Facebook Inc is “delusional” in believing that people will trust it with their money, a United States senator said at a hearing on Tuesday as lawmakers from both sides of the aisle grilled the social media company about its plans for a digital currency.
Since then, Facebook has faced criticism from policymakers and financial watchdogs in the US and abroad who fear that widespread adoption of the proposed digital currency by the social media giant’s 2.38 billion users could upend the financial system.
“Facebook has demonstrated through scandal after scandal that it doesn’t deserve our trust,” Senator Sherrod Brown, a Democrat and the ranking member of the US Congress’s Senate banking committee, said in his opening remarks. “We’d be crazy to give them a chance to let them experiment with people’s bank accounts.”
As the hearing progressed, bitcoin declined, according to Bloomberg data, which showed the cryptocurrency falling as much as 8.9 percent on the day. The popular digital currency fell to $9,951.89 at 12:52pm in New York City. It’s down more than 16 percent this week.
Brown added during questioning that he thought it was “delusional” to think individuals would trust the social media company with their “hard-earned” money.
The US Senate Committee on Banking, Housing and Urban Affairs is questioning David Marcus, Facebook’s top executive overseeing the project, on issues ranging from how Libra could affect global monetary policy to how customer data will be handled. Marcus received a frosty welcome from Democratic lawmakers and several Republicans, who shared many of the same concerns.
“I don’t trust you guys,” said Republican Senator Martha McSally. “Instead of cleaning up your house, you are launching into a new business model.”
Marcus, who was president of PayPal from 2012 to 2014, tried to assuage concerns in his opening remarks by promising that Facebook will not begin offering Libra until regulatory issues are addressed.
“We know we need to take the time to get this right,” said Marcus, who is also due to testify before the US House Committee on Financial Services on Wednesday.
Prior to announcing its Libra plans, Facebook was already facing significant backlash over mishandling user data and not doing enough to prevent Russian interference in the 2016 US presidential election.
The US Federal Trade Commission (FTC) has been investigating allegations that Facebook inappropriately shared information belonging to 87 million users with the now-defunct British political consulting firm Cambridge Analytica. The probe has focused on whether the data sharing violated a 2011 consent agreement between Facebook and the regulator.
Last week, the FTC voted to approve a roughly $5bn settlement with Facebook over its investigation into the company’s handling of user data.
In response, three US senators who have been frequent critics of US tech giants wrote a letter to the FTC on Tuesday to criticise its reported settlement with Facebook Inc.
Senators Edward Markey and Richard Blumenthal, who are Democrats, and Josh Hawley, a Republican, told the agency that the $5bn settlement reported on Friday, “is woefully inadequate”.
“We are concerned that the FTC has failed to impose strict structural reforms and managerial accountability that would put an end to Facebook’s privacy violations,” the lawmakers wrote.
In particular, the senators pressed the FTC on how the penalty was determined, whether founder and CEO Mark Zuckerberg was interviewed as part of the probe, whether Zuckerberg or other executives were named in the new proposed settlement and whether new restrictions on data collection were agreed to.
US Senators raised concerns by asking how the company plans to prevent money laundering through the new payment system, how consumers’ data and funds will be protected and how the Geneva-based association created to run the system will be regulated.
McSally asked Marcus how consumers could trust Facebook not to share their payments data.
“I know we have to earn people’s trust for a very long period of time,” Marcus said.
The social media company has pledged that its payments subsidiary, called Calibra, will only share customer data with Facebook and external third parties if it has consent, or in “limited cases,” where it is necessary.
Critics have expressed anger that Facebook has come so far in its plans for such a potentially groundbreaking project without extensive input from policymakers, especially when it is already in the spotlight over privacy issues.
Facebook allocated a small fraction of its vast workforce to develop the Libra project, Kevin Weil, the vice president of product at Calibra, told Reuters on June 18.
One former Facebook employee told Reuters the company tried to keep the project under wraps even internally. Staff who were not involved knew little about it, not even that it was operating under the name Libra.
Rumours had surfaced as early as last year that Facebook was working on a digital currency, but news that the project was in its advanced stages started to emerge only in recent months.
In the weeks leading up to the announcement, the company began reaching out formally to key regulators including the US Federal Reserve, the Treasury and the Commodity Futures Trading Commission. But two people with knowledge of the discussions said the conversations remained vague, with key details of the project discussed only on a theoretical level.
Some lawmakers specializing in financial-services policy have been frustrated by the lack of clarity from Facebook before and since June 18, three congressional sources said.
One Democratic aide described the company’s contacts with legislators as “inept and entitled”.
In its defence, Facebook has said that it announced the project in its early stages to get feedback from stakeholders. Marcus reiterated this at the hearing on Tuesday.