US Congress Demands Facebook Put Brakes On Libra Cryptocurrency

US Congress Demands Facebook Put Brakes On Libra Cryptocurrency

Facebook’s Libra cryptocurrency is off to a rocky start. After announcing Libra last month, US lawmakers were none too thrilled given the social media giant’s dubious track record with privacy. Now, the US House Committee on Financial Services is calling on Facebook to halt its plans.

Led by Representative Maxine Waters, the committee wrote a letter addressed to Facebook CEO Mark Zuckerberg, CEO David Marcus and COO Sheryl Sandberg, asking for an immediate moratorium on Facebook’s plans to implement its Libra cryptocurrency and Calibra digital wallet.

“It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival US monetary policy and the dollar. This raises serious privacy, trading, national security, and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers, and the broader global economy,” the committee writes in its letter.

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The committee goes on to note that while Facebook released a white paper last month on the cryptocurrency, the “scant information provided about the intent, roles, potential use, and security” was a clear indication of the risks involved and the lack of regulatory protections.

It also reiterated the need for strong oversight over the cryptocurrency, as it would be vulnerable to the same bad actors who have targeted other cryptocurrencies, exchanges and digital wallets. The committee also pointed out that Libra and Calibra, as far as we know, don’t come with depository insurance.

Regarding oversight, Facebook has said it plans to hand over Libra to an independent consortium called the Libra Association. This body would be headquartered in Switzerland, and “strives to be a neutral, international institution” that facilitates operation of the cryptocurrency, as well as develop, promote and expand the Libra network.

Twenty-seven companies — including some financial institutions such as Mastercard, Visa and PayPal — have thus far signed up to act as “nodes”, which requires a $US10 million ($14 million) buy-in. The committee acknowledged the Libra Association’s existence in its letter, but it’s clearly not enough on its own to instil confidence.

“Because Facebook is already in the hands of a over quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action,” the committee writes in its conclusion.

“During this moratorium, we intend to hold public hearings on risks and benefits of cryptocurrency-based activities and explore legislative solutions. Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail.”

Rep Waters has announced plans to hold the first such hearing on July 17. As for how Facebook seems to be taking it? Seems like it was ready. “We look forward to working with lawmakers as this process moves forward, including answering their questions at the upcoming House Financial Services and Senate Banking Committee hearings,” a Facebook spokesperson told us over email.