Speaking at a Congressional committee on Wednesday, Federal Reserve Chairman Jerome Powell addressed Libra, Facebook’s controversial cryptocurrency project that has set lawmakers and regulators on edge. Powell says the project “cannot go forward” until the development team has provided sufficient answers to a number of questions.
While the semiannual report to Congress was scheduled to focus on monetary policy, it shifted to Facebook and its potential to launch the largest payment platform in the world. The Fed chair responded to multiple questions from members of the House Financial Services Committee about any concerns or reservations he has about the new cryptocurrency.
“We did actually have a meeting with representatives from Facebook a couple of months before the announcement. They made a fairly broad set of visits to authorities around the world. But getting to your questions, let me start by saying we do support responsible innovation in the financial services industry as long as the associated risks are appropriately identified and managed.
As we’ll discuss, while the project’s sponsors hold out the possibility of public benefits including improved financial access for consumers, Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability.
These are concerns that should be thoroughly and publicly addressed before proceeding. And that’s why at the Fed we’ve set up a working group to focus on this set of issues. We are coordinating with our colleagues in the government in the United States, with the regulatory agencies and the treasury. We’re coordinating with central banks around the world to look into this. I’ll just add that the process of addressing these concerns, we think, should be a patient and careful one – not a sprint to implementation.”
Powell later affirmed that the project “cannot go forward” until Facebook answers regulators’ questions.
Facebook representatives are planning to appear before Congress at two hearings next week to discuss Libra, with its execs facing an uphill battle. Slated to launch in 2020 at the behest of the newly established nonprofit Switzerland-based Libra Association, designed as a consortium of big and high-tech companies to alleviate concerns about Facebook’s overarching control and dominance, the project has faced an onslaught of criticism as well as coordinated efforts to stop the “sprint”, halt development and adjust to a timetable that’s more comfortable for regulators and policymakers.
Commenting on the economy Powell also notes that investment has slowed notably amid trade concerns. As the economy continues to stutter, crypto insiders are calling Bitcoin the best hedge against the traditional financial structure. Unlike Facebook’s Libra, Bitcoin proposes a different set of challenges to governments and regulators. As a truly decentralized asset, Bitcoin has no chief executive or group of executives to halt or slow down its development. The 10-year-old, censorship-resistant currency continues to grow in size and scope, reportedly drawing in an increasing number of institutional investors.
While crypto supporters believe the US dollar is at risk of losing its status as the world’s reserve currency, Powell is confident that the dollar will continue its reign.
“Why is the US dollar the world’s reserve currency? Powell is asked. There’s only usually one historically, Powell says. The U.S. has the world’s largest economy, is open and stable and adheres to the rule of law. ‘It’s hard to see the dollar not being the reserve currency for quite some time,’ Powell said. ‘I don’t see that under threat.'”
The S&P 500 hit an intraday record high of 3,000 after Powell continued to support his case for an easier monetary policy in the US, signaling an incoming rate cut.