Wednesday , August 12, 2020

Facebook’s Calibra Chief Marcus Runs Into Stiff Headwinds on Capitol Hill

Facebook Inc.’s Calibra wallet will generate revenue for its parent by stimulating incremental advertising but the proposed Libra cryptocurrency will also work with competing wallet apps, the company’s point man for Calibra said Tuesday.

David Marcus, head of Calibra for the huge social network, said in prepared remarks that the new wallet will lead to more transactions and hence more advertising. Calibra is an arms-length Facebook unit intended to allow consumers and businesses to trade in Libra. Facebook has 1.6 billion daily active users on average.

“We expect that the Calibra wallet will be immediately beneficial to Facebook more broadly because it will allow many of the 90 million small- and medium-sized businesses that use the Facebook platform to transact more directly with Facebook’s many users, which we hope will result in consumers and businesses using Facebook more. That increased usage is likely to yield greater advertising revenue for Facebook,” Marcus said in remarks prepared for the U.S. Senate Committee on Banking, Housing, and Urban Affairs.

But under questioning from committee member Mark Warner, D-Va., Marcus assured the panel Facebook will not bar competing wallets. The app, intended to be used for commerce with the Facebook-developed Libra digital currency, will be “one of many wallets” operating within the Libra network, Marcus said during his live remarks before the committee Tuesday morning.

Almost as soon as Facebook introduced Libra and the Libra Association last month, the company faced negative feedback from regulators, lawmakers, and consumer groups concerned about what they see as the social network’s spotty record on such matters as privacy, data security, and competition. The association is made up of Facebook and 27 other companies, including Mastercard Inc., PayPal Holdings Inc., and Visa Inc., that will take over management of the blockchain-based Libra currency from the social network.

Facebook has said it will not launch the currency until it has satisfied regulators, a point Marcus repeated Tuesday. “We are determined to meet the regulatory bar before we proceed,” he said. He added Facebook is working to comply with rules from a range of agencies, including the U.S. Treasury Department’s Financial Crimes Enforcement Network and Office of Foreign Assets Control, as well as the Federal Trade Commission.

Despite his assurances, Marcus encountered considerable skepticism from Democrats on the committee regarding not only regulatory concerns but also Facebook’s willingness to let Libra remain open to wallet apps that could compete with Calibra. “We will have to compete with a number of other wallets that will operate on top of Libra,” Marcus said in response. “We will have to have the highest standards when it comes to privacy. No data will be shared with Facebook.”

But Sen. Pat Toomey, R-Pa., pointed to benefits the Libra currency and Calibra wallet could introduce and cautioned against acting prematurely to stymie the project. “To strangle this baby in the crib seems wildly premature,” he noted.

Marcus’s grilling is likely to continue Wednesday, when he is scheduled to appear before the House Financial Services Committee.

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