WASHINGTON/NEW YORK: US lawmakers from both sides of the aisle are set to grill Facebook Inc on its cryptocurrency plans on Tuesday, as the project continues to draw intense scrutiny from financial regulators and politicians across the globe. Facebook is fighting a rearguard action to get Washington onside after it shocked regulators and lawmakers with an announcement on June 18 that it was hoping to launch a new digital coin called Libra in 2020.
Since then it has faced a barrage of criticism from policymakers and financial watchdogs at home and abroad who fear widespread adoption of the digital currency by the social media giant’s 2.38 billion users could upend the financial system.
Critics have expressed anger that the company would have got 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.
The Senate Banking Committee will question David Marcus, the company’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, who was president of PayPal from 2012 to 2014, will try to assuage concerns by promising that Facebook will not begin offering Libra until regulatory issues are addressed, according to prepared testimony the committee posted on Monday. “We know we need to take the time to get this right,” Marcus, who is also due to testify before the House Financial Services Committee on Wednesday, will say. Marcus is likely to get a frosty reception from Democratic lawmakers who already believe the company is too large and careless with consumer data. He is also likely to face skepticism from Republicans after President Donald Trump and Treasury Secretary Steven Mnuchin also voiced concerns.
“They’re going to have to convince us of very high standards before they have access to the US financial system,” Mnuchin said on Monday.
Facebook allocated a small fraction of its vast workforce to work on the project, Kevin Weil, who runs product for the Libra initiative, told Reuters on June 18.
One former 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.
Rumors 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 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.
For example, the top Republican and Democrat on the Senate Banking Committee sent Facebook a letter on May 9 seeking information, including how the company would protect consumers’ financial information. But Facebook did not write back until July 8, the committee said.
After receiving the response, the lead Democrat on the panel, Senator Sherrod Brown, said in a statement he still needed “real answers.”
One Democratic aide described the company’s contacts with lawmakers as “inept and entitled.”
In its defense, Facebook has said that it announced the project in its early stages to get feedback from stakeholders.