“Zuckbucks” encounters resistance due to Facebook’s damaged reputation, Libra may precipitate unfavorable legislation
Marcus went before members of the House Financial Service Committee to explain the social media platform’s ambitious proposal to enter the crypto space. During the hearing, which spanned more than four hours, most of the House Reps made it clear that if they had anything to do with it, this Facebook crypto would never come to fruition.
Following Marcus’ appearance before the Senate Committee on Banking, Housing, and Urban Affairs Tuesday, Bitcoin’s price plunged from $10,423 to $9,669 over the course of the hearing—a 7.2 percent drop. Prices continued to fall, hitting a low of $9,050 while the news circulated.
As the hearing in the House droned on this Wednesday, Bitcoin’s price rebounded by the end of the hearing around $9,698 at press time—up 7.1 percent from today’s low. Prices remained below $10,000 following the precipitous drop during the Senate hearing July 16, 16:00 UTC.
Plenty of speeches, little next-step guidance
House Financial Services Committee Chair Maxine Waters started the hearing by referencing legislation called the “Keep Big Tech Out Of Finance Act.” Congresswoman Waters, a California Democrat, garnered bipartisan support in calling for a moratorium for Facebook before it moves forward with Libra.
The bill recommends prohibiting giant tech firms from serving as financial institutions or launching their own cryptocurrency. During the hearing, instead of focusing on the proposal, lawmakers trained their sights on Facebook.
In making their comments, House members picked up where their colleagues from the Senate left off. This included thorough questioning of Facebook’s ability to safeguard user privacy.
Rep. Brad Sherman questioned the motives of Facebook, saying that its CEO, Mark Zuckerberg, should be an advocacy for privacy. Sherman coined the proposed crypto as a “Zuckbucks.” He charged that Zuckerberg was creating a device that will provide privacy to drug dealers, human traffickers, terrorists, tax evaders and sanctions evaders. He said:
“Problem number one, Zuckerberg can’t print money, yet. Problem number two. Zuckerberg is under attack because he invades the privacy of ordinary Americans, and sells it to the highest bidder.”
Reports surfaced Tuesday that the Swiss agency that Libra execs have said would be used to protect and oversee users’ data had not heard from Facebook.
David Marcus is sparse on details about Libra
Lawmakers were particularly annoyed with the lack of specifics. Marcus claimed to not know the answer to numerous questions or was not willing to share more detailed information about Libra. For example, when Rep. Michael San Nicolas asked him what the average user would have as a Libra balance, Marcus said:
“We have not projected average balances at this point.”
That drew a sharp rebuke from the San Nicolas, who responded:
“You really expect me to believe that? Facebook is built around average users, average number of hits. Visa, Mastercard—all these huge players are signing up and you guys have no idea how much you expect to have in an average Libra account?”
Unsatisfied with Marcus saying he’d be willing to follow up with answers, San Nicolas quipped the company was trying to hide the figure.
Lawmakers also pointed out that by the end of 2020, Libra was expected to have 100 partners for Libra. With that kind of triple growth, it was unbelievable that they’d sign up without knowing the cryptocurrency’s potential.
Libra’s not a bank, but it’s for unbanked, Facebook claims
Lawmakers complained that Libra seems like it is a bank, despite the company stressing that the network is a payment service. Moreover, Marcus had to admit that he did not have firm numbers on the number of unbanked consumers Libra could serve, causing more head-scratching among lawmakers.
In referring to the most vulnerable consumers who may not understand the nuances of cryptos, Rep. Joyce Beatty spoke about Libra’s potential victims.
“We know that those who are unbanked and underbanked are that for a reason. This is very complicated. We have some of the best minds here on both sides and clearly there’s a lot of unanswered questions.”
She questioned how Libra could be explained to someone who is unbanked or underbanked considering they are likely not financially savvy.
Libra encounters staunch resistance
Facebook’s shortage of goodwill cuts across political boundaries. Hardline Democrat Maxine Waters and President Donald Trump both voiced similar concerns about the social media giant’s crypto proposal.
Facebook created Calibra as one of many wallet applications it claims will be on the Libra network. The application, similar to Venmo or PayPal, will use the crypto to settle payments. It’s supposed to also offer consumers fraud protections. It will also serve as the point of control for conducting know-your-customer and anti-money laundering checks on users, according to the whitepaper and statements from Marcus.
When it comes to Calibra, Marcus stressed Facebook would have just one vote among the 100 partners. That assertion largely fell on deaf ears in the hearing. Libra was seldom the topic of focus, especially considering the sparse details offered by Marcus. For Congress, it seems the driving force behind regulating Libra is the distrust toward Facebook.