Connect with us

Cybersecurity

Facebook Continues to Face Intense Congressional Scrutiny at House Financial Service Committee Hearing

Masha Abarinova

Published

on

WASHINGTON, July 17, 2019 - Facebook’s digital currency platform Calibra continues to be the focus of intense congressional scrutiny. On Wednesday, it was from the House Committee on Financial Services.

Chairman Patrick McHenry, R-N.C., said the committee wanted to make sure that Libra isn’t just a “ploy” to send Facebook’s Twitter mentions “through the roof.”

David Marcus, head of Calibra at Facebook, said that the social network giant’s association with Libra aims to establish the “rules of the road” for the blockchain industry. Facebook will not interfere with the monetary policies of central banks, he said.

Calibra will not offer banking services, but wants Libra to become a globally recognized digital currency. Facebook will “take the time to get this right,” he said.

Marcus received pushback from both sides of the aisle regarding Libra’s specific role in the financial service industry and its possible exploitation for nefarious use.

“We need to get Mark Zuckerberg here,” said Rep. Brad Sherman, D-Calif. “This is an attempt to turn power from America to Facebook and its allies.”

Committee Chairwoman Maxine Waters, D-Calif., asked why Facebook should be trusted with spearheading the project. The company has allowed “malicious Russian state actors” to purchase ads in a campaign to influence the 2016 election, she said.

The creation of currency is a core government function and should be left to accountable, democratically elected members, said Rep. Carolyn Maloney, D-N.Y. Congress should “seriously consider” stopping the Calibra project from moving forward, she said, if Facebook does not at least launch a small pilot program to test the system.

Libra is a “complete overhaul” of the circulation system of America’s global economy, said Rep. Jim Himes, D-Conn.

Rep. Ann Wagner, R-Mo., said that Libra could have “significant geopolitical implications” regarding the enforcement of economic sanctions.

60 percent of the world’s population does not live in a country with stable currency, said Rep. Steve Stivers, R-Ohio. We want to encourage cryptocurrency innovation, but we need to address the application of cross-border payments, he said.

People will be able to connect bank cards with their Calibra wallets when making international payments, said Marcus, but he said he expects there to be limits on where money can be sent.

“I doubt people will be paying their rent with Libra anytime soon,” he said.

America needs to remain a leader in global financial services and innovation, said Rep. Gregory Meeks, D-N.Y. He expressed uncertainty of how Facebook should be regulated if it is acting similarly to a bank.

“Libra looks exactly like an exchange-traded fund, so why isn’t it?” said Rep. Bill Foster, D-Ill.

Neither Facebook’s white paper nor subsequent online post provided any concrete plans on how to provide safety for America’s financial system, said Rep. David Scott, D-Ga.

Rep. French Hill, R-Ark., asked Marcus whether users will be charged a fee in the Calibra system. Marcus said that Calibra is hoping to offer little to no price at all between consumers and a small fee for merchants. He also said that people will not be able to open accounts without a government issued identity document or a more traditional “know your customer” assessment.

Facebook will have a number of different payment types on the platform, said Marcus, including debit and credit cards.

Rep. Blaine Luetkemeyer, R-Mo., said he was concerned about who will share the profits of Libra’s reserve.

The value of the reserve will be proportional to the number of Libra coins in circulation, said Marcus. Returns will be used to fund operation costs and to reimburse investors in the Calibra System.

The main point that Marcus addressed was that the current banking is “not working” for most people. Going forward, Facebook needs to be “thoughtful” about Calibra’s project, as the company should not be in the business of deciding what people can do with their money, he said.

(Photo of David Marcus at Facebook F8 developer conference in 2015 by Maurizio Pesce used with permission.)

Popular