Facebook’s foray into the cryptocurrency sector has attracted criticism from the world’s most influential central banker.
Federal Reserve Chairman Jerome Powell today listed a string of red flags concerning the social media behemoth’s upcoming cross-border remittance token Libra. Reiterating the stance taken by several governments and regulators before him, Powell said the Facebook cryptocurrency could boost money laundering and financial instability. The Fed chair also expressed concerns over Facebook’s history of mismanaging customers’ privacy, which, in case of finance, could spell double-trouble.
“Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability,” Powell said. “These are concerns that should be thoroughly and publicly addressed.”
The comments appeared during Powell’s address to the House Financial Services Committee. When questioned by Rep. Maxine Waters, D-Calif., chairwoman of the Congressional committee, about how Federal Reserve plans to regulate Libra, Powell said they would take a careful approach while looking into it.
Troubles Not Ending
Facebook ran into difficulties right after it released the whitepaper of Libra, a project that heavily borrows from blockchain-based asset bitcoin. The social media giant proposed to introduce a stablecoin atop a permissioned ledger, which would receive backing from a pool of “of low-volatility assets, including bank deposits and government securities” in multiple currencies.
The project further received support from a string of financial frontrunners, including Visa, Mastercard, PayPal, Stripe, and as well as Uber and Spotify.
French Finance Minister Bruno Le Maire said after the Libra technical paper release that the cryptocurrency attempts to replace sovereign currencies. Four US lawmakers asked Facebook to halt the payment project’s development before regulators examine its risks of cybersecurity, global financial markets, and national security.
Libra Cannot Go Forward
Just today, the People’s Bank of China former chairman Xiaochuan Zhou compared the Facebook cryptocurrency with the global dollarization trend, recommending the Chinese government to bar it from entering the country’s digital territories.
1/ Xiaochuan Zhou, former governor of PBoC: Libra reprensents the trend of digital currencies, China should take precautions. Zhou was the PBoC governor during 2013 to 2018, when the famous Chinese bitcoin exchange crackdown and ICO ban were conducted. pic.twitter.com/XAyHgVwRsY
— cnLedger (@cnLedger) July 10, 2019
“Maintaining a strong monetary status may put China in a favorable position. China should take precautions and undertake policy research,” added Zhou.
Despite Libra’s potential to make cross-border remittance cheaper and more transparent, Powell believes the project “cannot go forward” without receiving regulators’ blessing.
“All of those things will need to be addressed very thoroughly and carefully, and in a deliberate process,” the Fed chair said.