FACEBOOK’S plan to launch a new cryptocurrency came under further attack at a Senate hearing as the tech giant was branded “dangerous”.
Senators grilled Facebook executive David Marcus about the intention to create a digital currency, called Libra, within the next six to 12 months.
Lawmakers demanded to know why a company with a track record of scandals should be trusted with the ambitious project, given the potential for fraud, abuse and criminal activity.
"Facebook is dangerous," declared Senator Sherrod Brown of Ohio, the committee's senior Democrat, at yesterday's hearing.
“Like a toddler who has gotten his hands on a book of matches, Facebook has burned down the house over and over and called every arson a learning experience.”
Republican Senator Martha McSally of Arizona said "the core issue here is trust."
Users won't be able to opt out of providing their personal data when joining the new digital wallet for Libra, McSally said.
"Arizonans will be more likely to be scammed" using the currency, she said.
The criticism came as Congress began two days of hearings on the currency planned by Facebook, to be called Libra.
Executives from Apple, Amazon, Facebook and Google were also grilled by the House Judiciary Committee’s antitrust subcommittee on Tuesday.
Mr Marcus defended the cryptocurrency plans by pointing out Facebook won't be responsible overall for Libra.
Control will be ceded to the Libra Association, of which Facebook will be only one member among a planned 100.
He also argued that if an American company did not build it first, another country may take the lead.
"If we don't lead in the space, others will," Mr Marcus said.
"The same way we will end up having two internets and two infrastructures, we will have two different financial systems.
“I believe if we stay put we're going to be in a situation in 10, 15 years where half the world is on a blockchain technology that is out of reach of our national-security apparatus."
He said the new venture would be headquartered in Switzerland, not to avoid oversight but because the country is a recognised international financial centre.
The grilling followed a series of negative comments and warnings about the Libra plan in recent days from Donald Trump, his treasury secretary and the head of the Federal Reserve.
But some senators emphasized the potential positive benefits of Facebook's plan, meant to bring money transacting at low cost to millions around the globe who don't have bank accounts.
What is a cryptocurrency?
Bitcoin got you baffled? Here's what you really need to know
- A cryptocurrency is a virtual currency
- Examples include Bitcoin and the new Facebook-led coin "Libra"
- It's traded between people without the help of a bank
- Every transaction is recorded in a public ledger, or 'blockchain'
- Crypto cash is created by mining
- Mining involves solving difficult maths problems using computer processors
- Coins can be traded anonymously, which makes them a popular way of funding illegal activities
- A single Bitcoin is worth over £7,000 today, but the value fluctuates wildly
Facebook had its strong defenders of the project, too, on the panel.
"To strangle this baby in the crib is wildly premature," said Senator Pat Toomey, R-Pa.
The planned digital currency is to be a blend of multiple currencies, so that its value will fluctuate in any given local currency.
Promising low fees, the new currency system could open online commerce to millions of people around the world who lack access to bank accounts and make it cheaper to send money across borders.
But it also raises concerns over the privacy of users' data and the potential for criminals to use it for money laundering and fraud.
To address privacy concerns, Facebook created a nonprofit oversight association, with dozens of partners including PayPal, Uber, Spotify, Visa and MasterCard, to govern Libra.
As one among many in the association, Facebook says it won't have any special rights or privileges.
It also created a "digital wallet" subsidiary, Calibra, to work on the technology, separately from its main social media business.
While Facebook owns and controls Calibra, it won't see financial data from it, the company says.
Senators demanded to know exactly what that separation will entail.
Trump tweeted last week that the new currency, Libra, "will have little standing or dependability".
Both Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell have expressed serious concerns recently that Libra could be used for illicit activity.
The Treasury Department has "very serious concerns that Libra could be misused by money launderers and terrorist financiers," Mnuchin told reporters at the White House on Monday.
"This is indeed a national security issue."
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