Categories: Bitcoin Business

Senators Grill Facebook Executive on Company’s Cryptocurrency Plans

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Anna Moneymaker/The New York Times

Lawmakers grilled a top Facebook executive at a Senate Banking Committee hearing on Tuesday, heightening scrutiny of the company as it prepares to enter the world of cryptocurrency and global finance.

Facebook’s cryptocurrency project, Libra, has been in the works for more than a year. It has an ambitious goal: to offer an alternative financial system that makes it possible to send money around the world with few fees.

But almost immediately, the company has run into resistance from Washington.

“Facebook has said ‘just trust us’” Senator Sherrod Brown, Democrat of Ohio, said at the hearing. “And every time Americans trust you, they seem to get burned.”

The initiative is far from the first effort of its kind. The best-known cryptocurrency, Bitcoin, is in wide circulation, and it introduced the idea of digital currencies that are free from government control.

But the Libra effort has put a spotlight on cryptocurrencies and amplified the voices of critics who say the technology has little value beyond speculative investing and illegal transactions, like online drug sales.

When Facebook announced Libra in June, it also faced immediate skepticism from people who are wary of the power the social media company has already accumulated. Within days, regulators in Washington were calling for hearings on Facebook’s plans.

That concern was made clear on Tuesday when members of the committee questioned David Marcus, who leads the company’s cryptocurrency initiative.

“Do you really think people should trust Facebook with their hard-earned money?” Mr. Brown asked.

Mr. Marcus, adopting a conciliatory tone, said that the company would do its best to fight fraud and to earn back the trust of the more than two billion people who use Facebook’s services regularly.

“We’ve made mistakes in the past,” Mr. Marcus said. “We have been working, and are working hard to get better.”

“Trust is primordial,” he added.

The Senate session was the first in a day of Capitol Hill hearings involving the technology industry. House lawmakers were set to question multiple tech executives at an afternoon hearing focused on competition issues as part of a broad antitrust inquiry. And Google executives were scheduled to face questions at another hearing on the subject of whether the company censors conservative voices.

Facebook executives will also have to answer more questions about the company’s cryptocurrency plans in a House Financial Services Committee hearing on Wednesday.

Some lawmakers and regulators — most notably at the Securities and Exchange Commission — have been raising concerns about the legality and usefulness of cryptocurrencies for some time.

The involvement of Facebook, which has faced an onslaught of controversy over the last two years and is expected to pay a $5 billion settlement with the Federal Trade Commission, has put a charge into those discussions.

Last week, the chair of the Federal Reserve, Jerome H. Powell, said Libra raised “serious concerns” around “money laundering, consumer protection and financial stability.”

“I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering” and other issues, Mr. Powell said as he testified before the House Financial Services Committee. Central bankers from Britain, China, France, Singapore and the European Central Bank have all voiced similar concerns.

President Trump also criticized Libra and Bitcoin, writing on Twitter last week that the digital tokens were “highly volatile and based on thin air.”

And at a news conference on Monday afternoon, Treasury Secretary Steven Mnuchin also raised questions about Libra and other cryptocurrencies. Facebook has “a lot of work to do before we get to the point where we’re comfortable with it,” Mr. Mnuchin told reporters.

The issue provides a rare instance when the Trump administration is lining up with Democrats rather than other Republicans. While Democrats on the Senate Banking Committee lashed into Facebook, several Republicans on the committee voiced support for Facebook and its new initiative.

“I just think we should be exploring this and considering the benefits as well as the risks,” said Patrick Toomey, a Republican from Pennsylvania. “To announce in advance that we have to strangle this baby in the crib seems wildly premature.”

But not all Republicans on the committee were so positive.

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

Mr. Marcus, a former PayPal executive, was handpicked by Mark Zuckerberg, Facebook’s chief executive, to lead the Libra effort.

Facebook’s role in the project will be run through a subsidiary company called Calibra, led by Mr. Marcus and other top Facebook employees. If the Libra digital token become popular, Calibra could build a business around offering customer financial services, including loans and other actions traditionally offered by the banking industry.

A separate entity called the Libra Association, whose proposed board would include more than a dozen partners in the tech and financial industries, would manage the cryptocurrency system once it is up and running, which Facebook is hoping to do next year.

Mr. Brown asked if there was any amount of opposition that would convince Facebook to scrap Libra.

“Is there anything that elected leaders can say that will convince you and Facebook that it should not launch this currency?” he said.

Mr. Marcus said that the company would not move ahead with the project until the concerns of regulators are answered.

Lawmakers grilled a top Facebook executive at a Senate Banking Committee hearing on Tuesday, heightening scrutiny of the company as it prepares to enter the […]

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