Representative Maxine Waters, a Democratic Congresswoman from California, takes her job seriously as the chair of the House Financial Services Committee. During a grilling session of Fed Chairman Jerome Powell, which happens twice a year, she made it known that she is on personal crusade against Facebook’s blockchain token Libra. In a hearing that was scheduled to be a semi-annual review of monetary policy and actions taken by the Fed, Ms. Waters could not resist asking a few pointed queries about Libra.
Her opening salvo began with:
Facebook’s planned products may ultimately be intended to establish a parallel banking and monetary policy system to rival the dollar… I believe what they’re doing raises national security and monetary policy concerns for consumers, investors, and the global economy.
As with all Fed chairmen that have preceded him, Powell chose his words carefully and cautiously. He noted that his staff had been meeting with Facebook officials before their major product announcement and that it had also been discussing the topic of cryptocurrencies and potential issues with Libra with other regulators around the globe.
As for Libra, his group does have a number of issues:
We do support responsible innovation in the financial services industry… Libra raises many concerns regarding privacy, money laundering, consumer protection, and financial stability… It’s something that doesn’t fit neatly or easily within our regulatory scheme, but it does have potentially systemic scale. It needs a careful look, so I strongly believe we all need to be taking our time with this. The process of addressing these concerns should be a patient and careful one, not a sprint.
Powell then delivered a surprise. Until his concerns are sufficiently addressed, he does not believe “the project can go forward”. In other words, he is calling for a halt, until he is satisfied. More meetings have been scheduled. Bitcoin and its other altcoin brethren had benefited to a degree by the recent Facebook and Libra “hype”, but the possibility that regulators would now take a hard stand was not what the market wanted to hear. Values across the board plummeted 10 to 15%, but have since steadied.
Facebook officials are remaining calm. According to Facebook spokeswoman Elka Looks:
We are very much aligned with the chairman around the need for public discourse on this. This is why we along with the 27 other Founding Members of the Libra Association made this announcement so far in advance, so that we could engage in constructive discourse on this and get feedback.
In an amusing side note, the Winklevoss brothers, who founded the Gemini crypto exchange and were the benefactors of a $65 million settlement from Marker Zuckerberg over the creation of Facebook, had a message for their fellow Harvard grad:
Welcome to the party. What took you so long?
On Tuesday, Tyler Winklevoss also spoke out at a New York event:
A company with the stature of Facebook talking about the word ‘crypto’ demystifies it, takes out some fear for some people — it might add other fear for different reasons, maybe privacy or whatnot — but the fact that a publicly traded company that’s a huge part of our economy actually is doing something really serious in crypto very much mainstreams it and I think it’s a big win for our space.
But Libra has many miles to go and hills to climb. Its success is far from guaranteed:
U.S. regulators have already expressed qualms about its efficacy and have raised alarms over privacy issues. Both the House and Senate are holding hearings next week on Libra… Last week an ECB executive described Libra as a “wake-up call” to regulators and it could not operate in a “void” outside the typical structure of central banks.