Facebook’s plans to create a new cryptocurrency that can be used for everything from commerce to money transfers is facing pushback from angry US lawmakers.
House financial services committee chairwoman Maxine Waters urged the company to halt development of the token until the US congress and regulators can examine it. Other lawmakers demanded hearings and questioned whether the coin, called Libra, will have appropriate oversight.
The scrutiny shows the risks for a corporate titan like Facebook, which already faces deep scepticism in Washington, of moving into a controversial industry like cryptocurrencies. Still reeling from allegations that it failed to protect users’ data, the Silicon Valley power is now entering a space that is known for its lax regulation and resistance to oversight.
“Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data,” Waters, a California Democrat, said in a statement. “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users.”
Representative Patrick McHenry, the top Republican on the financial services panel, wants Waters to hold a hearing. He said congress needs to go “beyond the rumours and speculations and provide a forum to assess this project and its potential unprecedented impact on the global financial system”.
Particular concerns lawmakers have had about digital currencies include the risk that consumers’ coins might be stolen and the potential for money laundering.
David Marcus, the Facebook executive leading the company’s cryptocurrency and blockchain efforts, said last week that he has been in touch with regulators and central banks in multiple countries. “We really wanted to make them stakeholders early on in the process and get their feedback early on,” he said.
In response to criticism on Tuesday from US lawmakers, a Facebook spokeswoman said: “We look forward to responding to lawmakers’ questions as this process moves forward.”
Facebook intends to launch its coin in 2020. Senator Mark Warner, a Virginia Democrat, said he was concerned the company appears to be using its corporate heft to move into and try to dominate new industries.
Senator Sherrod Brown, the top Democrat on the senate banking committee, made a point that was common in lawmakers’ statements: regulators must make sure Facebook users are protected. But like others, he didn’t identify a particular watchdog, perhaps signalling uncertainty over who might police Libra.
The Securities and Exchange Commission typically steps in when companies raise money by selling ownership stakes in an asset likes shares. The Commodity Futures Trading Commission has oversight of trading in futures and derivatives but not underlying digital tokens. States and banking regulators like the Federal Reserve could potentially have a role in regulating Libra.
The Wall Street Journal reported on Tuesday that Facebook said a Libra subsidiary that will create crypto wallets that can be used to pay for items will be regulated. Facebook didn’t say which agency will have jurisdiction. — Reported by Jesse Westbrook, with assistance from Kurt Wagner, (c) 2019 Bloomberg LP