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The US House Financial Services Committee has written Facebook a letter asking the tech giant to put a hold on the development of its crypto, Libra, per Business Insider.
Business Insider Intelligence
Reps. Maxine Waters, Carolyn Maloney, Lacy Clay, Al Green, and Stephen Lynch wrote to Facebook earlier this week to impose a moratorium on Libra until regulators and Congress have had time to explore concerns about the project. Concerns include risk of hacking, data security, and global financial security.
The letter also stresses that failure to cease the project before regulators can explore it appropriately could lead to a new Swiss-based financial system that’s too big to fail. This follows a plethora of other regulators and lawmakers voicing concerns about the project.
Here’s what it means: Concerns around Libra are valid, but Facebook is already looking to get licensed appropriately.
- Consumer money could be at substantial risk under Facebook’s project. Consumers using Facebook’s digital wallet, Calibra, would potentially store trillions of dollars without depository insurance, per the letter, putting their financial stability at risk. Additionally, Libra’s high profile in the news makes Calibra a big target for potential hacks. During the first three quarters of 2018 alone, hackers stole nearly $1 billion from cryptocurrency exchanges, and it’s not yet clear how Facebook aims to prevent such attacks and ensure that consumer money will be held securely.
- Facebook has already been busy applying for licenses, but the outcome is not yet certain. Calibra has applied for money-transfer licenses in the US and registered with the US Financial Crimes and Enforcement Network (FinCEN) as a money services business, per Reuters. Additionally, it’s filed an application to operate a cryptocurrency business in New York. Since Facebook is aiming to take Libra global, it’ll ultimately need "hundreds, perhaps thousands of licenses" from various different global regulators, Sean Park, founder and chief investment officer at Anthemis, told Reuters.
- Waters has previously called for Facebook to halt the development of Libra, which the company rejected. Facebook simply said in a statement that it looks forward to responding to lawmakers’ questions as this process moves forward, clearly stating that it would not halt the development. This previous response from Facebook was likely met with increased uneasiness from regulators, and getting licensed in the country seems unlikely for the time being.
The bigger picture: Facebook appears to be prepared for the backlash, and the power of authorities remains questionable.
Facebook has previously stated that the scrutiny it’s seen is both expected and welcome.Therefore, it is likely that the tech giant has prepared for the backlash from authorities and is still confident that it will be able to move forward with Libra. Moreover, this is already the second time Waters has asked Facebook to stop progressing on the project, yet there’s no sign of Facebook wanting to do so.
This brings authorities’ power into question, and even if the likes of the House Financial Services Committee want to halt the project, they might not have the ability to do so after all. So, for the time being, it’s expected that Facebook will proceed with Libra as planned.
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