Ever since Facebook announced Libra, it was quite clear that launching it is not going to be an easy affair. But we didn’t have an idea of how difficult it’s going to get for the company in its own home market. Yesterday, however, we got our very first glimpse on it as company’s head of crypto and blockchain operations David Marcus testified before the US Senate. And I must say that he was grilled very hard by the members of Senate Banking Committee present at the hearing. Here we’re going to discuss some of the special remarks that came from the Senators during this hearing. But the bottom line of hearing is that Facebook has been told to clean its house before launching another major business.
One of the senior senators to quiz Mr. Marcus at yesterday’s hearing was Senator Sherrod Brown from Ohio. And here are some of the disastrous questions he asked Mr. Marcus:
“Facebook has a long track record of abusing users’ trust, you know that Mr. Marcus. Until recently, you’ve headed Facebook’s messaging team and you were allowing other companies like Netflix and Spotify and the World Bank of Canada access and read Facebook users’ private messages. So be clear about what went on at Facebook. Facebook told us that they were keeping our data safe when they were allowing other companies to sift through private messages. You had to shut down those programs after huge backlash. Over and over Facebook has said ‘just trust us’, and every time Americans trust you they seem to get burned. Facebook told the FTC in 2012 that it would stop abusing our data and then last week out of 5 billion, with a ‘B’ 5,000 million dollar fine for violating that agreement. And as we know, you’ve even run psychological experiments on your users so… so sitting here Mr. Marcus, after all the times Facebook has abused the public’s trust, and you know that, do you really think people should trust Facebook with their hard-earned money? Yes or No?”
David Marcus in response outlined how Zuckerberg had also said in his testimony to the Senate that trust is primordial, and how they’ve taken a number of steps to fix their previous “mistakes” in the areas of user privacy and election integrity. About Libra, he said that Facebook will only be the one particular member of Libra Association among a hundred, and they won’t have any special privilege over other members. So the governments will not have to trust Facebook, he was trying to convey… but Senator Brown cut him short right there, and fired another salvo after outlining how Facebook can’t be “just one among the hundred with data and information about 2 billion users”. Here’s the next million-dollar question he asked David Marcus:
“If you think a hardworking family should trust Facebook’s monopoly money, I’d like to see how much you and your company trusted. You get a paycheck in dollars I assume, I assume you get some pretty good compensation in Facebook stock too… will you pledge today in this committee that you and your team who are working on this project will accept a hundred percent of your salary and other compensation in this Facebook currency?
Now, David answered this question in yes… but only after trying to evade it twice. But Senator Brown didn’t allow him to evade it by interrupting both times. It was only then that he said “Yes, I would… because it’s backed one-for-one with a reserve”… But senator Brown was quick to point out in response that if that’s the case then Mr. Marcus would have simply said “Yes” in the beginning itself. You can see the video of this conversation below, which is courtesy of CNBC:
Other members of the committee also shared the concerns of Senator Brown. Congresswoman Alexandria Ocasio-Cortez (popularly known as AOC), for instance asked David Marcus if the members of Libra Association were elected democratically? And the answer to her question was negative. When she specifically asked who picked these members of Libra Association, here’s what Mr. Marcus told in response:
“Congresswoman, the membership is open based on certain criteria… the first 27 companies and the other companies that have joined are the companies that have shared that desire to come and build this network.”
His response, however, didn’t go down too well and AOC asked him if he thinks that currency is a public good? And David didn’t give any specific response to her question. He told that sovereing currencies should remain sovereign, and Facebook doesn’t want Libra to compete with sovereign currencies. Instead, it only wants to augment the capabilities of sovereign currencies, and therefore they’ll work with the regulators to address their concerns. This response was taken as a “No” by the Congresswoman.
In addition to the Senators and members of US Congress, Federal Reserve Chairman Jerome Powell and US Treasury Secretary Steven Mnuchin have already said it earlier that they’re not comfortable with Facebook launching a cryptocurrency.
These events took place at the hearing of US Senate’s Banking committee. Mr. Marcus will also testify before one other committee today, and that is the House Financial Services Committee. It will be interesting to see what goes happens there. It’s certainly not looking to be a smooth ride for one of the world’s most powerful corporations!