US Congress and Over 30 Organizations Requested Moratorium on Facebook’s Libra
The United States House of Representatives Committee on Financial Services issued a letter to request Facebook to stop developing Libra stablecoin and Calibra wallet.
In the letter addressed to the CEOs of Facebook, Mark Zuckerberg and David Marcus, and COO Sheryl Sandberg, regulators pointed out that the Libra project “may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar.”
As a consequence, regulators believed that Facebook Libra “raised 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 letter cited the example of $1 billion stolen by hackers from cryptocurrency exchanges during the first three quarters of 2018 in regard to the privacy and security concerns. It also suggested that the crypto platform could potentially become an under-regulated place for illicit activity and money laundering.
The letter concluded that it is urgent for Facebook to cease any development plan on its Libra project until the regulators and Congress have the opportunity to examine the existing issues and take actions. Otherwise, the regulators suggested it would “risks a new Swiss-based financial system that is too big to fail.”
Over 30 organizations had signed up a letter requesting the Congress and regulators to impose a moratorium on Facebook’s Libra project until the questions raised in the letter are properly addressed. The letter raised some interesting questions on the impact of Facebook’s Libra on national sovereignty, including “Facebook says that the Libra Association will act as a currency board rather than central bank – i.e., it will create new Libra only in proportion to which investors and users buy in with real money – but what is to stop the Libra Association from changing that policy in the future? How would that affect national monetary policy?”
The Senate banking committee will hold a hearing titled “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations” on Facebook’s Libra project on 16 July. After that, the United States House Committee of Financial Services will convene another hearing titled “Examining Facebook’s Proposed Cryptocurrency and its Impact on Consumers, Investors, and the American Financial System” on Facebook’s Libra on 17 July.
Facebook’s history of data scandals raised serious concerns for regulators, the letter cited the Facebook’s Cambridge Analytica scandal where the political consulting firm, Cambridge Analytica had access to more than 50 million Facebook user’s private data which had been used for the 2016 Trump campaign. This led Facebook to pay up to $5 billion fines to the Federal Trade Commission (FTC).
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