Facebook’s Libra Gets a Cold Reception at Senate Hearing
Facebook’s head of Calibra — the name of Facebook’s cryptocurrency corporate subsidiary and its wallet — David Marcus was grilled by the Senate Banking Committee on Wednesday afternoon in a session called “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations”. Facebook says that its planned Libra currency and Calibra wallet will lower the cost of international money transfers and help bring more than a billion people without bank accounts onto the global financial system.
Senator Sherrod Brown, on the Senate Banking Committee, who made the ‘dangerous’ comment likened Facebook to a toddler with matches. “Facebook has burned down the house over and over and called every arson a learning experience,” he said.
Facebook’s Marcus responded: “We will have to make very strong commitments so that people trust us, and we will have to honor those commitments for a very long period of time to earn people’s trust.”
Marcus also noted that Libra will be compatible will all crypto wallets, though only the Libra wallet will be included in Facebook Messenger and WhatsApp. It’s not known if the Calibra wallet will be able to store other cryptocurrencies.
During the hearing, Marcus made it clear that Facebook and its partners its launching Libra with intend to follow all US regulations even though the Calibra association will be headquartered in Switzerland, while also stressing that Facebook does not intend to monetize user’s data via Libra. Libra will not be launched, according to Marcus, until all of the concerns US lawmakers have brought up are satisfied.
What Marcus was unable to answer, however, was how much data Facebook would collect on purchases users make with Libra and how that data would be used. Marcus was also unable to answer questions about how much scrutiny it would apply to developers. This would be particularly relevant when it comes to consumer protection and users’ funds; plenty of fake cryptocurrency wallets litter the Android Play Store.
Separately, a day before the Senate Libra hearing, former Commodity Futures Trading Commission (CFTC) Gary Gensler, who ran the CFTC from 2009 to 2014, told the US House of Representatives that Libra is essentially a security and should be regulated as such. This is important to note, as currencies are not regulated instruments or treated as securities. As such, in the eyes of regulators, this would put Libra closer to an ICO or STO token rather than a cryptocurrency like Bitcoin.
Marcus will be back before the Congress’ House Financial Services Committee on Wednesday (July 17) to testify as that committee reviews Libra.
Little Love for Libra
Facebook is having a tough time finding support for Libra, as many US lawmakers have publicly announced skepticism over the proposed cryptocurrency. One might think that Libra would garner more support within the broader crypto= community, but the reaction there has been at best lukewarm.
Erik Voorhees, the CEO of currency exchange ShapeShift, pointed out that Libra isn’t a cryptocurrency by the strictest of definitions even though it relies on Blockchain
3/ Libra deserves nuanced analysis, it is neither “great” nor “horrendous.” This brings up an important point too often missing in discussions of crypto: digital assets and blockchains have *many* attributes, optimizing for certain ones can detract from others, and that’s okay.
— Erik Voorhees (@ErikVoorhees) June 18, 2019
Popular crypto commentator and executive Gabor Gurbacs ran a Twitter poll in June asking his followers if they trusted Libra over the existing payments services offered by banks. The results were not encouraging for Libra:
Would you trust Facebook’s coin (Libra) more than payment and financial services provided by banks? Vote and retweet to get a good sample size. Comment if you have an opinion on the matter or tag someone who does.
— Gabor Gurbacs (@gaborgurbacs) June 14, 2019
However, the CEO of Binance, Changpeng Zhao, was upbeat on Libra’s prospects:
Facebook Libra coin don’t need KYC. They have so much more data on the 2 billion people. Not just name, id, address, phone number. They know your family, friends, real-time/historic location, what you like… They know you more than yourself. And now your wallet too. Best AML!
— CZ Binance (@cz_binance) June 18, 2019
Facebook has a long road ahead for Libra. There are plenty of fears — most legitimate — that the company will need to assuage. There’s no guarantee that Facebook will even be able to launch the cryptocurrency. But if it does, it will surely be a disruptive force to be reckoned with in the finance sector.