“Trust is primordial,” David Marcus, head of Libra at Facebook, told senators at a hearing about the company’s plans for a cryptocurrency on its platform.
But Marcus had a tough time gaining the supposedly – primeval emotion from the group facing him.
The hearing was remarkable for two reasons. First it was held approximately a month after the social media behemoth announced its intentions for a global blockchain and cryptocurrency. Typically, regulation lags technological advances. Facebook itself is an example. It came under the regulatory scanner several years after its launch. The swift response from lawmakers to Facebook’s announcement is a sign of the importance of this undertaking.
Second, it revealed little about Facebook’s plans for Libra other than what’s already known. The premature nature of the hearing meant that senators focused their energy and attention on Facebook’s record on privacy rather than on Libra’s specifics.
A Hostile Reception
Senator Sherrod Brown began proceedings with a long list of Facebook’s transgressions and questionable business practices over the years. His colleagues laid into Marcus soon after, repeatedly condemning Facebook’s prior record and demanding specifics about its plans for Libra. “I don’t trust Facebook,” declared Senator Martha McSally from Arizona. “It’s because of the repeated violations and repeated deceit (of the company).”
Senator Krystal Sinema, again from Arizona, brought up the question of vetting developers to prevent scamsters from making off with consumer’s cash. (In an interview earlier this week, Kevin Weil, head of product at Calibra – Facebook’s wallet on the platform – said it would not vet developers.)
Senator Brown also asked Marcus whether he would accept 100% of his salary in Libra. Marcus said year because Libra was not meant to compete with bank accounts. “It is also backed by a 1:1 reserves,” he added as reference to its reserves of fiat currency meant to ensure stability.
On the all-important question of privacy on the platform, Marcus said that Facebook would commingle anonymized data from Libra with data from its social network. But Libra’s platform is pseudo-anonymous, meaning that explicit information relating to an individual is anonymized but a trail, in the form of wallet address, is kept intact. This pseudo-anonymity has enabled the likes of FBI to trace criminals. Under pressure, Marcus also admitted that Calibra’s opt-in permission for data sharing was, in fact, mandatory. This means that users will have to agree to its data policy to use the wallet.
Questions about the composition and functions of the Libra Association also remained unanswered. Previous news reports have indicated that the Association’s members are not committed to it and have simply signed a Letter of Intent (LOI) that allows them to opt out anytime. Some have also said that the association is an ETF in disguise that will provide a regular stream of income to members. Marcus said the association’s charter was still being ratified. Even here he came in for criticism. “Members of the consortium have lots of questions too, similar to the ones we’ve asked today, and they have great reservations about moving forward but they don’t want to be left out because of Facebook’s marketing power,” opined Senator Brian Schatz from Michigan.
During the hearing, Marcus repeatedly said that Facebook and Calibra would have to earn user trust. Clearly, they have ways to go.