WASHINGTON (AP) — Facebook endured a second day of criticism from Congress over its plan to create a digital currency as senior House Democrats asked Facebook to scale back the project and threatened legislation that would block big tech companies from getting into banking.
Facebook’s massive market power and its record of scandals, fines and privacy breaches were on trial at a hearing Wednesday of the House Financial Services Committee. Lawmakers from both parties insisted they cannot trust the social network giant.
“I think you’re pretty low on the trust spectrum right now, and understandably,” Rep. Vicente Gonzalez, D-Texas, told David Marcus, the Facebook executive leading the project. It was Marcus’ second straight day of tough questioning by lawmakers.
Among their concerns is the risk that the new currency, to be called Libra, could be used for illicit activity such as money laundering or drug trafficking. Lawmakers also worry that the massive reserve created with money used to buy Libra could supplant the Federal Reserve and destabilize the financial system, and that consumers could be hurt by Libra losses.
The committee’s leader, Rep. Maxine Waters, D-Calif., has asked Facebook to suspend its plan for the new currency until regulators and lawmakers have a chance to fully review it. She renewed that demand to Marcus.
Rep. Carolyn Maloney, D-N.Y., asked that Facebook commit to starting with a pilot project with no more than a million users, overseen by the Federal Reserve.
If Facebook cannot meet that request, Maloney said, “then Congress should seriously consider stopping this project from moving forward.”
Waters held out the prospect of legislation that would prohibit big tech companies such as Facebook, Google, Amazon and Apple from becoming chartered or licensed as U.S. financial institutions, and thus able to offer banking services, and specifically from establishing a digital currency.
Facebook, marshaling its more than 2 billion users around the world, “is apparently trying to create a new global financial system that will compete with the U.S. dollar,” Waters said.
The congressional criticism thickened the cloud over Facebook’s plan, coming after negative statements and expressions of concern from the two most powerful financial regulators , Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin, as well as from President Donald Trump himself.
In a rare endorsement of Trump’s views, committee Democrats projected his negative tweets last week about cryptocurrencies and Libra on a giant electronic screen in the hearing room. Trump said Libra “will have little standing or dependability.”
As he did at Tuesday’s hearing by the Senate Banking, Housing and Urban Affairs Committee, Marcus repeatedly took pains to assure lawmakers that Facebook would not launch the currency project until it had received all the necessary approvals from regulators and secured safeguards to protect the privacy of…