Members of the US Congress have issued an open letter to Mark Zuckerberg, CEO of Facebook, and its executives, requesting that the tech giant cease working on Libra, the social network’s controversial upcoming cryptocurrency. The moratorium would give the government some time to understand how Libra will operate.
Since Libra’s unveiling last month, regulators around the world have been expressing their criticism and concerns about privacy and monetary policy. Today’s request from US lawmakers arrives ahead of two scheduled hearings dedicated to Libra this month. The letter, signed by Chairwoman of the House Financial Services Committee, Maxine Waters, along with representatives from several subcommittees and the Chair of the Task Force on Financial Technology, reveals that lawmakers fully understand that Libra is a disruptive technology that aims to revolutionize the global financial system.
According to the letter,
“We write to request that Facebook and its partners immediately agree to a moratorium on any movement forward on Libra – its proposed cryptocurrency and Calibra – its proposed digital wallet. 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.
On June 18, 2019, Facebook announced its plans to develop a new cryptocurrency, called Libra, and a digital wallet to store this cryptocurrency, known as Calibra. To assist it in this venture, Facebook has enlisted 27 other companies and organizations to form the Libra Association, which is based out of Switzerland. These companies span the financial services and retail industry and include payment systems, like Mastercard, Paypal, and Visa, and technology giants, like Uber, Lyft, and Spotify. By the target launch date of early 2020, Facebook hopes to have recruited over 100 firms into the Libra Association.
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 c1yptocurrencies, exchanges, and wallets have been in the past. Indeed, regulators around the globe have already expressed similar concerns, illustrating the need for robust oversight.”
The letter casts a dubious eye on Facebook and goes through a list of the company’s transgressions, including deceiving consumers and failing to keep private data safe, entanglements with Cambridge Analytica and the $5 billion in fines it expects to pay to the Federal Trade Commission (FTC).
In an interview last week with author Ben Mezrich, CNBC anchor Andrew Ross Sorkin said he expected lawmakers to jump on the Libra pause button.
“Governments have a monopoly on fiat currency. It’s one of the last things they have a monopoly and an ability to control things with.
The idea that they’re going to let these other cryptocurrencies flourish, where people can send money completely unencumbered, completely untraceable, completely untaxable, seems to me at some point there’s going to be a fork in the road or a conversation where there is going to be a major pause being pressed.”
In an interview with Bloomberg, BitMEX CEO Arthur Hayes expressed the existential threat that Libra poses to governments.
“I think it will destroy commercial and central banks.”
You can read the open letter to Facebook here.