U.S. lawmakers bashed Facebook on Wednesday over its planned cryptocurrency, saying the company had not shown it could be trusted to safeguard the world financial system and consumers’ data.
The social media company is fighting to get Washington on its side after it shocked regulators and lawmakers with its announcement on June 18 that it was hoping to launch a new digital coin called Libra in 2020.
It has faced criticism from policy-makers and financial watchdogs at home and abroad who fear widespread adoption of the digital currency by Facebook’s 2.38 billion users could upend the financial system.
“I have serious concerns with Facebook’s plans to create a digital currency and digital wallet,” Maxine Waters, chairwoman of the Democrat-controlled House Financial Services Committee, said in her opening remarks.
“If Facebook’s plan comes into fruition, the company and its partners will wield immense economic power that could destabilize currencies and governments.”
Lawmakers on the House Financial Services Committee questioned David Marcus, the Facebook executive overseeing the project, who was grilled by the Senate Banking Committee on Tuesday over the possible risks posed by Libra to data privacy, consumer protections and money laundering controls.
The hearing in Congress proved to be even more tense on Wednesday.
Facebook has been on the defence amid a backlash over mishandling user data and not doing enough to prevent Russian interference in the 2016 U.S. presidential election.
“You expect us to believe that you’re going to start collecting financial data and not share it because you promised not to do that?” said Democratic U.S. Representative Alma Adams.
The social media company has said its digital wallet subsidiary Calibra will only share customer data with Facebook or external parties if it has consent, or in limited cases where it is necessary.
Democratic Representative Carolyn Maloney pushed Marcus to commit to a Libra pilot program with 1 million users overseen by U.S. financial regulators, including the Federal Reserve.
“I don’t think you should launch Libra at all,” Maloney said. “At the very least you should agree to do this small pilot program.”
Marcus, who was president of PayPal from 2012 to 2014, did not commit to a pilot but tried to assuage lawmakers by pledging not to begin issuing Libra until regulatory concerns had been addressed.
“We will take the time to get this right,” Marcus said.
He said the company had unveiled the project at an early stage in order to get feedback from all stakeholders.
’INNOVATION IS GOOD’
While many lawmakers on both sides of the aisle aired concerns and skepticism about the project, several Republicans argued the government should not be reflexively opposed to new ideas from the private sector. Some noted Libra could produce benefits for people lacking traditional banking services.
“We should presume that innovation is good; it presents enormous opportunity,” said Republican U.S. Representative Andy Barr.
Congress members asked how Facebook will ensure sufficient consumer protection and prevent the cryptocurrency from being used for illegal activities such as money laundering or terrorist financing.
“I’m concerned a 2020 launch date represents deep insensitivities about how Libra could impact U.S. financial security, the global financial system, the privacy of people across the globe, criminal activity and international human rights,” said Republican U.S. Representative Ann Wagner.
Facebook has said Calibra will be carrying out compliance checks on customers who want to sign up.