FinTechBlockchainRegulators swoop on Facebook’s currency plans

Regulators swoop on Facebook's currency plans

Regulators call for greater scrutiny into Libra project, with some calling for the project to be paused.

Regulators are pressing Facebook about its new cryptocurrency – Libra – amid concerns that the project is insufficiently regulated.

Facebook says the new currency will be a stablecoin, a digital currency that’s supported by hard assets, established government-backed currencies and securities and will be ‘better than Bitcoin’. It’s hoped this mix will deliver a stable value. A broad group of partners are supporting the project, including Mastercard, Visa, Spotify, Uber, and Lyft.

Following the announcement of the cryptocurrency project by the social media giant, regulators have quickly called for scrutiny of the plan – leading the G7 to issue a letter outlining its plans to set up a high-level forum to examine the risks of such currencies to the financial system. The letter adds that the International Monetary Fund and central banks are also planing to participate.

Facebook revealed that a new digital wallet will exist in its Messenger and WhatsApp services to make it easy for people to send money to friends, family and businesses through the apps.

Operating in a regulatory vacuum

French Finance Minister Bruno Le Maire who has reportedly called for G7 banking officials to issue a report on Facebook’s plan, told Europe 1 radio: “Libra must not become a sovereign currency. It can’t and it must not happen.”

“This money will allow this company to assemble even more data, which only increases our determination to regulate the internet giants,” Le Maire added in the parliament.

A German member of the European Parliament, expressing similar concerns, said: “Facebook is at risk of becoming a shadow bank and must not be allowed to operate in a regulatory nirvana when introducing virtual currencies.”

Libra was also a talking point at the European Central Bank’s annual symposium in Sintra, Portugal, where Bank of England Governor Mark Carney said: “Anything that works in this world will become instantly systemic and will have to be subject to the highest standards off regulation.”

Halt the project

US lawmakers Rep. Maxine Waters, who chairs the House Financial Services Committee, called on Facebook to pause, citing the company’s seemingly endless list of scandals.

Waters said in a statement: “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users.

“The cryptocurrency market currently lacks a clear regulatory framework to provide strong protections for investors, consumers and the economy. Regulators should see this as a wake-up call to get serious about the privacy and national security concerns, cybersecurity risks, and trading risks that are posed by cryptocurrencies.”

Rep. Patrick McHenry, a top Republican on the House Financial Services Committee, also requested a hearing on Facebook and its cryptocurrency project.

Since the Cambridge Analytica scandal, the spotlight has been relentlessly focused on the social media giant’s next moves. Last year the WSJ had announced that Facebook had been in contact with banks and financial institutions asking them to share detailed financial information about customers, which had spurred on further backlash against Facebook from commentators worried about personal data implications.

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