Facebook's Libra finds new allies as criticism remains rampant
Criticism of Facebook’s new digital currency remains rampant, but the social media giant found new allies on Capitol Hill on Tuesday as the firm seeks to assuage widespread concerns over consumer privacy and protection provided by the offering.
Known as Libra, the product outlined by the Menlo Park, California-based firm in a white paper last month drew scrutiny from President Trump, Treasury Secretary Steven Mnuchin, Federal Reserve Chairman Jerome Powell and other top government officials.
But Facebook’s David Marcus, who heads the company’s digital wallet, Calibra, used an appearance in front of the Senate Banking Committee on Tuesday to try to address some of those concerns, assuring lawmakers that consumer transactions will be protected from fraudulent activity and ruling out any near-term effort to collect user data on financial transactions.
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He also warned the panel that rival offerings could soon be introduced by nefarious actors, using one of Facebook’s long-relied on talking points that the threat posed by China is driving the decision to pursue products like Libra.
“We could soon see a digital currency controlled by others whose values are dramatically different from ours,” he said during opening remarks at the hearing.
Despite the overtures, lawmakers had harsh words for the embattled Silicon Valley giant that continues to face scrutiny over its data collection efforts and inability to protect against Russian influence on the platform ahead of the 2016 elections.
“Facebook is dangerous,” said Sen. Sherrod Brown of Ohio, the top Democrat on the banking panel. “They are playing like a toddler who has gotten his hands on a book of matches. Facebook has burned down the house over and over and called every arson a learning experience.”
Still, the company found potential allies who voiced confidence in the potential benefits that a new digital currency could offer, including lower payment transaction costs and easier access to capital.
“It strikes me as wildly premature for us to come to the conclusion that we have to act now to prevent what could be a very constructive innovation in financial services,” said Sen. Pat Toomey, R-Pa. “To announce in advance that we have to strangle this baby in the crib, I think, is wildly premature.”
Facebook is planning to launch a Switzerland-based consortium to oversee Libra. But Marcus assured lawmakers that the offering will still be registered with and overseen by U.S. regulators. He also told the panel that Facebook’s digital wallet will be interoperable with other cryptocurrencies.
And despite previously saying that the company would ask user permission before using transaction data for advertising purposes, Marcus said Facebook has no immediate plans to use that information as a revenue source. Instead, the firm is hoping that usage by the 90 million small businesses on the platform will lead to more ad profits.
Despite those assurances, Senate Banking Chairman Mike Crapo, R-Idaho, said the Libra offering highlights the need for legislation to ensure that consumers have control over their online information.
The Libra consortium will be structured as a non-profit but companies that are involved in the association could receive financial returns, a structure that Marcus conceded warrants review from regulators.
“We will need to find a way over time to create new pools of incentives that go back to people and businesses using the Libra network and this is part of the conversation we are notably having,” he said.
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Facebook has vowed not to officially introduce Libra until the concerns from U.S. and international regulators are addressed.