WASHINGTON -- Under sharp criticism from senators, a Facebook executive on Tuesday defended the social network's plan to create a digital currency and pledged to work with regulators to achieve a system that protects the privacy of users' data.
"We know we need to take the time to get this right," David Marcus, the Facebook executive leading the project, told the Senate Banking Committee at a hearing.
But that message did little to assure senators. Members of both parties demanded to know why a company with extensive market power and a track record of scandals should be trusted with such a far-reaching project, given the potential for fraud, abuse and criminal activity.
"Facebook is dangerous," asserted Sen. Sherrod Brown of Ohio, the committee's senior Democrat. Like a toddler playing with matches, "Facebook has burned down the house over and over," he told Marcus. "Do you really think people should trust you with their bank accounts and their money?"
Sen. Martha McSally, R-Ariz., said that "the core issue here is trust." Users wouldn't be able to opt out of providing their personal data when joining the digital wallet for the currency, McSally said.
"Arizonans will be more likely to be scammed" using the currency, she said.
The criticism came as Congress began two days of hearings on the currency planned by Facebook, which is called Libra. Also on Tuesday, a House Judiciary subcommittee was extending its bipartisan investigation of the market power of Facebook, Google, Amazon and Apple.
On the defensive from bursts of aggressive questioning, Marcus indicated the plan is a work in progress. "We will take the time" to ensure the network won't be open to use by criminals and illicit activity such as money laundering and financial fraud, he said.
"We hope that we'll avoid conflicts of interest. We have a lot of work to do," Marcus said.
The grilling followed a series of negative comments and warnings about the Libra plan in recent days from President Donald Trump, his treasury secretary and the head of the Federal Reserve.
But some senators emphasized the potential benefits of Facebook's plan, meant to facilitate money transactions at low cost to millions around the globe who don't have bank accounts. Facebook also had its strong defenders of the project on the panel.
"To strangle this baby in the crib is wildly premature," said Sen. Pat Toomey, R-Pa.
In that vein, Marcus said Libra "is about developing a safe, secure and low-cost way for people to move money efficiently around the world. We believe that Libra can make real progress toward building a more inclusive financial infrastructure."
The planned digital currency is to be a blend of multiple currencies, so its value will fluctuate in any given local currency. Because Libra will be backed by a reserve, and because the group of companies managing it will encourage a competitive system of exchanges, the project leaders say, "anyone with Libra has a high degree of assurance they can sell it for local [sovereign] currency based on an exchange rate."
Promising low fees, the currency system could open online commerce to millions of people around the world who lack access to bank accounts and make it cheaper to send money across borders. But it also raises concerns over the privacy of users' data and the potential for criminals to use it for money laundering and fraud.
To address privacy concerns, Facebook created a nonprofit oversight association to govern Libra, with dozens of partners including PayPal, Uber, Spotify, Visa and MasterCard. As one among many in the association, Facebook says it won't have any special rights or privileges. It also created a "digital wallet" subsidiary, Calibra, to work on the technology, separately from its main social media business. While Facebook owns and controls Calibra, it won't see financial data from it, the company says.
Marcus said Facebook's messaging apps such as WhatsApp and Messenger won't be able to use digital wallets made by other companies once Facebook launches Libra.
Wallets will be how users store and make transactions with Libra.
Marcus said only Calibra will be allowed on Facebook's messaging apps. But users will be able to send or receive money from other wallets, regardless of where the transaction originated.
Marcus also confirmed that Calibra will support full data portability -- so people who decide they would rather use a different Libra wallet would be able to move all their money and data there.
Facebook's currency proposal has faced heavy skepticism from the Trump administration.
Trump tweeted last week that the currency "will have little standing or dependability." Both Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell have expressed concerns recently that Libra could be used for illicit activity.
The Treasury Department has "very serious concerns that Libra could be misused by money launderers and terrorist financers," Mnuchin told reporters at the White House on Monday. "This is indeed a national security issue."
Facebook has "a lot of work to do before we get to the point where we're comfortable with it," Mnuchin said.
Business on 07/17/2019