U.S. lawmakers have issued a letter to social media giant, Facebook executives formally asking them to stop all development of its recently announced Libra cryptocurrency.
The U.S. House of Representatives Democrats has written an open letter to Facebook on Tuesday. The letter calls on a moratorium to all libra development until the hearings held by the Financial Services Committee and affiliated subcommittees is completed. Notably, the hearing will determine how Libra is to operate and what measures should be implemented to protect user privacy.
Addressed to Facebook CEO Mark Zuckerberg, COO Sheryl Sandberg and Calibra CEO David Marcus, the letter was signed by representatives Maxine Waters (D-CA), Chairwoman of the House Financial Services Committee; Carolyn Maloney (D-NY), Chair of the Investor Protection, Entrepreneurship and Capital Markets Subcommittee; William Lacy Clay (D-MO), Chairman of the Housing, Community Development and Insurance Subcommittee; Al Green (D-TX), Chairman of the Oversight and Investigations Subcommittee; and Stephen F. Lynch (D-MA), Chairman of the Task Force on Financial Technology.
Facebook was on Water’s so-called hit list for a while as he previously suggested that the social media giant to pause development of Libra, this will be the first time a formal letter is issued to the company. The letter describes the concerns that committee has with Facebook’s track record, along with the potential that Libra has to act as a new global currency system.
The lawmakers wrote:
“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 U.S. 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.”
“While Facebook has published a ‘white paper’ on these projects, the scant information provided about the intent, roles, potential use, and security of the Libra and Calibra exposes the massive scale of the risks and the lack of clear regulatory protections. If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability. These vulnerabilities could be exploited and obscured by bad actors, as other cryptocurrencies, exchanges, and wallets have been in the past.”
Concern regarding privacy
Facebook has had privacy issues with the data of its users, a recent example is the Cambridge Analytica scandal, wherein a political consulting firm gained access to the data over 50 million Facebook users. Notably, the company already has to pay a fine of $5 billion to the Federal Trade Commission for its involvement with Cambridge Analytica.
Further, Facebook still remains under a consent decree “for deceiving consumers and failing to keep consumer data private. They referenced this recent incident stating:
“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. During this moratorium, 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.”
Libra was first unveiled last month, though rumors and speculations about it have been making the rounds for months. Facebook has lined up 27 launch partners, including crypto exchange Coinbase, and intends to have at least 100 members for the Libra Association, which will act as the cryptocurrency’s governing council, when the token goes live.
A hearing with the House Financial Services Committee is already scheduled for July 17, a day after the Senate Banking Committee is set to hold its own hearing.
The regulators across the globe have shown concern over Libra’s launch ever since the projects formal announcement was made. Recently, the members of the G7 formed a task force led by France, that will look into the project.
Facebook has reportedly already briefed Congressional aides about the project. A liberal political and public policy magazine The American Prospect posted a contributed piece, by a House Democratic aide that elaborated over the meeting of Libra’s head of policy with legislative aides
As per the article, Facebook’s representative outlined different aspects of the project, including the Facebook’s aim to have libra go live by next year and to maintain its value using a basket of fiat currencies. The representatives “kept suggesting” that the 2020 launch target was “prolonged,” meaning conservative, though other participants in the room did not agree with this assessment.
The range of topics also includes the ways with which to regulate the cryptocurrency:
“Facebook said that they assumed the FTC (Federal Trade Commission) or the CFPB (Consumer Financial Protection Bureau) would regulate Libra”
The Staffer further noted:
“They kept selling Libra as a means of providing banking services to 1.7 billion unbanked people around the world. When challenged on how they were going to do that, and asked directly whether they’d figure out how exactly a digital currency would be an answer for people who can’t access credit currently, they said, ‘The short answer is no.’ The phrase ‘the miracle of blockchain’ was used at one point.”
About The Sensitive data
Notably, the Congressional staffers present at the briefing asked about the information Facebook would have if users transferred libra using WhatsApp or Messenger, two of the instant messaging apps Facebook owns and operates.
As per the author:
“We were assured that … Facebook would not access specific information about [users’] transactions beyond that they were interested in or using Libra. That would, of course, be enough information to know a lot more about the users.”
Moreover, the staffers showed concern over how Facebook can prevent its governing council partners from colluding with each other, though the response appeared to be that “the partners were well aware of the ‘reputational risks’ they might incur should they violate privacy laws, etc.” The aide wrote.
“It was also pointed out that some of the partners are direct competitors, as if that has ever prevented them from colluding in the past.”