On July 2, US lawmakers, in an open letter to Facebook, called upon the company to cease all development of its Libra cryptocurrency, writing that the proposed digital currency could create “an entirely new global financial system that is based out of Switzerland and intended to rival US monetary policy and the dollar”. During this moratorium, the lawmakers wrote, “we intend to hold public hearings on the 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.” The letter said Libra raises “serious privacy, trading, national security, and monetary policy concerns for not only Facebook’s over two billion users, but also for investors, consumers, and the broader global economy”.
Signed by Representative Maxine Waters and four other House Democrats, the letter said that while Facebook had published a white paper on Libra and Calibra, it had provided little information about the intent, roles, potential use, and security of these products, and that this “exposed the massive scale of the risks and the lack of clear regulatory protections”. If products and services like these were left improperly regulated and without sufficient oversight, they could “pose systemic risks that endanger US and global financial stability”, the letter said. Waters had hinted at such a move last month, shortly after Facebook unveiled Libra.
The letter also mentioned Facebook’s various privacy issues, including the Cambridge Analytica scandal, in which the political consulting firm got access to the data of more than 50 million Facebook users without their knowledge. “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 letter said.
Facebook recently briefed Congressional aides
The letter comes just days after Facebook reportedly briefed Congressional aides about the project. In an an article for The American Prospect on July 2, an anonymous House Democratic aide wrote that legislative aides had met with Facebook executives, including Libra’s head of policy, who outlined various aspects of the project, such as Facebook’s aim to have Libra go live by 2020 and peg the Libra to a basket of currencies. S/he wrote that Facebook executives “kept suggesting” that a 2020 launch represented a “prolonged timeline”, but that it “didn’t seem lengthy to anyone in the room”. S/he added that Facebook said they had assumed the Federal Trade Commission or the the Consumer Financial Protection Bureau would regulate Libra. Asked for specifics about the basket of currencies, the executives’ answers were “fairly vague”, s/he wrote.
Two Congressional hearings on Libra this month
Last month, the US Senate Committee on Banking, Housing, and Urban Affairs said that it would hold a hearing on Libra on July 16, titled “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations”. The committee had written an open letter to Facebook in May, seeking answers about its work on Libra, including how it works and to what extent the company had sought inputs from regulators and market watchdogs. Days later, Waters announced that the House Financial Services Committee would also hold a hearing on Libra on July 17, a day after the banking committee’s hearing.