A group of congressional Democrats on Tuesday called on Facebook to delay the rollout of its new digital currency, Libra, until regulators have a chance to evaluate any potential risks to the global economy.
Lawmakers on the House Financial Services Committee sent a letter to Facebook CEO Mark Zuckerberg, Chief Operating Officer Sheryl Sandberg and the CEO of Calibra, the company’s new digital wallet, urging the social media giant to temporarily halt its plans for Libra, a digital financial system modeled after cryptocurrency. Facebook announced Libra earlier this month, saying it planned to launch it as early as 2020.
“It appears that these products may lend themselves 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 lawmakers, led by Financial Services Committee Chairwoman Maxine Waters (D-Calif.), wrote. “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.”
Facebook addressed the letter in a statement to HuffPost on Tuesday, saying: “We look forward to working with lawmakers as this process moves forward, including answering their questions at the upcoming House Financial Services and Senate Banking Committee hearings.”
Libra, if it goes forward, could instantly create one of the planet’s largest financial markets in which billions of people could easily transfer money to each other, or pay for goods and services. Facebook has specifically pointed to the benefits for underdeveloped countries, which may not have a stable currency or reliable banking systems, saying users could send Libra to “almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost.”
It would be run by a nonprofit group out of Switzerland and aims to have more than 100 major partners, such as MasterCard and Uber, to help govern the network (27 have already signed on). Libra would also be backed by fiat currencies, like the dollar or euro, and should not fluctuate wildly like Bitcoin.
The proposal has already been met with a hearty dose of skepticism by regulators and some of the announced partners. The New York Times notes many of those critics worry about Facebook’s issues with privacy and its recent troubles with lawmakers around the globe, as well as broader questions about the security of cryptocurrency networks.
In their letter Tuesday, the House lawmakers pointed to what they called Facebook’s “troubled past,” calling out the company’s role in the Cambridge Analytica scandal. The political consultancy firm was able to improperly harvest the personal data of 87 million users of the social network during the 2016 presidential campaign, and the Federal Trade Commission has been investigating Facebook for more than a year to determine if the company was at fault.
Facebook said in April that it expected to be fined $3 billion to $5 billion by the FTC for privacy violations, in what would be a record penalty leveled against a technology giant and a signal that the federal government is willing to rein in Silicon Valley behemoths.
Some lawmakers have said that even at those stratospheric levels, a fine of that size would merely be a slap on the wrist. Facebook made more than $15 billion in revenue for the first quarter of the year.
Waters and her colleagues on Tuesday warned that Facebook’s massive and expanding user base only further emphasized the need for regulators and those in Congress to review the proposal before it goes into effect. She said that during any moratorium, lawmakers would hold public hearings and determine if any legislation was needed to address such currencies.
“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,” the lawmakers wrote. “Failure to cease implementation before we can do so risks a new Swiss-based financial system that is too big to fail.”