Facebook, under scrutiny for being careless with users’ personal information, has lawmakers on both sides of the aisle skeptical of its ability to run its own cryptocurrency.
Just hours after Facebook announced details of its Libra cryptocurrency on Tuesday, lawmakers in Congress told the social media giant to put on the brakes.
Rep. Maxine Waters (D-California), chairwoman of the House Financial Services Committee, said Facebook should stop developing the cryptocurrency until Congress can weigh in.
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“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,” Waters said in a statement. “The cryptocurrency market currently lacks a clear regulatory framework to provide strong protections for investors, consumers, and the economy.”
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Libra has some high-profile backers including Visa, Mastercard, PayPal, Uber, Stripe (a fintech firm), Booking.com (travel reservations) and Argentina-based e-commerce site MercadoLibre Inc. They’re investing around $10 million as part of a consortium that will govern Facebook’s digital coin.
Calibra, a newly formed Facebook subsidiary, plans to provide financial services that will let people access and participate in the Libra network, Facebook said. The first product Calibra will introduce is a digital wallet for Libra, a new global currency powered by blockchain. The wallet will be available in Messenger, WhatsApp and as a standalone app. A launch is planned for 2020.
Here’s how Facebook addressed safety issues: “Calibra will have strong protections in place to keep your money and your information safe. We’ll be using all the same verification and anti-fraud processes that banks and credit cards use, and we’ll have automated systems that will proactively monitor activity to detect and prevent fraudulent behavior. “
Should we take their word for it?
Rep. Waters isn’t. She ran down a list of reasons why Facebook can’t be trusted to create a cryptocurrency and handle people’s money.
“Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data,” Waters said
in a statement. “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.”
Regulators should see Facebooks libra launch “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,” Waters added. “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.”
Waters is calling for Facebook executives to appear before the House Committee on Financial Services to provide testimony on these issues.
Sherrod Brown, the ranking Democrat on the Senate Banking Committee, said in a statement. “We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight.”
Republicans also called for slowing down Facebook’s crypto plans. Rep. Patrick McHenry, the senior Republican on the House Financial Services Committee, asked Waters asking to hold a hearing into the cryptocurrency, Digital Trends reported.
“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,” McHenry wrote in a letter. “It is incumbent on us as policymakers to understand Project Libra.”
Facebook says it hopes with libra to address challenges of exclusion and access to formal banking. “Almost half of the adults in the world don’t have an active bank account and those numbers are worse in developing countries and even worse for women. The cost of that exclusion is high — approximately 70% of small businesses in developing countries lack access to credit and $25 billion is lost by migrants every year through remittance fees.”
Mark Carney, governor of the Bank of England, said he foresees libra gaining traction in countries such as the U.S., where informal movement of small amounts of cash is slow and expensive. Carney spoke at a conference of central bankers in Portugal, CoinTelegraph reported.
On Twitter, users urged caution about libra and predicted blanket bans by governments.
“Hip-Hop Fatwa #3: The Facebook coin should be looked at w/ EXTREME suspicion & be called a “corporate coin” or a “surveillance coin,” Jamarlin Martin tweeted. “This is Netflix coming into Hollywood, Amazon coming into retail, & $FB HOOKING media co’s. It’s not a trust coin & will PERVERT crypto market.”