Libra this week on Capitol Hill, underscores a general distrust of Facebook FB, -0.97% which reached a record $5 billion settlement with the Federal Trade Commission last week over its data-privacy practices and is likely to be the target of a Justice Department investigation on antitrust matters. The Senate committee’s doubts mirror those of consumers and privacy advocates who question why individuals should entrust Facebook with financial information. Committee members dismissed Libra as “delusional” and “crazy.”
See also: Why Facebook’s Libra coin could become a big pain in your wallet
Company executive David Marcus, in his opening statement to the Senate Banking Committee, said Facebook has huddled with regulators and assured them it will manage Libra under the independent Libra Association, a consortium of 28 companies and nonprofits that includes Visa Inc. VISA, -0.46% Uber Technologies Inc. UBER, -0.82% MasterCard Inc. MA, -0.04% and Spotify Technology SPOT, -2.08%
“To be clear, the Libra Association expects that it will be licensed, regulated, and subject to supervisory oversight,” Marcus, the former president of PayPal Holdings Inc. PYPL, -0.11% said. He told Brown that Facebook shares the concerns of privacy advocates and wary lawmakers.
Marcus has some convincing to do.
The company’s entry into the cryptocurrency market has been the target of scathing comments from President Donald Trump (“Facebook Libra’s ‘virtual currency’ will have little standing or dependability,” he said in a tweet) to Federal Reserve Board chief Jerome Powell (who said the central bank is looking into how to regulate cryptocurrency) to billionaire Mark Cuban (“I think it’s a big mistake,” he said in a recent interview on CNBC). Treasury Secretary Steve Mnuchin, in a press conference Monday, warned Libra “could be misused by money launderers and terrorist financiers,” posing a “national security risk.”
Their skepticism is compounded by the uncertainty over how -- and whether -- developing countries are capable of handling the currency. Cuban is particularly concerned about the veracity of digital currency in countries with poor infrastructure and unstable governments.
Sen. Mark Warner, D-Va., viewed Libra as a manifestation of Facebook’s so-called “catch and kill” strategy of acquiring smaller companies in emerging technologies to limit competition. Marcus said the breadth and scope of the consortium would make its cryptocurrency project available on a wide scale. (Facebook has 2.38 billion monthly active users.)
Opinion: Facebook’s Libra threatens the dollar’s international status
“Facebook wants to control the money supply. What could go wrong?” a sarcastic Sen. John Kennedy, R-La., said after he lacerated Facebook for its tardiness in addressing Russian meddling on its platform during the 2016 presidential campaign. Marcus acknowledged that the company did not move fast enough, but has addressed flaws in its system through spending on security.
There was some level of support for the planned currency. Sen. Pat Toomey, R-Pa., said it would be presumptuous to “strangle the baby in the crib” and not explore its potential.
Indeed, despite broad support for financial innovation, Washington’s wariness toward Facebook is a “substantial weight around Libra’s neck,” Isaac Boltansky, director of policy research for Compass Point Research & Trading, told MarketWatch.
Facebook eventually anticipates a gold mine from Libra-related business as it transitions to a privacy-focused platform and seeks alternative forms of revenue. Roughly 99% of its nearly $56 billion in 2018 sales came from ads.
Shares of Facebook are up slightly to $204.33 in trading Tuesday.