By Dave Michaels and Paul Vigna 

WASHINGTON -- Senators on Tuesday questioned Facebook Inc.'s plans for its own cryptocurrency, known as Libra, with lawmakers in both parties saying the social-media giant isn't trustworthy enough to operate its own digital money.

Sen. Sherrod Brown (D., Ohio) said at a Senate Banking Committee hearing that Facebook's market power and lawmakers' concerns that it has failed to oversee abuses of its platform show it shouldn't have a digital currency that could boost its role in online commerce. Mr. Brown said after the hearing that lawmakers could draft legislation targeting Libra if Facebook "is arrogant enough to just blast ahead on this."

"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," Mr. Brown said at the hearing where Facebook executive David Marcus testified.

Committee Chairman Mike Crapo (R., Idaho) said the proposal heightens the need to pass legislation that would give consumers more control over the information they share online.

"We need to go beyond can we can trust Facebook or some other entity that will come up with a cryptocurrency," Mr. Crapo said after the hearing. "We've got to look at how we structure data protection in the United States."

However, Mr. Crapo also said Libra could provide social benefits, showing Facebook could have allies on Capitol Hill as it strives to launch Libra by 2020.

Mr. Marcus, a former PayPal executive, weathered tougher questions from other lawmakers about how Facebook and its partners would secure consumers' data and guard against the misuse of the digital currency by criminals or entities trying to evade U.S. sanctions.

"Isn't it true, and I really want your opinion," Sen. John Kennedy (R., La.) said, "Facebook has chosen to advance a set of values in which truthful reporting has been displaced by flagrant displays of bullshit?"

"I don't know how to answer that question, senator," Mr. Marcus said, eliciting some laughter in the hearing room.

Speaking in a measured voice, Mr. Marcus tried to assure lawmakers that Facebook and its partners would bring professionalism and order to the wild West world of cryptocurrencies.

In an exchange with Sen. Brian Schatz (D., Hawaii), who suggested the "grandiosity of Silicon Valley" spurred Facebook's desire to enter another risky business, Mr. Marcus said: "It's important to innovate on behalf of the people we serve, the same way we have been able to bring communication prices down with messaging apps."

Mr. Marcus also sought to persuade lawmakers that Facebook wouldn't control Libra once it is operational. A Switzerland-based association that will govern Libra includes 27 other companies, and consumers will be able to choose digital wallets to store Libra offered by other companies, Mr. Marcus said.

"They will have plenty of choice with established companies that have a lot of trust," Mr. Marcus said.

Facebook won't move forward with Libra until it has "fully addressed regulatory concerns and received appropriate approvals," Mr. Marcus told the panel. But opposition from within the Trump administration, some corners of Congress and international officials could mean the tech giant can't kick-start the project as soon as it hoped.

Treasury Secretary Steven Mnuchin said Monday that cryptocurrencies, including potentially Libra, are a "national security issue."

Democrats showed considerable wariness and sometimes opposition. Mr. Brown called Libra "monopoly money" and asked Mr. Marcus whether he would be willing to take his pay in Libra.

"Senator, if your question is whether I would trust all my assets in Libra, the answer is yes," Mr. Marcus said.

President Trump tweeted last week that Libra would have "little standing or dependability" and suggested that Facebook's project should be subject to banking regulations. Mr. Mnuchin said Facebook has a high bar to show it can operate the system while guarding against risks that are prevalent with cryptocurrencies, including money laundering.

Facebook has said it hopes to make Libra available next year on its Messenger and WhatsApp services and as a stand-alone app.

Mr. Marcus told the panel that Facebook wouldn't monetize users' data related to Libra. No financial or account data from the Libra network would be shared with Facebook, he said.

"We've heard loud and clear from people, they don't want those two types of data streams connected," Mr. Marcus said.

The company has said it doesn't expect the project to make money "at the outset." But it hopes that even in the near term, the currency will make it easier for smaller companies to do business with Facebook's users. That additional activity is also likely to boost advertising revenue, Facebook says.

Mr. Marcus received good reviews for his performance, even if he didn't completely mollify lawmakers, and he will face what will likely be an even tougher hearing Wednesday in the House.

"Marcus performed as well as anybody could in that situation," said Jerry Brito, the executive director of Washington, D.C.-based research firm Coin Center. "But Libra faces a huge challenge" given all the skepticism from lawmakers.

Yet other payments networks work within existing laws, Mr. Brito added, and Libra could, too. "It isn't a crypto issue," he said. "This is a Facebook issue."

Write to Dave Michaels at dave.michaels@wsj.com and Paul Vigna at paul.vigna@wsj.com

 

(END) Dow Jones Newswires

July 16, 2019 14:08 ET (18:08 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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