Whilst Facebook showed lots of enthusiasm last month when it revealed its stablecoin project Libra and the whole environment in which the coin will interact, the reality indicates that the path towards regulating the asset in different locations will be full of obstacles, for many reasons.
Facebook and the Libra project, received some bad pieces of news in recent hours, when the United States House of Representatives, most precisely the Committee on Financial Services, formally requested the company and all of its partners to stop developing the Libra stablecoin.
Privacy invasive practices and other concerns
A few days ago, it was reported on this site that the US House Committee on Financial Services was going to hold an audience on July 17th about Facebook’s cryptocurrency, Libra. American lawmakers had requested the social media giant to provide additional details about the project.
Several governments have made it clear that they fear about Facebook’s privacy invasive practices, due to the company’s troubled past in that specific department. France, the United Kingdom, Russia, and Spain were among the countries that expressed concern about the amount of information that Facebook has about its users.
This time, the legislators issued a letter on July 2nd, asking Facebook’s CEOs Mark Zuckerberg and David Marcus, as well as the firm’s COO Shreyl Sandberg, and the involved partners to agree with a moratorium on the development of Libra and its related wallet, Calibra.
An “entirely new global system intended to rival the US”
The committee stated that it fears the project can lead “to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar.” The committee also expressed concern about other issues that touch several fields.
“This raises serious privacy, trading, national security, and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers, and the broader global economy,” were the words that could be read on the letter.
The Committee of Financial Services clarifies that the project could experience cybersecurity vulnerabilities, which can lead to trillions of dollars of uninsured deposits being lost and other related national security and privacy risks.
The US Congress quotes Facebook’s past regarding the handling of user data as the fuel that ignites those concerns. “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.”
“It is imperative that Facebook and its partners immediately cease implementation plans,” at least until regulators and financial watchdogs can better examine those issues. For the duration of the moratorium, the regulators plan to have public hearings to raise awareness about the potential risks and benefits of the system, as well as searching for legislative solutions.
“Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail,” the letter stated.
By Andres Chavez