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US senators have attacked Facebook’s cryptocurrency plans, saying it takes a “breathtaking amount of arrogance” to launch a global digital currency, given the company’s poor track record on privacy.
Facebook executive David Marcus, head of the Libra project, faced a series of combative questions from members of the Senate’s banking committee, who expressed serious concerns over whether people’s sensitive financial data would be safe in Facebook’s hands.
“Facebook has a long track record of abusing users’ trust,” said senator Sherrod Brown. “Over and over again, Facebook has said ‘just trust us’, and every time Americans trust you, they seem to get burnt.”
Brown pointed to the Federal Trade Commission (FTC)’s decision to fine Facebook $5bn for violating its 2012 settlement, in which the company said it would stop deceiving consumers about how their data was being used.
“Do you really think people should trust Facebook with their hard-earned money – yes or no?” said Brown.
Marcus responded: “Trust is primordial. We have made mistakes in the past and we have been working, and are continuing to work, to get better.”
Other senators also expressed concerns about Facebook’s repeated privacy violations throughout the two-and-a-half hour hearing.
“It’s just one [violation] after another after another,” said senator Martha McSally. “Now, instead of cleaning your house, you’re launching into a new business model.
“You say you won’t be sharing any account information or financial data with Facebook or any third party without consent, so how do we know this isn’t going to change and do we know you’re actually going to do that, based on your track record of failing and violating and deceiving in the past?”
Computer Weekly has revealed 22 occasions when Facebook violated its users’ privacy, including multiple instances of the firm surreptitiously tracking users’ activity either without consent or in ways it had explicitly promised it would not.
Marcus responded by saying Facebook had “invested incredible resources” in protecting user privacy going forward, adding that “Mark [Zuckerberg] has made it his top priority” and that Facebook will continue to work on these issues until they are fully resolved.
Marcus said the Libra network had been designed to be interoperable in such a way that people will be able to benefit from it without having to use Facebook’s own digital wallet, Calibra.
But he added: “I know we will have to earn people’s trust for a very long time in order to get the benefit of them wanting to use the Calibra wallet instead of any of the other wallets they will have the choice of using.”
Senators also expressed concern about how Facebook planned to make money from the new currency, questioning what the long-term business opportunities were for the company.
Marcus – a former president of PayPal – said Libra would expand users’ ability to transact with the 90 million small businesses on the Facebook platform. “If there is more commerce, there will be more advertising revenue for Facebook, so that’s an indirect effect,” he said.
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If Facebook could earn enough trust from users for its Calibra wallet, said Marcus, then it would be able to partner with financial institutions and banks to provide other services that could be a new source of revenue for the company.
He said the US should be at the forefront of establishing new regulations that set a gold standard for other countries to follow.
“I believe that if America does not lead innovation in the digital currency and payments area, others will,” he said. “If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different.”
Senators questioned why the Libra Association, a planned consortium of 100 private sector and civil society members, with equal voting rights, that will control the currency’s governance, will be based in Switzerland.
“We chose Switzerland not to evade any responsibilities or oversights, but because it is a well-established international place [for banking institutions],” said Marcus.
Facebook has claimed that the Swiss Federal Data Protection and Information Commissioner would oversee the data and privacy protections for Libra, but a spokesperson for the agency said it is yet to be contacted by the social network.
Brown added: “If all of us find this to be a bad idea and think you shouldn’t do this launch, are you still going to do it?”
Marcus responded: “If those concerns are not addressed and if the regulatory oversight is not appropriate, then we will not launch until it is.”
Facebook is expected to face more scrutiny from lawmakers in the coming weeks and months, including from the US Financial Services Committee.