Gregory Barber cryptocurrency, blockchain and artificial intelligence for WIRED.
On Wednesday, US Federal Reserve Chairman Jerome Powell told the House's Financial Services Committee that Facebook's financial efforts were "of great concern." In addition to concerns about privacy, money laundering and consumer protection, Libra represents a serious risk to financial stability the enormity of the Facebook user base, Powell said. "The process of resolving these issues must be patient and cautious, not a sprint," he said, adding that the Fed was collaborating with other federal agencies and central banks abroad .
Powell's concerns follow similar comments from leading regulators in Europe and Asia. Benoît Cœuré, executive at the European Central Bank, announced Sunday describes the Libra with regard to the "wake-up call" of the regulators, stating that it could not operate in a "void" outside the typical structure of central banks. A problem for regulators is that the Facebook project lacks an obvious precedent. The company's projects involve a Swiss-based association that would run the Libra blockchain platform, as well as the funds used to back up the value of its chips. Companies, including Facebook, could create portfolios and other applications, allowing Libra to operate a global financial network outside the usual framework of central banks like the Fed.
Powell's comments Wednesday came in response to questions from Representative Maxine Waters (California), who was among the most savage critics of Libra. His call for a moratorium on the development of Libra was joined last week by fellow Democrats from the House Financial Services Committee. Facebook has refused to respond to these requests, although David Marcus, head of Facebook's Calibra division, who will oversee the company's financial services products, will appear in consecutive hearings in the House and Senate next week. .
A Facebook spokesperson led WIRED to a letter Sent by Marcus on Monday in response to Senators' questions, the company subscribed to Powell's call for a "patient and cautious" approach to problems.
At Wednesday's hearing, Mr. Waters raised the possibility that Libra could enforce Facebook under the Dodd-Frank Financial Reform Act as a "financial institution" too big for going bankrupt". These institutions, which require special regulatory oversight, are usually large banks, such as JP Morgan and Wells Fargo. Powell said it was too early to say whether Facebook would be eligible, but a working group within the Financial Stability Board, a regulator created under Dodd-Frank, was examining the issue "so serious ".
Powell also confirmed that he had met with Facebook representatives in the months leading up to Libra's announcement, as part of the company's global tour of technology with financial authorities. Apparently, many regulators have left these meetings unsatisfied. Beyond the EU, regulators the United Kingdom, Japanand Singapore have called for a closer examination of Libra in recent weeks.
Concerns have spread to places where Facebook does not plan to use Calibra. In China, for example, where Facebook does not carry out any activity, central bankers published Monday a list of their concerns about global systemic risks and the potential impact of Libra, according to Bloomberg. One of the concerns was that Libra could increase instability in developing economies if people flocked to the local currency. Some countries, such as South Africa, have strict currency controls in place to prevent this instability. The People's Bank of China, which is working on its own digital currency, reportedly accelerated these plans after Facebook's announcement.
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