House lawmakers square off over Facebook's crypto plans
WASHINGTON — While lawmakers on both sides of the aisle have concerns about Facebook's proposal to create a global digital currency, there was a sharp divide Wednesday about whether it should be allowed to move forward with the project.
On the one side, Democrats repeated calls for Facebook to immediately halt its Libra plans.
“Will you stop kind of dancing around this question and commit here in this committee before the duly elected representatives of the American people to a moratorium until Congress enacts an appropriate legal framework to ensure that Libra and Calibra do what you claim it is intended to do, which is to serve the public's good?” House Financial Services Committee Chairwoman Maxine Waters, D-Calif., asked David Marcus, the head of Facebook's digital wallet.
But Republicans said Congress has no right to stifle potential innovation.
“Washington must go beyond the hype and ensure that it’s not the place where innovation goes to die,” said Rep. Patrick McHenry, R-N.C., the panel's top Republican. “Some politicians want us to live in a permission-based society. ... Those are the politicians who would rather kill it before it grows.”
Marcus told the committee that he would commit to ensuring that Facebook satisfies regulatory concerns, but stopped short of committing to stop the Libra project until Congress fully investigates its plans.
“I agree with you that this needs to be analyzed, understood, and the proper oversight needs to be set up before Libra can launch,” Marcus said, responding to Waters. “And this is in this spirit that we released a white paper very early, before any launch, so that we could have the time to engage with all of the proper regulators and central banks and lawmakers to ensure that we will get this right. And this is my commitment to you, chairwoman. We will take the time to get this right.”
When Rep. Carolyn Maloney, D-N.Y., went further to ask Marcus if Facebook would conduct a pilot for Libra limited to “no more than one million users,” Marcus said only that he would remain in contact with regulators.
“Congresswoman, we will continue to engage with regulators and the working group at the G-7 that is notably looking after the issues that you raise to ensure that however we launch this it is responsibly and it is with the appropriate oversight and in a very responsible way,” Marcus said.
Maloney said that if Facebook does not commit to conducting a pilot program for Libra, then “Congress should seriously consider stopping this project from moving forward.”
Waters has already floated legislation to block big tech companies from operating as banks.
But Republicans on the committee echoed McHenry’s comments, and said Congress should allow the private sector to innovate.
“There's always a presumption that the private sector innovating is a bad thing,” said Rep. Andy Barr, R-Ky. “I think the presumption should be totally reversed. I think we should presume that innovation is good. It presents enormous opportunity for financial inclusion, reducing friction in transactions. The opportunities that are created by this innovation is laudable. It's to be commended. That's not to say we shouldn't ask questions, but the presumption in this hearing room today seems to be in the wrong place.”
Lawmakers' concerns on Marcus' second day testifying on Capitol Hill ranged from the cryptocurrency's potential to be used for illicit finance to questions about how Libra should be defined by regulators.
Rep. David Scott, D-Ga., said Facebook’s white paper did not properly address how Libra would comply with anti-money-laundering laws.
“I want to call your attention to the fact that neither your white paper nor your subsequent Facebook posts offered any concrete details as to how you plan to implement or enforce strong anti-money-laundering, how you plan to enforce know-your-customer protections and, most importantly, to ensure … the safety of our financial system,” Scott said.
Marcus said Libra will register with the Financial Crimes Enforcement Network, which has an AML regime in place.
Other lawmakers raised questions about what type of product Libra is. While Marcus continuously said that Libra will be a “payment tool,” some lawmakers questioned whether it is potentially just an investment instrument.
“This looks to me exactly like an exchange-traded fund backed by a series of short-term instruments and foreign currency, it looks exactly like an ETF,” said Rep. Jim Himes, D-Conn. “The SEC says if you have a security that is backed … by other securities you are an exchange traded fund.”
Marcus told Himes that Libra is backed by “mainly currencies” and that “no one will buy Libra as an investment.”
Rep. Warren Davidson, R-Ohio, further suggested Libra could be regulated as a security.
“You intend to have it pegged to not just a bundle of currencies, but in the white paper, short-term securities,” Davidson said. “Well currently under U.S. law, if you’re trading in securities as the underlying basis for the asset that you’re selling, that’s regulated as a security. Why would it not be considered a security?”
Marcus again said that Facebook does not believe Libra would be a security “because it is designed as a payment tool.”
Meanwhile, several committee Republicans questioned whether Facebook would make Libra available to users independent of their political views — even if those views are controversial.
Rep. Sean Duffy, R-Wis., noted that Facebook has barred controversial figures like Milo Yiannopoulos and Louis Farrakhan from its platform.
“With regard to your network, can Milo Yiannopoulos or Louis Farrakhan use Libra?” Duffy asked. “Both those two individuals have been banned from Facebook.”
Barr urged Marcus to ensure that Libra is a neutral financial platform.
“To the extent that Facebook and other social media enterprises have been criticized for political bias, I think that's important, to earn the credibility of the American people that this platform, this financial platform, be viewed and earn the confidence as a neutral player so that the adoption can serve all and really serve that ultimate purpose of financial inclusion,” Barr said.