Fed chief: Facebook crypto project poses 'serious concerns' for economy, consumers

Fed chief: Facebook crypto project poses 'serious concerns' for economy, consumers
© UPI Photo

Federal Reserve Chairman Jerome Powell on Wednesday said that Facebook’s proposed cryptocurrency project poses “serious concerns” and warned the company against a “sprint toward implementation.”

Testifying before lawmakers on Wednesday, the Fed chairman raised questions about how Facebook’s Project Libra could affect “privacy, money laundering, consumer protection and financial stability.”

“It cannot go forward without there being broad satisfaction with the way the company has addressed” those concerns, Powell told the House Financial Services Committee. “All of those things will need to be addressed very thoroughly and carefully.”

ADVERTISEMENT

Set to launch next year, Libra would allow users to send and receive money through exchanging a proprietary cryptocurrency backed by dozens of major corporations, including Facebook.

While Libra will be controlled by a Swiss nonprofit separate from Facebook, the system will use a virtual wallet called Calibra that is operated by a Facebook subsidiary.

Facebook has insisted that it will play no role in controlling Libra, but lawmakers and regulators have expressed deep skepticism of the project given Facebook’s massive reach and a series of data and privacy controversies faced by the company in recent years.

“What they're planning raises serious privacy, trading, national security and monetary policy concerns for consumers investors, the US economy and the global economy,” said Rep. Maxine WatersMaxine Moore WatersPowell, Mnuchin stress limits of current emergency lending programs Pelosi: House will stay in session until agreement is reached on coronavirus relief Omar invokes father's death from coronavirus in reaction to Woodward book MORE (D-Calif.), chairwoman of the Financial Services Committee.

Waters and several Democrats on the Financial Services panel have called on Facebook to halt work on Libra until the company settles the concerns of lawmakers and regulators. Republicans have also expressed qualms with the potentially transformative impact of Libra.

“We all want innovation, but we want innovation that protects data security and the Know-Your-Customer anti-money laundering laws that are so important to our economy,” said Rep. Steve StiversSteven (Steve) Ernst StiversGOP lawmakers distance themselves from Trump comments on transfer of power Business groups back pandemic insurance bill modeled on post-9/11 law National Retail Federation hosts virtual 'store tours' for lawmakers amid coronavirus MORE (R-Ohio).

Powell said he met with Facebook officials several months before Libra’s launch and that an internal central bank working group has been considering the potential regulatory concerns the project poses.

“We do support responsible innovation in the financial services industry, as long as the associated risks are appropriately identified and managed,” Powell said.

“The process of addressing these concerns, we think, should be a patient, careful one and not a sprint to implementation.”