FinTechPayments TechnologyCongress questioning of Libra highlights rise of cryptocurrencies

Congress questioning of Libra highlights rise of cryptocurrencies

Grilling of Facebook executive over Libra introduction underscores how digital currencies are now mainstream

The US Senate Banking Committee’s grilling of Facebook over the company’s plan to launch its Libra digital currency demonstrates that US lawmakers know cryptocurrencies are the future, according to industry commentators.

Facebook executive David Marcus was this week grilled by the Senate and House panels – and was forced to defend plans around the cryptocurrency – a move that underscores that digital currencies are now mainstream, according to Nigel Green, CEO and founder of deVere Group.

“The high-profile scrutiny of Libra must be championed as cryptocurrencies are already part of the global financial system,” said Green. “They are here to stay. And their influence is set to grow exponentially. As such, they should face the same scrutiny and meet the same standards and requirements as the rest of the financial system.

“This is a step in the right direction for establishing a robust global regulatory framework for the wider crypto market.

“Whatever you think about Facebook’s Libra as an individual cryptocurrency, these top-level US governmental hearings underscore again that, as a concept, digital, global, borderless currencies are now a part of mainstream finance, and increasingly so. This is why most major financial institutions, tech giants, and of course institutional and retail investors are increasingly involving themselves in the burgeoning sector.”

Addressing regulatory issues on priority

Responding to the concerns, Marcus tried to promise that Facebook will not begin offering Libra until regulatory issues are addressed.

He told Senate representatives: “We know we need to take the time to get this right. I know we have to earn people’s trust for a very long period of time. The way we’ve built this is to separate social and financial data because we’ve heard loud and clear that they don’t want those two types of data streams connected, so this is the way the system is designed.

“Facebook will only have one vote and will not be in a position to control the association, nor will Facebook or the Libra Association position themselves to compete with sovereign currencies or interfere with monetary policy.”

Libra project should be scrutinized

Following the US President Donald Trump’s Bitcoin comments last week, Green believes that regulation is necessary.

He added: “Last week President Trump raised the issue of Bitcoin, with the effect of making cryptocurrencies become a presidential issue.  The hearings this week will make them a global policy issue.

“This all adds to greater awareness and acknowledgement of digital currencies that will further boost mass adoption and push up prices across the sector. I agree with Mr Trump that Facebook’s new Libra project should be scrutinized.

“But, being the social media monolith that it is, Facebook is surely expecting this level of scrutiny. I would suggest that it is prepared for it, has the resources for it, and will welcome it, as it will make its cryptocurrency stronger.”

He concluded: “Facebook’s Libra will likely get through these hearings on Capitol Hill in a stronger position. The scrutiny, which could advance the cause of regulation, will be welcomed by crypto investors as it provides more confidence.

“But whatever happens with the social media giant’s crypto project, it is clear from the top-level hearings that the U.S. government now understands that, whether they like it or not, people and institutions across the world are increasingly using a combination of sovereign and non-sovereign digital currencies.”

Clean up the house before proceeding

The senators at the hearing brought up concerned like how Facebook planned to prevent money laundering through the new payment system and how consumers’ data and funds will be protected.

Sherrod Brown, a Democrat, said: “The company had showed through scandal after scandal that it doesn’t deserve our trust. We’d be crazy to give them a chance to let them experiment with people’s bank accounts.”

He opined it was “delusional” to think individuals would trust the social media company with their “hard-earned” money.

Martha McSally, a Republican senator, shared Brown’s concerns: “I don’t trust you guys. Instead of cleaning up your house you are launching into a new business model.”

Regulators swoop on Facebook’s plans

Facebook revealed its plans to launch a digital currency last month and since then the critics have lined up to voice scepticism. 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.

France, the current holder of the G7 presidency, is to set up a group taskforce to study how central banks ensure cryptocurrencies, including Facebook’s planned Libra, are governed by regulations covering everything from money laundering laws to consumer protection rules. The move was announced by France’s central bank Governor Francois Villeroy de Galhau, who hinted that the task force will be led by European Central Bank board member Benoit Coeure. Several ECB officials, including Coeure, have argued in favor of creating such an agency over the past months.

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