Fed Chairman Jerome Powell has stated that Facebook’s digital currency Libra cannot be allowed to operate until concerns about the project are addressed.
Reuters reports that Jerome Powell, the chairman of the Federal Reserve, has warned that Facebook’s digital currency Libra “cannot go forward” until serious concerns about the project are addressed. Powell commented on Facebook’s project during his semi-annual testimony on monetary policy before the House of Representatives Financial Services Committee.
Powell stated: “Libra raises many serious concerns regarding privacy, money laundering, consumer protection, and financial stability.” Powell later added “I don’t think the project can go forward,” without addressing those issues. He stated that any regulatory reviews of Libra should be “patient and careful.” “It’s something that doesn’t fit neatly or easily within our regulatory scheme but it does have potentially systemic scale,” he said. “It needs a careful look, so I strongly believe we all need to be taking our time with this.”
Facebook spokesperson Elka Looks told Reuters in an email: “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.”
Powell stated that he supports financial innovation but that risks must be identified with new projects and that Facebook’s platform gives its a better chance of success than other cryptocurrencies. “Facebook has a couple billion-plus users, so I think you have for the first time the possibility of very broad adoption,” he said. Powell added that any issues that Libra faces “would arise to systemically important levels just because of the mere size of Facebook.”
Others in Silicon Valley are starting to question if Libra will be successful, CNBC reports. Anuj Nayar, financial health officer at online lending company LendingClub, commented on the new cryptocurrency stating: “While the innovation in Libra certainly has potential, we should expect increased scrutiny not just from the federal government, but at the state level too, not to mention regulators in many markets outside the U.S.”
Charley Moore, the CEO of Rocket Lawyer, a San Francisco company that provides online legal services, noted that Facebook will have to navigate another set of regulatory hurdles in order to run the currency correctly. This is no easy task as regulations can differ wildly even between states: “In the U.S. alone, it can differ by city, by state and at the federal level. Given the breadth of Facebook’s reach and the broad ambitions of the new Facebook coin, it’s hard to predict which area will be most challenging for them.”
And Facebook’s history of privacy issues may result in a lack of trust with users according to Dimitri Sirota, CEO of BigID, a New York data privacy firm. “Facebook won’t get far with Libra if consumers are worried about their financial data being compromised or misused, and regulators don’t trust Facebook to keep that data secure,” Sirota said.