The United States House of Representatives Committee on Financial Services has released a letter requesting Facebook and its partners to stop the development of its new Libra stablecoin.
Addressed to Facebook CEOs Mark Zuckerberg and David Marcus, and COO Sheryl Sandberg, the letter demands the social media giant to “immediately agree to a moratorium on any movement forward on Libra,” and its accompanying Calibra wallet.
It was signed by Rep. Maxine Waters, chairwoman of the Committee on Financial Services, who has previously criticised the project.
The letter states: “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.”
It continues by referring to Facebook’s Libra white paper which is described as “exposes the massive scale of the risks and the lack of clear regulatory protections.”
Furthermore the letter cites the company’s “troubled past” and highlights previous faults in its cybersecurity following the Cambridge Analytica scandal.
If faults were to be found in the Libra and Calibra projects, the committee believe this could lead to trillions of dollars of uninsured deposits being lost and consumers could be exposed to severe privacy and national security concerns.
“If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger US and global financial stability,” continued the letter.
“These vulnerabilities could be exploited and obscured by bad actors, as other cryptocurrencies, exchanges, and wallets have been in the past. Indeed, regulators around the globe have already expressed similar concerns, illustrating the need for robust oversight.”
To conclude, the committee states it’s “imperative” for Facebook to halt implementation plans until regulators and Congress has an opportunity to analyse the product.
Maxine Waters also announced plans to assemble a full Committee hearing entitled, “Examining Facebook’s Proposed Cryptocurrency and Its Impact on Consumers, Investors, and the American Financial System” on July 17.
Speaking to PaymentExpert, Jane Jee, CEO of Kompli-Global, commented: “Anyone who reads The Four by Scott Galloway can only ask why the US government has failed to regulate Facebook and the other US tech giants.
“The other area of comment is that with Facebook’s track record on privacy governments globally should be concerned that they are entering the sector with no previous experience and without proper compliance checks Libra could be another cryptocurrency to be exploited by criminals.
“We in the UK are creating a competitive financial services sector and we do not need a potentially more monopolistic newcomer.”
“Libra, 2 weeks in”
Co-CEO of the social media giant David Marcus posted a piece on Facebook “to provide answers and add clarity” to any questions or misunderstandings about Libra/Calibra.
The post makes clear that the Libra Association will become its own entity on launch and Facebook’s involvement will only take place through its newly found subsidiary Calibra alongside the other initial 28 founding members.
Marcus said in the post: “We made the deliberate decision to announce the plans for Libra early. This was after an initial consultative phase with regulators, central banks, and other organisations from all around the world.
“Our rationale was simple: We wanted to encourage open discussion by design. Launching a high-quality medium of exchange in the form of a cryptocurrency, and its supporting infrastructure, cannot happen in darkness.
“If we truly want to have a chance to better serve the billions of people, and businesses, who deserve to be served by modern, open, financial services, this is the only way.”
Throughout the post, he acknowledges many of the areas that have created discussions in the industry including: blockchain technology, demographic, relationships with regulators, trust factor and Facebook’s intentions.
There is no mention of Congress’ letter however he does conclude by mentioning the upcoming testimony.
“We are looking forward to continuing to engage with the various communities and stakeholders. We want to hear your feedback, and we are committed to taking the time to get this right,” explained Marcus.
“This was the whole reason for sharing our plans early, and opening up Libra’s codebase to the world. The time between now and launch is designed to be a collaborative, open process.
“In that spirit, I look forward to testifying in Congress in front of both the Senate Banking and House Financial Services Committees in the weeks to come.”