Published: Thu, July 18, 2019
Markets | By Otis Pena

USA lawmakers challenge Facebook over Libra cryptocurrency plan

USA lawmakers challenge Facebook over Libra cryptocurrency plan

Group of Seven finance chiefs cast a cloud over prospects for Facebook's Libra digital coin on Wednesday, insisting tough regulatory problems would have to be worked out first.

Since then, it has faced criticism from policymakers and financial watchdogs at home and overseas who fear widespread adoption of the digital currency by Facebook's 2.38 billion users could upend the financial system.

Democratic and Republican lawmakers said on Tuesday that Facebook Inc's track record of what they described as untrustworthiness should stand in the way of it launching a digital currency, labeling the plan "delusional" and "crazy" at a Senate hearing.

Waters held out the prospect of legislation that would prohibit big tech companies such as Facebook, Google, Amazon and Apple from becoming chartered or licensed as US financial institutions, and thus able to offer banking services, and specifically from establishing a digital currency.

Facebook's David Marcus, the head of Facebook's Calibra, responded in a recent testimony for the US Senate Banking Committee that the Libra Association will be regulated under Swiss law.

"Kudos on the innovation", said Rep. Sean Duffy. Brown described the company as a "toddler" with a book of matches.

"Change is here. Digital currencies exist", he said. This failing, later confirmed by Facebook itself, it just the latest slip-up in what has been a frankly shambolic launch.

It hasn't been an easy few weeks for Facebook and its cryptocurrency project.

Meanwhile, House Democrats wrote a letter to Facebook on July 2 asking the social network to halt the development of Libra until hearings can be held and proper regulatory oversight can be put in place.

Facebook has been on the defence amid a backlash over mishandling user data and not doing enough to prevent Russian interference in the 2016 United States presidential election.

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"Because Facebook is already in the hands of over a 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". USA lawmakers haven't passed any significant laws on cryptocurrencies, and no federal agency has established itself as the primary overseer for virtual coins. It is not a solicitation to make any exchange in commodities, securities or other financial instruments.

"I don't know yet", explained Marcus. The digital money operations are being headquartered in Switzerland.

"That is why we have begun publicizing the vision for Libra, and why we have been discussing, and will continue to discuss, how best to achieve that goal with businesses, nonprofit and multilateral organizations, and academic institutions from around the world, as well as with policymakers, central banks and regulators", he added.

Carolyn Maloney if Facebook would commit to doing a small pilot program first to address numerous concerns from USA officials, both Democrats and Republicans.

Marcus said Facebook "will only build its own Calibra cryptocurrency wallet into Messenger and WhatsApp".

"Libra looks exactly like an exchange-traded fund, so why isn't it?" said Rep. Bill Foster, D-Ill. Though some members praised the company for taking steps to innovate, the tone of the hearing was overwhelmingly hostile, and it was clear Facebook does not yet have a clear path to Libra's launch.

"To earn people's trust we will have the highest standards for privacy", he said.

Now, the hearing is providing a platform for members of Congress to voice their concerns about the regulation of cryptocurrency on a larger scale, beyond simply targeting Libra. One reason Facebook wants to stay away from these activities is that they would require a federal banking charter.

Brown added during questioning that he thought it was "delusional" to think individuals would trust the social media company with their "hard-earned" money. "They ... have a lot of work to do before they get us comfortable".

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