House Representatives Ask Facebook to Halt Moving Forward with its Cryptocurrency
In the beginning of July 2019, four members of Congress in leadership roles in various committees in the House of Representatives issued a letter to Facebook’s executives calling for Facebook “to agree to a moratorium on any movement forward” with its proposed cryptocurrency, Libra, and proposed digital wallet, Calibra, citing concerns over “privacy, trading, national security, and monetary policy[.]”
In June 2019, Facebook announced its plan, which had been in development for a year, to create a cryptocurrency backed by financial assets assembled by the Libra Association, a membership organization based in Switzerland, consisting of 27 companies and organizations enlisted by Facebook. According to Facebook’s Founder Mark Zuckerberg the hope is that the Libra Association will grow to over 100 companies by 2020, including the likes of MasterCard, Visa, Uber and Spotify. The announcement was accompanied by a White Paper published by the Libra Association, which provides a general outline of the intent, purpose, roles, and use of Libra and Calibra.
Since Facebook’s announcement, regulators and industry professionals have expressed concerns over consumers’ privacy when using the currency and wallet, as well as the new currency’s potential impact on global financial stability, given Facebook’s reach to over two billion users, as well as investors and consumers.
The representatives’ letter, which comes on the heels of a June 18, 2019 statement from Congresswomen Maxine Waters (D-CA) in which she initially requested the moratorium, cites specific concerns associated with the plans proposed by Facebook, including the concern over consumers storing “potentially trillions of dollars” in Facebook’s digital wallet without the protection of depository insurance. The letter also cites concerns over access from hackers, noting that in the first three quarters of 2018 alone, hackers stole nearly $1 billion from other cryptocurrency exchanges. The concept behind the moratorium is to permit the creation of the proper regulatory framework to protect consumers and investors from these, and more, potential threats and concerns. Specifically stated:
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. 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.
A hearing has been scheduled by the House Financial Services Committee to discuss Libra on July 17, 2019. This follows a hearing by the Senate Banking Committee on the same topic, to be held on July 16, 2019.
Though Facebook has yet to formally respond, as outlined in the letter, Facebook’s recent history relating to its failure to protect the privacy interests of its users and consumers, including the Cambridge Analytica scandal, provides a just basis for Congress’ concerns.