Facebook's Libra Gets a Second Day of Grilling in House Hearing
At Wednesday's House hearing on Facebook's proposed digital currency Libra, trust in the company overall remained a key concern expressed by officials. Still, representatives appeared to go farther than yesterday's Senate hearing when digging into how Facebook believes the digital currency, and its associated digital wallet Calibra, will operate.
Members of the House Financial Services Committee raised concerns over how Facebook plans to ensure competition, combat money laundering, and protect data privacy. Other issues discussed included potential national and cybersecurity risks, and the stability of the U.S. dollar.
Several Republican lawmakers sought more information as to how Facebook would regulate Libra users based on their social or political viewpoints.
"We were concerned going in, and we're still concerned, if not, just even a little bit more, about how they're gonna think about de-platforming," Congressional Blockchain Caucus-member Rep. Ted Budd told Cheddar in an interview following the hearing. "Our encouragement [to Facebook] is, just as long as [a commercial activity is legal] in its area, that [users] be allowed to use it."
While testifying, David Marcus, the Facebook executive heading Libra, generally emphasized points the company had previously made in communication to officials and the white paper released in June. He also did not commit to Democrats' requests that Facebook issue a moratorium on the digital currency's introduction and test the digital currency in a pilot overseen by the Securities and Exchange Commission and the Federal Reserve.
However, Marcus appeared to concede somewhat when he said: "we will not actually proceed until we get all of the concerns and the proper regulatory oversight here in the U.S."
Trust in Facebook has emerged as one of — if not the largest — barrier to the company's digital currency plans. At the hearing, Democrats and Republicans alike pointed to the tech platform's myriad scandals, though some officials also expressed concerns that the U.S. could lose out on cryptocurrency innovation.
The committee hearing comes as House Democrats pass around drafted legislation called the "Keep Big Tech Out of Finance Act," which would effectively bar the Libra project as currently proposed.
The session began with Chairwoman Rep. Maxine Waters (D-Calif.) discussing her distrust in the social media giant."Facebook's proposed entry into financial services is all the more troubling because it has already harmed vast numbers of people on a scale similar to Wells Fargo, and demonstrated a pattern of failing to keep consumer data private on a scale similar to Equifax," she said.
Among her criticisms of the company's handling of data privacy, advertising policies that allowed for racial discrimination, and Russian influence over the 2016 election, Waters also said she was worried about the company's lack of diverse leadership.
"And [I] fear that if these plans go forward, women and minorities, and women- and minority-owned businesses, may be excluded from participating fully," she explained.
Waters' comments appeared to echo the sentiments of senators a day earlier, most notably Sen. Sherrod Brown (D-Ohio). In questioning, she repeatedly challenged Facebook to enact a moratorium on introducing Libra until Congress has more time to evaluate — a request she previously made in a letter to the tech platform earlier this month.
"We will take the time to get this right," Marcus said in response. When asked about delaying by Rep. Carolyn Maloney (D-N.Y.) in a later question, Marcus again seemed not to commit to the request, saying: "the commitment is that we will not launch until we have addressed all concerns fully."
"I take that as a no," retorted Maloney, who later said she told Marcus she didn't support Facebook introducing Libra at all. That representative also proposed a pilot program with one million users overseen by the Securities and Exchange Commission and the Federal Reserve — a request Marcus did not agree to, either.
Maloney asked Marcus to commit to allowing other digital wallets, and not just Calibra, to operate on Facebook and WhatsApp. Marcus said it would be interoperable, meaning that wallets could work between one another, but not that users could use non-Calibra wallets directly on Facebook's social platforms.
Meanwhile, North Carolina's Republican Rep. Patrick McHenry — who has previously received donations from Facebook, according to records tracked by OpenSecrets — asked Marcus about the nature of Libra and whether Marcus thought Libra should be classified as a security, a commodity, or an exchange-traded fund.
"Based on current U.S. law, it might be a commodity, but we see it as a payment tool," responded Marcus. He also said that the digital wallet will compete with services like WePay, Venmo, and Paypal.
"Washington must go beyond the hype and ensure it's not the place where innovation goes to die. Just because we may not fully understand a new technology proposal does not mean we should immediately call for its prohibition," McHenry said in his introductory remarks. "But let's face it. Let's be honest. It's Facebook, and I'm skeptical."
Other topics discussed in the hearing included how Facebook plans to verify users, the choice to locate the Libra Association in Switzerland, and skepticism over the company's claims that Libra will help the world's underbanked and unbanked populations.
At one point, Rep. Brad Sherman (D-Calif.) made the shocking claim that the digital currency would more greatly endanger Americans than the September 11 terrorist attacks.
Another striking moment came when the non-voting delegate from Guam to the U.S. Congress, Democratic Rep. Michael San Nicolas, demanded to know how much Facebook anticipated the average Calibra wallet to hold (Marcus said he didn't have that number available).
"I think you're just trying to hide that figure because when you actually start doing the math it becomes very, very alarming," said the delegate.
This piece will be updated as the hearing continues.