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Facebook rebuffs Maxine Waters on cryptocurrency delay



A top Facebook executive on Wednesday refused demands by Rep. Maxine Waters and other Democrats to delay work on the company's new digital currency despite growing concern about risks it will pose to the global economy.


Waters, a California Democrat who chairs the House Financial Services Committee, pressed executive David Marcus at a hearing to stop "dancing around this question" and commit to a moratorium on the so-called Libra project until Congress enacts new safeguards.


"Ultimately, if Facebook's plans come to fruition, the company and its partners will wield immense economic power that could destabilize currencies and governments," she said.


The hearing, the second on Libra this week, further illustrated the huge political hurdles that Facebook will have to overcome in Washington and other world capitals to get its international payment system off the ground. House lawmakers voiced clear frustration with the tech giant about the lack of firm details they were getting on how Libra would be run and regulated.


Waters and other lawmakers raised alarms about what Facebook's foray into finance meant not only for consumer privacy, in light of its poor track record of protecting user data, but also national security, given the questions about the anonymity Libra might afford money launderers and terrorism financiers.


One lawmaker even said Libra could be more of a threat to the U.S. than the Sept. 11 terrorist attacks.



"We're told by some that innovation is always good," Rep. Brad Sherman (D-Calif.) said. "The most innovative thing that happened this century is when Osama Bin Laden came up with the innovative idea of flying two airplanes into towers. That's the most consequential innovation, although this may do more to endanger America than even that."


Marcus, the executive overseeing Facebook's Libra-focused financial services subsidiary, pledged to take the time needed to address policymakers' concerns but stopped short of committing to the firm moratorium Waters and other House Democrats demanded.


Facebook and its partners, who will be members of an independent, Switzerland-based association that will manage the currency, plan to launch Libra next year.


"Chairwoman, 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.


Waters clearly felt rebuffed.


"That's not a commitment," she said.


In addition to clashing with Democrats over the timing, Marcus quibbled with lawmakers’ suggestions for how Libra might be regulated.


Among the ideas he disputed was one posed by Rep. Jim Himes (D-Conn.). Himes argued that Libra should be regulated and subject to disclosures like a traditional exchange-traded fund because it will be backed by a reserve of various government currencies that could expose consumers to unexpected fluctuations in the value of those currencies.


Rep. Alexandria Ocasio-Cortez (D-N.Y.) also targeted the reserves backing Libra, in particular the role of giant companies that Facebook says will work with it to manage the currency at the nonprofit Libra Association in Switzerland.


"So, we are discussing a currency controlled by an undemocratically selected coalition of largely massive corporations," she said.


Facebook has argued that Libra will not only allow it to sell a new service and more ads but that it will enable more people around the world to access the financial system.


Facebook plans to operate a digital "wallet" called Calibra that will enable its users to transact in the currency.


But, well aware of its damaged reputation, the company has stressed that Libra's management will be led by dozens of additional companies that are members of the Libra Association and that there will be competing wallets for users if they don't trust Facebook.


"Facebook will have only one vote and will not be in a position to control the wholly independent organization," Marcus said.


Rep. Patrick McHenry (R-N.C.), the committee's top GOP member, said it was premature to demand that Libra be stopped.


McHenry told reporters before the hearing that Libra at its best could reduce transaction costs domestically and internationally and provide financial inclusion to the world's poor. He said it could help immigrant families that today rely on Western Union to remit money back home to loved ones.


Or, he said, it could be "a mad dash for consumer data."


"We don't know," he said. "Is this disease or a cure? We should find out."



Article originally published on POLITICO Magazine