In a curiously worded message, the USA's House of Representatives Committee on Financial Services has requested that Facebook, and by extension its partners too, stop the development of the Libra digital currency until investigations and hearings are held to determine the risks and benefits should it be implemented. The letter sent on 2 July 2019 was sent to Mark Zuckerberg (CEO at Facebook), Sheryl Sandberg (COO at Facebook), and newly appointed CEO of Calibra, David Marcus.
Facebook announced earlier in 2019 that it will be launching its Libra digital currency in 2020 with some corporate partners who are each contriuting $10 million to the initiative.
"Investors and consumers transacting in Libra may be exposed to serious privacy and national security concerns, cyber security risks, and trading risks. Those using Facebook’s digital wallet — storing potentially trillions of dollars without depository insurance— also may become unique targets for hackers. For example, during the
first three quarters of 2018, hackers stole nearly $1 billion from cryptocurrency exchanges.’ The system could also provide an under-regulated platform for illicit activity and money laundering. These risks are even more glaring in light of Facebook’s troubled past, where it did not always keep its users’ information safe. For example, Cambridge Analytica, a political consulting firm hired by the 2016 Trump campaign, had access to more than 50 million Facebook users’ private data which it used to influence voting behavior," reads part of the letter.
The main worries seems to be that Libra is most likely going to replace or at minimum undermine the US Dollar and the US monetary policy. The second worry, which is a consequence of Facebook's recent troubles around user data and privacy highlights the cybersecurity risks of Libra and how unlikely Facebook is going to provide a secure platform for the running of the cryptocurrency and its official wallet, Calibra. Lastly, an argument we've heard all too often when policymakers the world over speak about cryptocurrencies, has to do with Libra being used for money laundering.
Although the first two main concerns are quite valid, the last one should not really be a concern given that to this day physical cash remains the most common way that money is laundered as it is mostly untraceable.
It remains to be seen how Facebook will respond. However, with potentially over 2 billion people going to have access to Libra, the House of Representatives is right to worry that Libra will become too big to fail and require the US to bail it out.Share this article via: