Even the revived push is already facing heavy skepticism from one top lawmaker and analysts, however, who said that Facebook hasn't quelled the underlying concerns that ignited scrutiny over the initiative in recent years.
“Facebook’s second attempt to launch its digital currency as federal regulators and advocates are warning us about the many ways stablecoin schemes threaten workers’ paychecks and the stability of our financial system is deeply troubling,” said Alysa James, a spokeswoman for Sen. Sherrod Brown (D-Ohio), chair of the Senate Committee on Banking, Housing, and Urban Affairs.
“This product is good for Facebook’s executives and that’s all they care about,” she added.
Facebook has touted the products as a boon particularly for the developing world: a way to lower costs for payment services, facilitate cross-border transfers and reach underbanked communities globally. David Marcus, head of Facebook Financial, argued in a blog post last month that the company’s Novi wallet project — nee Calibra — is now “ready to come to market,” adding it would be “unreasonable to delay” delivering on those intended benefits.
But since its unveiling in 2019, it has been perpetually delayed, amid intense concern from lawmakers and regulators that any for-profit company — let alone Facebook — issuing a digital currency could destabilize global economies and create a haven for illicit activities like money laundering. The initiative’s critics have also argued the tools would give Facebook access to even more of their users’ financial data, raising privacy and competition concerns.
Marcus is now looking to quash those fears by again taking his case directly to officials in Washington, where he said in a sit-down interview he plans to huddle with regulators and other key stakeholders about Facebook’s plans for its digital wallet, Novi.
“We have a lot to prove in terms of our ability to earn people’s trust over a very long period of time,” Marcus told the Technology 202 during an interview in Washington last week, just blocks from the White House and U.S. Treasury Department.
Marcus rebuffed the arguments, saying with the addition of an external group of partners, including Lyft, Uber and Coinbase, to a coalition that will steer the digital currency, and by making its own digital wallet interoperable with competitors, Facebook has nipped those issues in the bud.
“I can't think of any other precedent where you have a company that would build what I think is very good tech … for purpose-built blockchain for payments with all of the compliance bells and whistles, and actually open source the whole thing [and] put it in an association with 26 members that it doesn't control,” he said.
He pushed back on claims that the company’s digital currency offerings could quickly scale up to challenge legal tender in the U.S., partly due to the fact that users won’t be automatically enrolled in the digital wallet or the cryptocurrency and will need to take extra steps to opt-in. And the scale it would require to compete at that level, he said, is vastly underestimated.
“For it to be systemic, we're talking about a tremendous amount of usage because at the scale of our financial system, it needs to be ginormous for it to actually even register,” he said.
But some analysts aren’t buying that Facebook has done enough to assuage fears.
“The fundamental risk is that this is Facebook, and Facebook has violated trust and promises repeatedly since its inception, so why should this time be any different?” said Lee Reiners, executive director of the Global Financial Markets Center at Duke University.
Reiners said tweaks the Facebook-backed Diem Association has taken to shore up Diem could help ease concerns about money laundering and about it escaping some regulatory guardrails.
But ultimately, Reiners said depending on how much Facebook integrates Novi and Diem into its existing products, such as Messenger, Instagram and WhatsApp, it could make it easy to “flip the switch” and turn its currency offerings into a “Leviathan.”
“It's still very much a real risk that this is going to become the primary mode of payment for a lot of people,” he added.
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Facebook blasted the U.K. antitrust regulator's call for it to sell Giphy
In response to a call from regulators to spin off the company it bought last year for $400 million, Facebook said such an action would be “grossly unreasonable and disproportionate," Bloomberg's Aoife White and Katharine Gemmell report.
The U.K.'s Competition and Markets Authority argued in August that “the only effective way to address the competition issues” is for Facebook to sell Giphy “in its entirety, to a suitable buyer." The regulator set Oct. 6 as the deadline for a decision on its inquiry of the deal.
Twitter said it accidentally suspended an account belonging to J.D. Vance, a Republican Senate candidate and Big Tech critic.
The company said it mistakenly flagged a campaign account belonging to Vance for violating its policies around impersonation, Bloomberg’s Mark Niquette reports. Vance is best known for writing the book “Hillbilly Elegy,” though he has also allied himself with former president Donald Trump in his race for a Senate seat being vacated by Sen. Rob Portman (R-Ohio).
Vance is competing for office in a crowded field racing for Trump’s endorsement.
Vance’s campaign platform calls for major technology companies to be broken up and a ban on the “theft of our personal information.” He immediately seized on the suspension, criticizing the power of major technology companies:
A tech policy think tank wants President Biden to crack down on high-risk algorithms.
New America's Open Technology Institute published a report Wednesday with more than a dozen recommendations for policymakers and Internet platforms to promote fairness, accountability and transparency around high-risk algorithms. Among their recommendations, the group called on President Biden to sign an executive order “that requires both Internet platforms and government agencies to evaluate any high-risk algorithmic system before it is deployed.”
OTI also said government agencies that make or use algorithmic systems should do periodic audits and assessments of their harms. It also redoubled its call for federal lawmakers to pass a comprehensive privacy bill into law. (Major technology companies like Amazon, Apple, Facebook, Dropbox, Google, Lyft and Microsoft fund New America, and the report’s authors acknowledged support from Craig Newmark Philanthropies.)
Rant and rave
Technology and encryption experts criticized a ProPublica article that argues that WhatsApp’s handling of reports by its users undermines the company’s defense of end-to-end encryption and privacy. The Electronic Frontier Foundation’s Eva Galperin:
Alec Muffett, a former engineer at WhatsApp's owner Facebook:
Stanford Internet Observatory Director Alex Stamos, the former chief security officer at Facebook:
Riana Pfefferkorn, a scholar at the Stanford Internet Observatory:
Inside the industry
- Law firm Kelley Drye & Warren has added two former FTC officials to its privacy and advertising practice groups: Jessica L. Rich, the former director of the Bureau of Consumer Protection, and Laura Riposo VanDruff, the former assistant director of the bureau’s privacy and identity protection division.
- Intel named Shannon Taylor its new head of technology and manufacturing policy. She previously worked as the Information Technology Industry Council’s senior vice president and senior counsel for government affairs.
- UK Innovate at the University of Kentucky, Columbia Technology Ventures, the Center for Strategic and International Studies and AUTM host the U.S. Innovation Competitiveness Summit, which begins Sept. 13.
- The Stanford Internet Observatory hosts an event on end-to-end encryption proposals at noon on Sept. 14.