Lawmakers struggle to understand Facebook’s Libra project
House lawmakers struggled to understand how and why Facebook plans to enter the financial services industry, raising doubts about the viability and safety of the company’s proposed cryptocurrency payments system.
Members of a House panel grilled Facebook’s lead on Project Libra about concerns spanning from financial systemic risk and data privacy to core questions about what kind of product the social media giant was building with dozens of major corporations.
David Marcus, head of Facebook subsidiary Calibra, insisted that Libra was intended to expand financial system access to millions of unbanked consumers across the world through lower transaction costs.
But skeptical members of the House Financial Services Committee came away with little clarity on how the federal government could monitor and mitigate the risks of a potentially transcendent financial network.
“If Facebook’s plans come to fruition, the company and its partners will yield immense economic power,” said Rep. Maxine Waters (D-Calif.), chairwoman of the Financial Services panel.
“Ownership of government assets on such a massive scale, without proper oversight, threatens to concentrate government influence in the hands of a few elites.”
Struggling to make the case: Project Libra has been a hard sell for Facebook in Washington. The proposed payment system based on a cryptocurrency is backed by more than two dozen corporations. But lawmakers and regulators are concerned about how Facebook could use the immense reach and data of its more than 2 billion members to influence the global economy and financial system.
Congress has so far made it clear that Facebook is struggling from a dearth of trust in Washington as it works to launch its ambitious global currency project.
“What are you?” But above all, lawmakers on Wednesday appeared puzzled about how Libra would fit in the financial system and why it would be profitable for the dozens of corporations already involved in its development.
“What we’re struggling with is, what are you?” asked Rep. Ed Perlmutter (D-Colo.). “We think you’re a bank, but you’re not quite like a bank.”
“I want to support your innovation, I want to support your efficiency that people believe you’re bringing to the table,” Perlmutter continued. “But I also don’t want anybody getting hurt here.”
What’s next: More hearings on Libra are likely to follow the two held in the Senate and House this week. While Marcus said he would be willing to come in for more briefings, he declined to answer whether CEO Mark Zuckerberg would be willing to testify about the project.
The House Financial Services Committee is currently circulating a draft of a bill that would bar major social media and technology companies from providing financial services and offering digital currencies. That would effectively outlaw Libra. Waters has repeatedly asked Facebook to agree to halt the Libra project until the regulatory issues are worked out.
Facebook looks to move ahead: When asked whether Facebook would agree to the moratorium, Marcus said, “The commitment is that we will not launch until we have addressed all concerns.”
