David Marcus, Facebook’s Libra Defender

(Bloomberg Businessweek) -- David Marcus removed his tie, undid the top two buttons of his shirt, and ordered a bourbon. It had been a long week.

Five days earlier, on Oct. 11, Marcus, the executive leading Facebook’s ambitious and controversial foray into cryptocurrencies, had listened as a handful of high-profile partners he’d helped recruit to the project—including Visa, Mastercard, and Stripe—called to say they were dropping out. Then, three days after that, hours before the group was to sign its charter and elect a board of directors to oversee the currency, news broke of another. By the time the group convened later that day, 21 of 28 members remained, among them Uber Technologies, Lyft, and Spotify Technology. “I stopped trying to convince people” not to leave, Marcus says at Succotash, a swanky, Southern-style restaurant in an old bank building in Washington, D.C. “I would have preferred having them. But it’s OK. I think in the long run, they’ll come around.”

Libra may be the most embattled idea that Facebook has ever proposed. The vision—a global cryptocurrency that promises to make sending money internationally cheap and as fast as texting—has run into political opposition at every step. Libra could be a tool for money launderers and traffickers, opponents say, while others worry that it could undermine the global economy by eliminating the ability of governments and central banks to regulate their currencies. “You should be concerned,” two U.S. senators warned in an October letter to Visa, Mastercard, and Stripe before they bailed, “that any weaknesses in Facebook’s risk management systems will become weaknesses in your systems.”

Marcus is more optimistic. He sees people taking their dollars, euros, or pounds and exchanging them for Libra in a digital wallet such as the one Facebook is building, called Calibra. Your Libra could then be moved across borders instantly to others with digital wallets.

Libra would be stable enough for everyday transactions, which hasn’t been possible with most other popular cryptocurrencies, including Bitcoin. While Bitcoin is built on the same blockchain technology, it’s finite and traded by speculators who want to buy low and sell high. Its value can swing, making it a poor currency for transferring money. Libra, by contrast, is a “ stablecoin” and will be backed “one-to-one,” meaning that no new Libra can be created without an equal amount of dollars, euros, or pounds placed in reserve.

Marcus says Libra could most help people without bank accounts and those in countries where currencies fluctuate wildly. Over cocktails and hors d’oeuvres, he compares Libra to the telephone and electricity. Because of its lofty ambition, he’s not surprised that it’s gotten pushback from politicians and regulators and criticism in the press. “It feels like people have forgotten what it takes to do these hard things,” he says.

The likelier reason he’s facing opposition is because of Libra’s association with Facebook—the company that has mishandled users’ private data, allowed the spread of disinformation during U.S. elections, and come under antitrust investigation from multiple U.S. agencies. Also, Facebook isn’t spearheading this effort out of altruism. The company envisions making money from Libra the same way it makes money with its other products, through ads. The thinking is that if more people have disposable income at their digital fingertips, Facebook’s ads become more expensive because advertisers can reach consumers when they have money at the ready. Facebook says it doesn’t plan to take a cut of personal transactions, but it’s possible that the company could offer financial services later on.

Libra was birthed in December 2017 while Marcus was vacationing in the Dominican Republic. (The name, he says, is taken from a unit of measure in ancient Rome and the astrological symbol for balance and justice.) At the time, he was running Facebook’s 1 billion-plus-user Messenger app and doing the kind of self-reflection common on a beach vacation. He messaged Chief Executive Officer Mark Zuckerberg with an idea that had been percolating in his head for a while.

Marcus is an entrepreneur at heart. He sold his first startup, a telecommunications company, at 27. He landed at PayPal Holdings Inc. when he sold it a payments startup for $240 million in 2011; he was president of PayPal less than a year later. Zuckerberg recruited him to Facebook, where he’s become one of its most important senior executives and a trusted confidant. Libra combined Marcus’s passion for tech with his interest in building something from scratch. “I’m not interested in cruising-altitude things,” he says. He got Zuckerberg’s blessing and has spent almost two years assembling a Libra team, pulling from his old employer and other parts of Facebook, such as Instagram.

Part of what Marcus has had to figure out is how to convince U.S. lawmakers that while Libra is a Facebook invention, the company won’t control it once it’s live. The Libra Association—the 21-member governing body that will oversee the cryptocurrency—was key to Facebook’s pitch. The company has the same voting power as the other members, even if it’s Libra’s most important booster. Ultimately, this setup may help the project get regulatory approval.

Facebook has pledged that it won’t launch the currency until it gets that OK, which should appease some critics. (It’s unclear which domestic and foreign entities will have jurisdiction.) That likely jeopardizes Facebook’s goal of introducing Libra in 2020. But, Marcus says, “I have no doubt that we’ll get there,” adding, “the important thing for me is the 100-year impact that this has.”

To contact the editor responsible for this story: Bret Begun at bbegun@bloomberg.net, Max Chafkin

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