If there’s one big takeaway from Facebook’s (FB) grilling on Capitol Hill over its new Libra cryptocurrency, it’s that the social networking behemoth has a trust problem.
“I think the whole circus around this coin is due to the fact that Facebook has a trust deficit in D.C.,” Isaac Boltansky, director of policy research at Compass Point Research & Trading told Yahoo Finance’s “The First Trade.”
Lawmakers didn’t mince words – on either side of the aisle. Democratic Sen. Sherrod Brown called Facebook “delusional” to think people would trust the company with their “hard-earned” money.
Republican Sen. Martha McSally flat out said, "I don't trust you guys. Instead of cleaning up your house, you are launching into a new business model."
It’s the messenger, not the message
Facebook knows it faces an uphill battle. David Marcus, the executive in charge of Libra, admitted to lawmakers that Facebook "will have to work hard to earn people's trust" in its own products.
Marcus tried to appease lawmakers, stressing that Facebook would not have total control over the Libra coin.
“You will not have to trust Facebook,” he told the Senate Banking Committee, “because it’s only one of 28 current and potentially 100 or more Libra Association members, and it won’t have special privileges.”
Lawmakers aren’t buying it. “This is more about the messenger than the message,” says Boltanksy. “If this was anyone else other than Facebook, I think the level of scrutiny would be far lower.”
Much of that heightened scrutiny can be attributed to Facebook’s myriad issues, including data misuse, hate speech and fake news on its site, Russian election interference, as well as failing to prevent its platform from being used to incite genocide in Mynamar, and live streaming the Christchurch massacre in New Zealand.
In the name of innovation
As if its plate isn’t full enough, Facebook is now pushing to enter the largely unregulated cryptocurrency market. Lawmakers weren’t going to take this one lying down.
Boltansky says if another tech giant tried to launch its own digital currency, it would still face Congressional hearings, but says it wouldn’t be the “national event” that the Facebook hearings have become.
Of all the big tech names, Boltanksy says Facebook is the riskiest from a policy perspective.
“I think there’s going to be an enormous amount of focus on how they are going to police content during the upcoming election,” he says.
When asked why it’s pushing so hard for a digital coin, Facebook echoed the Silicon Valley mantra: If we don’t innovate, someone else will. And that someone else could be China.
“You would be hard-pressed to find a soul in D.C. who doesn’t think that financial innovation is a good thing,” says Boltansky. “It’s the pace and scope of said innovation that’s going to be the focus of regulators.”
He doesn’t think Libra will be on the market in 2020 and may even be delayed indefinitely.
Alexis Christoforous is co-anchor of Yahoo Finance’s “The First Trade.” Follow her on Twitter @AlexisTVNews.
Read more about Facebook:
Critics say Facebook's Libra isn't really a cryptocurrency
Blockstack CEO on Libra: 'We have done what Facebook is trying to do'
Sen. Brown: Yes, it's time to break up Facebook
Sen. Brown: Facebook shouldn’t slow down on Libra, it should stop
House Democrats draft bill to keep big tech out of financial services
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