US Congress asks for moratorium on Libra
Facebook asked to halt plans for its cryptocurrency project Libra
The US Congress has released a letter asking social media giant Facebook to pull the breaks on the development of its recently announced stablecoin and ‘immediately cease implementation plans’.
The letter, which is signed by a number of Democrat heavyweights, such as Head of the house committee on financial services Maxine Water, follows the release of Libra’s white paper and asks for a moratorium so that lawmakers can be given time to investigate the implications and ramifications the Libra project will have on the stability of sovereign currencies. The next congressional committee is set to convene on 17th July where it will hold a full hearing on Libra.
“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.”
Congress writes that it plans to hold public hearings to assess the risks and benefits of cryptocurrency-based activities and that failure to cease activity before this time ‘risks a new Swiss-based financial system that is too big to fail.’
The social media platform plans to run Libra through its subsidiary Calibra, a Geneva-headquartered association. A number of prominent backers such as Visa, Lyft, PayPal and Vodafone sit on the board alongside Facebook. The inclusion of the Libra Association has done little to dispel criticism; Facebook still maintains tight control, including paying the salaries of the employees in the Association.
In addition to a troubled past with Congress, reports that a number of as yet unknown backers are rethinking their allegiance indicate that Facebook may be in for a rough ride. At least 7 are said to have signed non-binding agreements that gives them a chance to back out.
The Monetary Authority of Singapore (MAS) also joined the chorus of concern over the cryptocurrency, with MAS managing director Ravi Menon voicing doubts over the way Libra would function, saying we needed to ‘figure out the nature of the beast’.
France’s central bank governer, Francois Villeroy de Galhau and Bank of England governor Mark Carney have also called for more oversight , with de Galhau saying that he was urging the G7 to establish a task force to assess the impact of such a ‘large multinational cartel setting up its own currency’ and Carney insisting that it must be held up to the highest standards of regulatory scrutiny.
Congress will most likely grill Zuckerburg on his inability to keep user data safe, with the Cambridge Analytica scandal serving as handy ammunition for members already predisposed to scepticism.
“The scant information provided about the intent, roles, potential use, and security of the Libra and Calibra exposes the massive scale of the risks and the lack of clear regulatory protections,” it says. “If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger US and global financial stability,” write Congress members.
Libra is expected to launch on Facebook’s platforms, WhatsApp and Messenger in 2020.