What Facebook is proposing with its Libra cryptocurrency is no less than a global financial system rivaling the U.S. dollar but shielded from regulatory oversight, Rep. Maxine Waters warned Wednesday.
“The company and its partners will wield immense economic power that could destabilize currencies and government,” said Waters, the California Democrat who chairs the House Financial Services Committee.
Not only would Facebook’s massive audience of 2 billion users a month give Libra instant heft, the company’s history of privacy complaints and regulatory issues makes its involvement questionable, Waters said during her committee’s hearing on the proposal, the second in as many days.
Her comments echoed blunt criticism from both Republicans and Democrats that included Rep. Brad Sherman’s comparison of the cryptocurrency’s potential for damage with the 9/11 terrorist attacks. The Trump administration has long warned that cryptocurrencies — generated through so-called mining, or confirming transactions on a shared digital ledger — are ripe for misuse, partially because of the anonymity they afford.
Since Libra could become large enough overnight that its failure would imperil the financial system, it should be “subject to the highest level of expectations” as well as regulations requiring risk-controls and capital reserves for crises, Federal Reserve Chairman Jerome Powell said last week.
Facebook, which said it shares such concerns, attempted to prevent some of the pushback by linking Libra to a basket of world currencies including the dollar and the British pound, and setting up a governing body, the Switzerland-based Libra Association, in which it will have no more voting power than any of the other 100 eventual members. The company would retain control of Calibra, a digital wallet designed for the currency.
But basing the association in Switzerland raises its own questions, said Waters, who said the country “has a history as a monetary haven for criminals and shady corporations.”
Libra “is the biggest thing, or it tries to be the biggest thing, this committee will deal with this decade,” said Sherman, a California Democrat, who termed the cryptocurrency a Zuckbuck, a reference to Facebook CEO and founder Mark Zuckerberg.
“Zuckerberg has billions, but he doesn’t have the authority to print more until he gets this,” Sherman added, a concern similar one Trump expressed on Twitter.
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….
— Donald J. Trump (@realDonaldTrump) July 12, 2019
Still, Rep. Patrick McHenry, the highest-ranking Republican on the committee, cautioned against overstating the risks.
“Washington must go beyond the hype and ensure it is not the place where innovation goes to die – just because we don’t understand a new technology proposal doesn’t mean we should call for its prohibition,” the North Carolina congressman said. “But let’s be honest. It’s Facebook. I’m skeptical.”
