David Marcus, head of the Facebook subsidiary in charge of Libra, testifies on Libra and Facebook's cryptocurrency plan during a Senate Finance Committee Hearing on Capitol Hill in Washington, D.C. on Thursday. Photo by Kevin Dietsch/UPI | License Photo
July 16 (UPI) -- Senate lawmakers said Tuesday they don't trust a plan by Facebook to devise and roll out an entirely new digital cryptocurrency system, the Libra, next year.
The Senate banking committee questioned David Marcus, head of the Facebook subsidiary in charge of Libra, at length Tuesday. His testimony came at a time of measured caution among lawmakers and members of the Trump administration -- and recent scandals involving the social media giant.
Ohio Sen. Sherrod Brown compared Facebook to a toddler playing with matches. Allowing Facebook to launch a decentralized digital currency, he said, is a bad idea.
"Facebook has burned down the house over and over and called every arson a learning experience," he said.
Some lawmakers have already drafted plans to block the Libra in the United States. Beyond regulatory concerns, they're concerned the system could be misused by terrorists and money launderers. Marcus emphasized at Tuesday's meeting the entire system will be fully vetted before launch.
"If America doesn't lead innovation in digital currency and payments area, others will," he told the panel.
Facebook said it plans to embed a Libra "wallet" into its Messenger and Whatsapp and will block other competing wallets, like Google's. Libra will be headquartered in Switzerland despite being regulated by the U.S. Department of the Treasury's Financial Crimes Enforcement Network. Facebook has said it won't use any personal data from the digital wallet, an issue Facebook has already taken substantial criticism for.
Facebook says the Libra will allow users to send money around the world for free with the same ease as sending a text message or a photo. It will immediately challenge other blockchain systems like standard-bearer bitcoin.
Marcus said Libra is backed on a one-to-one basis through cash bank deposits, short term government securities and hard currencies, including the U.S. dollar, British pound, euro and Japanese yen. A number of companies have already backed the Libra, including MasterCard, Uber, PayPal and eBay.
"[Federal Reserve] Chairman [Jerome] Powell has made clear that the process for reviewing Libra needs to be patient and thorough, rather than a sprint to implementation. We strongly agree," he said. "We know we need to take the time to get this right.
U.S. Treasury Secretary Steven Mnuchin said Monday President Donald Trump has concerns about how cryptocurrencies can be misused by "money launderers and terrorist financiers," noting Facebook has "a lot of work to do."
"Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs and human trafficking," he said.
In the House, financial services committee chair Maxine Waters wants Facebook to suspend Libra's release until lawmakers first consider a bill that would bar social media and tech companies from setting up their own financial systems. Titled the "Keep Big Tech Out of Finance Act," the ban would apply to any company with at least $25 billion in annual revenue -- which also offers a web-based marketplace, exchange or platform for "connecting third parties."
Marcus will answer questions from Waters' committee Wednesday.