Skip to main content

U.S. Business Facebook shouldn’t be trusted with ‘delusional’ cryptocurrency plan, U.S. lawmakers say

Head of Facebook's Calibra David Marcus testifies during a hearing before Senate Banking, Housing and Urban Affairs Committee July 16, 2019 on Capitol Hill in Washington.

Alex Wong/Getty Images

Democratic and Republican lawmakers said on Tuesday that Facebook Inc’s history of what they described as untrustworthiness should stand in the way of it launching a digital currency, labelling the plan “delusional” and “crazy” at a Senate hearing.

Facebook is fighting to get Washington onside after it shocked regulators and lawmakers with its announcement on June 18 that it was hoping to launch a cryptocurrency called Libra in 2020.

Since then, the social-media company 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.

Story continues below advertisement

“Facebook has demonstrated through scandal after scandal that it doesn’t deserve our trust,” Democratic Senator Sherrod Brown, the ranking member of the Senate Banking Committee, said in his opening remarks. “We’d be crazy to give them a chance to let them experiment with people’s bank accounts.”

Mr. Brown added during questioning that he thought it was “delusional” to think individuals would trust the social-media company with their “hard-earned” money.

U.S. senators from both parties opened a hearing with tough questions and criticisms of Facebook's ambitious plan to create a financial eco-system based on a digital currency. The Associated Press

Before announcing its Libra plans, Facebook was already facing a backlash over mishandling user data and not doing enough to prevent Russian interference in the 2016 U.S. presidential election.

David Marcus, the company’s top executive overseeing the project, testified on issues ranging from how Libra could affect global monetary policy to how customer data will be handled. He received a frosty welcome from Democratic lawmakers and several Republicans, who shared many of the same concerns.

“I don’t trust you guys,” said Republican Senator Martha McSally. “Instead of cleaning up your house, you are launching into a new business model.”

Mr. Marcus, who was president of PayPal from 2012-14, tried to assuage concerns by promising that Facebook will not begin offering Libra until regulatory issues are addressed.

“We know we need to take the time to get this right,” Mr. Marcus, who is also going to testify before the House Financial Services Committee on Wednesday, told lawmakers.

Story continues below advertisement

Lawmakers raised a range of concerns, including about how the company plans to prevent money laundering, how consumers’ data and funds will be protected and how the Geneva-based association created to run the system will be regulated.

“I know we have to earn people’s trust for a very long period of time,” Mr. Marcus said when asked whether consumers could trust Facebook not to share their payment information.

The social-media company has pledged that its payments subsidiary, called Calibra, will only share customer data with Facebook and external third parties if it has consent, or in “limited cases,” where it is necessary.

UNDER WRAPS

Critics have expressed anger that the company would advance such a potentially groundbreaking project so far without extensive input from policy-makers, especially when the company was already in the spotlight over privacy issues.

Facebook allocated a small fraction of its vast work force to work on the project, Kevin Weil, who runs product for the Libra initiative, told Reuters on June 18.

One former employee told Reuters the company tried to keep the project under wraps, even internally. Staff who were not involved knew little about it, not even that it was operating under the name Libra.

Story continues below advertisement

In the weeks leading up to the announcement, the company began reaching out formally to key regulators, including the Federal Reserve, the Treasury and the Commodity Futures Trading Commission. But two people with knowledge of the discussions said the conversations remained vague, with key details of the project discussed only on a theoretical level.

On Tuesday, U.S. Securities and Exchange Commission chair Jay Clayton told Reuters on the sidelines of a Washington event that he had not discussed the Libra project with Facebook since its announcement but would welcome more information.

Some lawmakers have been frustrated by the lack of clarity from Facebook before and since June 18, three congressional sources said. One Democratic aide described the company’s contacts with lawmakers as “inept and entitled.”

Facebook has said that it announced the project in its early stages to get feedback from stakeholders, a point Mr. Marcus reiterated at the hearing on Tuesday.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter