Skeptical lawmakers on Tuesday questioned Facebook’s plan to help create a global currency, arguing that the Silicon Valley giant is seeking unprecedented influence over the financial system.
“Facebook is dangerous,” Sen. Sherrod Brown (D-Ohio) said during a Senate Banking Committee hearing on the cryptocurrency project. “We would be crazy to give them a chance to experiment with people’s bank accounts.”
Sen. Martha McSally (R-Ariz.) added: “I don’t trust Facebook. … Instead of cleaning up your house, you are starting a new business model.”
Facebook says the cryptocurrency, known as Libra, would bridge a gap in the financial system for people who lack access to traditional banking. The project would ultimately allow Facebook’s 2.4 billion users worldwide to send and transfer money quickly — and with almost no fees, the company says.
But the project, unveiled last month, sparked immediate concerns from leaders around the world about whether Libra would threaten government-backed currencies, encourage money laundering and jeopardize consumers’ data. On Monday, Treasury Secretary Steven Mnuchin said criminal misuse of cryptocurrency is a “national security issue,” and last week, Federal Reserve Chair Jerome H. Powell told Congress that Libra raises “serious concerns.”
“We agree with all of the concerns,” said David Marcus, head of Calibra, the Facebook subsidiary focused on cryptocurrency. Libra will not be launched until all of regulators’ questions are addressed, he said.
Many lawmakers focused on whether Facebook, which has been engulfed in controversy for more than two years, should be trusted with such a potentially powerful technology. Just last week, the Federal Trade Commission approved a $5 billion settlement with the company over its privacy practices.
“Why in the world should Facebook, of all companies, given the last couple years, do this?” Sen. Brian Schatz (D-Hawaii) asked.
“We shouldn’t stand back and wait [when] we have the resources and engineering talent,” Marcus responded.
“Because you’re so big, you think you should just get bigger?” Schatz said.
Marcus repeatedly attempted to relieve lawmakers’ concerns, promising Facebook would not directly control Libra. The tech giant is one of nearly 30 members of a coalition that would control the cryptocurrency, Marcus said.
“I know that we will have to earn people’s trust for a very long period of time in order to get the benefit of them wanting to use” the program, he said.
Some Republicans came to the company’s defense. Libra has a lot of potential, Sen. Patrick J. Toomey (R-Pa.) said, and “to strangle this baby in the crib is premature. I think we should be exploring this and considering the benefits and concerns.”
Still, Facebook faces a tough task winning over many lawmakers. Marcus is scheduled to appear before the House Financial Services Committee on Wednesday. That committee is led by Rep. Maxine Waters (D-Calif.) who has introduced legislation that could block Libra.
The bipartisan drumming of Libra could also slow efforts to sign up more corporate sponsors. The project has already received a pessimistic reception from Wall Street, which is weary of Silicon Valley encroachment on the financial industry and has questioned whether Libra would face the same strict, and often cumbersome, oversight as does a traditional bank.
“As long as it’s [a] level playing field reviewed by regulators, we have no problem with what anyone does,” Jaime Dimon, chief executive of JPMorgan Chase, said in a call with reporters Tuesday.
Just a few years ago, Dimon drew the ire of the crypto community when he called bitcoin a “fraud.” But since then, JPMorgan, the country’s largest bank, has begun preparing a pilot program for an internal cryptocurrency, JPM Coin. Its reach would be limited to internal transactions with the bank’s corporate clients.
Dimon did not respond to a question about whether the bank would join the Calibra coalition backing Libra.
Correction: An earlier version of this article incorrectly attributed a quote from Sen. Brian Schatz (D-Hawaii) to Sen. Chris Van Hollen (D-Md.). The article has been updated.