Bitcoin continued its downward spiral as lawmakers questioned the safety and legitimacy of cryptocurrencies during a Senate hearing Tuesday.
The world’s first and largest digital asset fell 10% to a low of $9,496.69 Tuesday — a more than 25% drop from where it was trading a week earlier. Still, bitcoin has tripled in value since January.
Bitcoin had rallied after Facebook’s announcement in June to launch a global cryptocurrency. But that enthusiasm has faded in recent weeks as top U.S. lawmakers and White House officials, including the U.S. president, questioned the project’s motives and soundness. Many brought up nefarious uses for bitcoin, like money laundering and terrorist financing, as reason to question Facebook’s plans.
The debate continued on Capitol Hill Tuesday as lawmakers grilled Facebook executive David Marcus, who is leading Facebook’s charge to create a global digital asset with dozens of other companies like Uber, PayPal and Spotify. While the tech giant has said it is not the sole creator of the cryptocurrency Libra, it does have plans to profit from it through a digital wallet called Calibra.
In a series of tweets last week, President Donald Trump said he was “not a fan” of bitcoin and other cryptocurrencies, “which are not money, and whose value is highly volatile and based on thin air.” He also said Facebook might need a bank charter to go through with any plan. In the past two weeks alone, cryptocurrency has also been questioned publicly Treasury Secretary Steven Mnuchin, Federal Reserve Chairman Jerome Powell and a handful of Congress members.
Sen. Sherrod Brown was among the more vocal Congress members Tuesday — kicking off Senate Banking Committee hearing on the Facebook’s new cryptocurrency project by calling the company “dangerous.”
“We would be crazy to give them a chance to experiment with people’s bank accounts, to use powerful tools they don’t understand like monetary policy to jeopardize hardworking Americans’ ability to provide for their family,” the Ohio Democrat and ranking committee member said in his opening statement.
Marcus, a former PayPal executive, responded to questions from the U.S. Senate Banking Committee and said that U.S. national security could fall behind without innovation in financial services.
“If we don’t lead in the space, others will,” Marcus said. He is also scheduled to testify before the House Financial Services Committee on Wednesday.
Other Washington policymakers have also asked for more clarity around the project. Rep. Maxine Waters, D-Calif., chairwoman of the House Financial Services Committee, asked Facebook to delay the project, which she said was a continuation of its “unchecked expansion and extending its reach into the lives of its users.”
Still, Fundstrat Global Advisors’ Tom Lee called the public push-back “positive because cryptocurrencies and bitcoin really are on the main stage now.”
“It’s now a matter of policy and where the administration wants to come out on this issue,” Lee, J.P. Morgan’s former chief equity strategist, told CNBC’s “Squawk on the Street” Tuesday.