Facebook’s Libra Project soon to face first major obstacle – U.S. Congress


Whoa, Mark Zuckerberg! The bloom is off the Libra rose! After weeks of hype and never-ending worldwide acclaim, the reality of promoting an independent, global cross-border payment system utilizing cryptos and blockchain technology just came home to roost. Not everyone, especially those in the U.S. government, is wildly enamored with the intriguing Facebook proposal. Democrats on the House Financial Services Committee have gone so far as to call for a halt of the project, until a panel of the committee conducts a hearing later this month. The Senate Banking Committee will meet, as well.

For those of you that read several of the more in depth articles about the Libra Project, you would have undoubtedly encountered a paragraph or two citing the numerous governmental approvals that would have to be obtained in order for Libra to conduct its first transaction across international borders. Facebook’s Calibra subsidiary may have disclosed plans for the actual Libra operating entity to an independent, non-profit Swiss association, with no direct ties to the FB platform, but a simple bifurcation of boards of directors will not suffice to win over both regulators and government officials.

These lawmakers put their thoughts in writing:

If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability. These vulnerabilities could be exploited and obscured by bad actors, as other cryptocurrencies, exchanges, and wallets have been in the past.

There written missive continued:

Investors and consumers transacting in Libra may be exposed to serious privacy and national security concerns, cyber security risks, and trading risks. Those using Facebook’s digital wallet – storing potentially trillions of dollars without depository insurance – also may become unique targets for hackers.

The letter was addressed to Facebook CEO Mark Zuckerberg, COO Sheryl Sandberg and Project Libra chief David Marcus, and literally requested that the management team “immediately agree to a moratorium on any movement forward on Libra.” The signatories to the letter were House Financial Services Committee Chair Maxine Waters (D-Calif.) and Democratic Reps. Carolyn Maloney (N.Y.), Lacy Clay (Mo.), Al Green (Texas) and Stephen Lynch (Mass.).

The Facebook hearings over privacy issues may still be fresh in the minds of these lawmakers, and when you combine these concerns with fact that cryptocurrencies and the exchanges that operate within the crypto space are largely unregulated, you have the makings for a major catastrophe, unless review and oversight at a high level are active from Day One. Per the group:

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.

Facebook may have been caught flatfooted upon receiving these Congressional invitations, but a spokesperson for Facebook issued a standard response:

We look forward to working with lawmakers as this process moves forward, including answering their questions at the upcoming House Financial Services Committee hearing.

The folks at Facebook also felt the need to squelch any hint that privacy issues would be compromised for the sake of ad revenues. In order to clarify that the potential to harvest Libra data for ad purposes will not happen, Kevin Weil, Calibra’s vice president of product, told The Washington Post:

Your social data on Facebook is kept separate from Calibra data. This is not about improving ad targeting. We’re trying to draw a bright red line.

After more than a decade of dealing with government authorities, regulators, and members from law enforcement, cryptocurrency advocates have achieved a modicum of success when it comes to acceptance and grudging accommodation by the financial services establishment. It remains to be seen if a large, legitimate entity like Facebook can move the “needle” more quickly in a positive direction, as many hope.

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