Who could have seen this coming?
Just hours after the announcement, and release of a white paper, of its new cyrpocurrency, called Libra, the US government has decided its time to intervene - likely for the good of us all.
Rep. Patrick McHenry, senior Republican on the House Financial Services Committee, wrote a letter Tuesday to committee Chair Maxine Waters, a Democrat, demanding a hearing on the Facebook cryptocurrency initiative, according to Reuters.
" Unlike existing digital currencies, Facebook has a worldwide platform and scale that can impact global payments and the digital currency market..."
"We know there are many open questions as to the scope and scale of the project and how it will conform to our global financial regulatory framework...
It is incumbent upon us as policymakers to understand Project Libra. We need to go beyond the rumors and speculations and provide a forum to assess this project and its potential unprecedented impact on the global financial system", McHenry said in a letter, cited by Reuters.
Waters, not exactly known for her cutting-edge financial smarts, responded quickly by demanding that Facebook should halt development of its announced cryptocurrency until Congress and regulators conduct a review.
Reuters reports that Waters also said Facebook executives should testify before Congress about the product, saying the company has "repeatedly shown a disregard for the protection and careful use of this data."
"Given the company's troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action," she said in a statement.
Waters and McHenry were not alone as Facebook's announcement was met with immediate backlash from regulators across the globe...
“Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy. We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight,” said Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, in a statement.
U.S. Senator Mark Warner, a Virginia Democrat who also sits on Senate Banking Committee, expressed concern that through Libra, Facebook was using its scale in social networking to achieve dominance in adjacent markets like mobile payments.
French Finance Minister Bruno Le Maire called for more regulation of tech companies.
“This instrument for transactions will allow Facebook to collect millions and millions of data, which strengthens my conviction that there is a need to regulate the digital giants,” he said in an interview on Europe 1 radio.
Reuters reports that Facebook has engaged with regulators in the United States and abroad about the planned cryptocurrency, company executives said. They would not specify which regulators. We suspect it will be a little while until Zuck's brave new world is unleashed. The one downside is that this rush to intervention will prompt a broader crackdown on the crypto world once again, just as Bitcoin is regaining momentum.
Finally, as we noted earlier, Bloomberg points out, whether Libra will be used in commerce is very much in question. For the last decade, multiple cryptocurrencies starting with Bitcoin have tried and failed to penetrate coffee shops and retail stores. In the first four months of this year, only 1.3% of Bitcoin economic transactions came from merchants, according to researcher Chainalysis Inc. The majority of the rest related to trading, and while many digital-assets enthusiasts are now hanging their hopes on the company’s new digital coin succeeding where Bitcoin has not, there are plenty of concerns.
“While Libra might be a big step in opening up a new wave of users to the benefits of asset-backed digital money, it comes with the risks of centralized pain points and vulnerabilities,” said Joseph Lubin, a co-creator of Ethereum.
“Data silos enable incumbents to maintain pricing power, and also come with the risks of data breaches, privacy, and security issues -— problems that many have already begun to associate with Facebook.”
Maxine's full statement is below. What is most surprising is that she is, don't shoot us, right.
Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data. It has also exposed Americans to malicious and fake accounts from bad actors, including Russian intelligence and transnational traffickers. Facebook has also been fined large sums and remains under a Federal Trade Commission consent order for deceiving consumers and failing to keep consumer data private, and has also been sued by the government for violating fair housing laws on its advertising platform.
“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. The cryptocurrency market currently lacks a clear regulatory framework to provide strong protections for investors, consumers, and the economy. Regulators should see this as a wake-up call to get serious about the privacy and national security concerns, cybersecurity risks, and trading risks that are posed by cryptocurrencies. Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action. Facebook executives should also come before the Committee to provide testimony on these issues.”