by Gene Koprowski
HOUSTON, July 18 (Xinhua) -- U.S. Representatives on Wednesday contested the testimony of executives from social media giant Facebook regarding plans to launch a digital currency called Libra, with one Congresswoman telling the Silicon Valley software company that managing currency is a core government function, not a commercial one.
The stock market in the United States fell on Wednesday, with the S&P 500 down by 19.62 points, or 0.65 percent, and the Dow Jones Industrial Average down 115.78 points, or 0.42 percent, as uncertainty over the technology industry dominated traders' thinking.
Experts believe the U.S. government scrutiny is sure to intensify as digital currencies remain popular with some speculators, but not with regulators or financial institutions around the globe.
"Washington policymakers are not only wading in on Libra, but are largely bringing extreme skepticism and criticism," John Meyer, managing partner of Starship Capital based in New York City, told Xinhua.
"This can come down to two reasons: the insurmountable potential impact on the U.S. and global financial system by Libra, and second: Facebook's poor track record of maintaining user trust on their platform," he said.
Representative Carolyn Maloney said during the House Financial Services Committee hearing, "I don't think you should launch Libra at all."
She said managing currency is a government function, in response to remarks from David Marcus, the French-born founder of PayPal, and now vice president for messaging products at Facebook, who testified on Tuesday at the Senate and Wednesday at the House.
During the hearing in the House of Representatives, Marcus said, "We will not launch Libra until we have fully addressed regulator's concerns."
Moreover, Representative Brad Sherman expressed concerns that the firm's founder, Mark Zuckerberg, did not appear at the hearing, as the controversy over the currency is the weightiest financial issue the committee has dealt with since the stock market crash and Wall Street bank failures in 2008-2009.
This is "one of the biggest things this committee will deal with this decade," said Sherman, who elliptically compared the currency's pending launch to a terrorist attack.
"We have been told by some that innovation is always good," said Sherman. "The most innovative thing that happened this century is when Osama Bin Laden came up with the innovative idea of flying two airplanes into towers."
Meanwhile, skepticism was also shown at the Facebook strategy of characterizing the companies investing in the global project as a non-profit Libra Association. But these are hardly struggling non-profit firms, with members including MasterCard, PayPal, Uber, and Lyft.
Representative Alexandria Ocasio-Cortez said Libra is in reality "a currency controlled by an undemocratically selected coalition of large, massive corporations."
Representative Ann Wagner, a former member of the Republican National Committee, pointed out a huge downside risk, suggesting that Facebook would undermine the power of the U.S. dollar, and even destabilize the global economy.
"I'm concerned that a 2020 launch date demonstrates deep insensitivities around how Libra could impact our national security, the global financial system, the privacy of people across the globe, criminal activity, and international human rights," said Wagner.
Analysts reckon the moves by Facebook could potentially revolutionize the financial industry, and that has deeply concerned the Congress.
"Libra is no small endeavor," Marwan Forzley, CEO of e-commerce financial firm, Veem, based in San Francisco, told Xinhua. "With the launch of a cryptocurrency-based payments system on the back of its social network, Facebook could revolutionize the banking and payments ecosystem completely."
Forzley explained that, by building an infrastructure around Libra, Facebook would create a "currency" that can in fact compete with the U.S. dollar.
"Facebook will give users more options when it comes to transferring funds, leading the way to mainstreaming multi-rail payments methods. Libra will need to consider regulatory and government responses to address issues of money laundering," said Forzley.
Christopher Robling, an international business consultant and founder of Clearspan Strategic, LLC, based in Chicago, told Xinhua that Facebook wants to coin its own money. "Congress is barely catching up, and probably has no clear idea of what to do, and won't after the hearings, because it is paralyzed. But, the pressures of digital communications on traditional regulatory schemes could not be more apparent."
According to media reports, the House Financial Services Committee is considering legislation called "Keep Big Tech Out Of Finance," which prohibits tech companies with at least 25 billion dollars in revenue -- like Facebook -- from issuing private digital currencies that compete with the greenback.
In fact, the hearings at the House and the Senate followed the news that the Federal Trade Commission (FTC), the government anti-corporate fraud watchdog, lambasted Facebook with the largest penalty ever against Silicon Valley, commanding the company to pay 5 billion dollars for consumer privacy violations in the Cambridge Analytica scandal.
FTC initiated the investigation after a scandal involving former British consulting firm Cambridge Analytica, which was accused of illegally accessing data of more than 87 million Facebook users without their prior knowledge. FTC investigated whether Facebook's data sharing with the British firm violated a 2011 consent agreement signed between Facebook and the regulator.
The matter has been moved to the U.S. Justice Department for a review. The fine, if finalized, might be the largest one the FTC has ever levied on a tech company. Facebook, however, can afford it: the company brought in almost 56 billion dollars in revenue last year. Facebook said in April that it expected to pay up to 5 billion dollars to settle the probe.