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Facebook's crypto chief warns of national security risks if the US fails to innovate in financial services

Key Points
  • Facebook's cryptocurrency lead said at a Senate hearing Tuesday that U.S. sanctions could be at risk without financial services innovation.
  • Calibra chief David Marcus said the global financial system could become fragmented if the U.S. does not move fast enough to modernize.
  • Marcus responded to a question from Republican Sen. Tom Cotton of Arkansas about how U.S. sanctions would be impacted by the new proposed digital currency.
David Marcus, head of blockchain with Facebook Inc., waits for the start of a Senate Banking Committee hearing in Washington, D.C., U.S., on Tuesday, July 16, 2019.
Andrew Harrer | Bloomberg | Getty Images

U.S. national security efforts will fall behind without innovation in financial services, the head of Facebook's new cryptocurrency subsidiary said at a hearing about the company's plans for a new digital currency.

David Marcus, who heads Facebook's Calibra subsidiary, responded to a question from Sen. Tom Cotton, R-Ark., about how the new currency would impact the ability of the U.S. to impose effective sanctions. Cotton said Iran, on which the U.S. has imposed sanctions, has been working on developing its own cryptocurrency.

"I'm glad you brought this up because I believe that if we don't lead in the space, others will," Marcus said. "And the same way that we will end up having two internets and two different infrastructures, we will have two different financial systems and two different financial networks. And one will be out of reach of sanctions that are so effective in enforcing our foreign policy and preserving our national security."

Marcus could be referring to the fragmentation of the online world between countries like the U.S. where citizens can freely browse and those like China where certain search results and websites are censored by the government. He said if the U.S. fails to get ahead of fragmentation in financial services, national security could be at risk.

"I actually believe that if we stay put, we are going to be in a situation in 10, 15 years where we're really going to have half of the world that is going to operate on, by the way a blockchain-based technology, that will be out of reach from our national security apparatus," Marcus said.

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