US lawmakers in a hearing at the House Committee on Financial Services on Wednesday expressed widespread mistrust of Facebook’s cryptocurrency plan, saying the company’s attempt at entering into financial services was troubling due to its “pattern of failing to keep consumer data private”.
The hearing comes a day after a separate hearing was conducted before the US Senate Committee on Banking.
During the hearing, Facebook’s cryptocurrency head David Marcus was questioned for over four hours about the company’s cryptocurrency plan for Libra, with various lawmakers saying the company cannot be trusted.
In the hearing’s opening statement, House Chairwoman Maxine Walters said there are serious concerns surrounding Libra as Facebook has consistently harmed vast amounts of people due to its privacy issues, analogizing the scale of Facebook’s failures to Wells Fargo’s account fraud scandal and Equifax’s privacy data breach.
The overall sentiment of the House hearing on Wednesday was that Facebook needs to be more transparent about its activities and long-term plans for the cryptocurrency play. The distrust is a flow-on from revelations that the social network had allowed its users’ data to be harvested in the Cambridge Analytica scandal.
The US Federal Trade Commission (FTC) approved a $5 billion fine on Facebook in response to the Cambridge Analytica scandal last week. The settlement is the FTC’s largest financial penalty to date, which was previously a $22.5 million fine against Google in 2012.
“I think before you move on to Libra, you ought to clean up the messes of the past and be very transparent,” Democrat Representative Madeleine Dean said at the hearing.
Marcus responded to these calls for more transparency by stating that “the company has learned from its past mistakes” and that Libra would not share its data with Facebook.
Despite promises about Libra’s data-sharing practices, Republican Representative Anthony Gonzalez said at the hearing that he would be shocked if Calibra did not share data with its holding company Facebook at some point, as Facebook, Instagram, and Messenger already share data with each other.
Gonzalez also questioned the efficacy of Facebook’s proposal that Libra could be both centralized — from having a 1-to-1 ratio reserve of real assets, called the Libra Reserve — while also eventually being permission-less, with Marcus saying that the Libra Association would be able to achieve this by making Libra’s blockchain “nodes more fungible”.
Other questions from House committee members about how Facebook intended to launch Libra next year included Dean asking for the anticipated income and figures for the operation of Libra.
Marcus skirted around providing this information, instead referring to how the launch of Libra and a digital wallet would allow people from lower socio-economic backgrounds to make payments to overseas countries.
It is also unclear how Libra will be structured, as Marcus did not directly respond to Dean’s questioning around how Libra functions as a non-profit organization if it takes dividends or interests, and distributes them to Libra Association members.
Throughout the six-hour-long hearing, Marcus was also repeatedly asked if Facebook would agree to halt the development of Libra until lawmakers and regulators had properly examined the cryptocurrency play. Democrat Representative Carolyn Maloney asked if Facebook would agree to run a small pilot program with 1 million users that are overseen by the Federal Reserve and the US Securities and Exchange Commission, while Democrat Representative Stephen Lynch proposed a similar sandbox setup.
“This is only my personal belief, but I don’t think you should launch Libra at all because the creation of a new currency is a core government function and should be left to democratically accountable institutions that are accountable to the American people. But at the very least you should agree to do this pilot program,” Maloney said.
Marcus repeatedly said the social media giant would “take the time to get this right”, but he stopped short of agreeing to any iteration of a moratorium.
Marcus did concede, however, that “[Libra] would not launch until we have addressed all concerns fully”.
In the lead up to the House hearing, Five Democrats, led by Walters, had issued a letter to Facebook requesting that it pause the development of its Libra cryptocurrency project, saying that Libra products “may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival US monetary policy and the dollar”.
Prior to the letter, Walters released a statement in June calling for Facebook to pause its project.
Last week, President Donald Trump blasted Bitcoin and other cryptocurrencies on Twitter, saying they “are not money” and that companies would have to seek a banking charter if they want to “become a bank”.
“I am not a fan of Bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” the President wrote on Twitter.
Trump also singled out Facebook, saying Libra, the digital coin being developed by the social media giant “will have little standing or dependability”.
Facebook unveiled its plans for Libra on 18 June, with the Libra Association — which consists of Facebook alongside 27 partners — stating the cryptocurrency platform would be slated for launch in 2020. The Libra Association is also expected to release a new digital wallet alongside Libra that would be integrated with Messenger and WhatsApp.