Today, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, delivered the following opening statement at a full Committee hearing entitled, “Examining Facebook’s Proposed Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System.”
As Prepared for Delivery
Today we are here for a hearing on Facebook’s proposed digital currency, Libra, and digital wallet, Calibra, and their impacts on consumers, investors and the financial system. Our first witness is David Marcus, Calibra’s CEO. Following his testimony, a panel of experts will share their views on Facebook’s plans.
I have serious concerns with Facebook’s plans to create a digital currency and digital wallet and its efforts to enlist partners that expand its reach, like Mastercard, Paypal, Visa, Uber, Lyft, and Spotify. Facebook is apparently trying to create a new global financial system that is intended to rival the U.S. dollar. This venture is slated to be based in Switzerland, which has a history as a monetary haven for criminals and shady corporations. Facebook’s plans raise serious privacy, trading, national security, and monetary policy concerns, not only for Facebook’s over 2 billion users, who will have immediate access to these products, but also for consumers, investors and the global economy.
In addition, Facebook has proposed backing Libra tokens with government currencies and government guaranteed securities, and holding them in a so-called Libra Reserve, to be governed by Facebook and its partners. Ownership of government assets on such a massive scale without proper oversight threatens to concentrate government influence in the hands of a few elites. Ultimately, if Facebook’s plans come to fruition, the company and its partners will wield immense economic power that could destabilize currencies and governments.
Facebook’s proposed entry into financial services is all the more troubling because it has already harmed vast numbers of people on a scale similar to Wells Fargo, and demonstrated a pattern of failing to keep consumer data private on a scale similar to Equifax. Facebook remains under a 2011 consent order from the Federal Trade Commission (FTC) for deceiving consumers and failing to keep consumer data private. In the wake of the Cambridge Analytica scandal, in which Facebook provided 50 million users’ private data to a political consulting firm, the company will reportedly pay a record $5 billion fine to the FTC for data privacy failures. In addition, Facebook has allegedly: insecurely stored user passwords dating back to 2012; paid unsuspecting teenagers to download spyware; experienced a hack of nearly 50 million accounts; and experienced a software bug that granted third party access to 6.8 million users’ photos. It has also been sued by HUD and civil rights groups for violations of the Fair Housing Act in what amounts to modern day redlining. Facebook also allowed malicious Russian state actors to purchase and target ads in a campaign to influence the 2016 election.
I am also concerned about the lack of diversity in Facebook’s upper ranks, and fear that if these plans go forward, women and minorities and women- and minority-owned businesses may be excluded from participating fully.
In light of these and other concerns, my colleagues and I wrote to Facebook earlier this month to call on it to cease implementation of its plans until regulators and Congress can examine the issues associated with a large technology company developing a digital currency, and take action. The Independent Community Bankers of America and others support this commonsense step.
Facebook’s plans also raise larger concerns about Big Tech’s expansion into financial services, as it appears to inappropriately mix commerce and banking activities. So, today we will discuss a draft bill, the Keep Big Tech Out of Finance Act, which would prevent large platform utilities like Facebook from becoming financial institutions and block them from creating their own currencies.
Today’s hearing is only the first step in our oversight and legislative process. I look forward to hearing from our witnesses.