Bitcoin has been rallying hard so far this year, largely due to the renewed interest in bitcoin and cryptocurrencies sparked by social media giant Facebook’s much-hyped Libra cryptocurrency project, which was unveiled last month.
The bitcoin price, which had struggled through a bitter bear market throughout 2018, has added over 250% so far this year, but continues to swing wildly as traders and investors attempt to find steady ground and has lost some 10% over the last 24-hour trading period.
Now, U.S. Federal Reserve chairman Jerome Powell has warned the Facebook Libra project “cannot go forward” until “serious concerns” are addressed—sending the bitcoin price down 7% over the course of his three-hour semi-annual testimony on monetary policy before the U.S. House of Representatives Financial Services Committee.
Federal Reserve chairman Jerome Powell made the comments about Facebook’s planned bitcoin rival during a House Financial Services Committee hearing.
“Libra raises many serious concerns regarding privacy, money laundering, consumer protection, and financial stability,” Powell warned, added he doesn’t think “the project can go forward” until these are addressed.
Bitcoin and cryptocurrency traders and investors were perhaps spooked by Powell’s comments that the Fed’s existing rules do not fit digital currencies, warning issues could “arise to systemically important levels just because of the mere size of Facebook.”
“It’s something that doesn’t fit neatly or easily within our regulatory scheme but it does have potentially systemic scale,” he said. “It needs a careful look, so I strongly believe we all need to be taking our time with this. The process of addressing these concerns should be a patient and careful one, not a sprint.”
The U.S.—which accounts for around 26% of bitcoin activity, according to data provider Cryptocompare—has struggled with bitcoin and cryptocurrency regulation, with the country’s regulators failing to come to a consensus on how to handle bitcoin and its crypto peers.
Powell’s comments could indicate the Fed and other U.S. watchdogs might be looking to clamp down on the likes of bitcoin in coming months.
Powell added that the Fed is working with other central banks around the world, with India already suggesting the bitcoin rival will not be permitted in the country.
Earlier this year, Christine Lagarde, who has just been nominated to replace Mario Draghi as president of the European Central Bank (ECB), warned that cryptocurrencies are “shaking the system”—something that could signal a change in the ECB’s approach to bitcoin and crypto.
Last week an ECB executive described Libra as a “wake-up call” to regulators and it could not operate in a “void” outside the typical structure of central banks.
The bitcoin price moved sharply lower throughout the Fed chair’s testimony.
Facebook officials are scheduled to speak before U.S. Congress this month about the bitcoin rival Libra project, just a little over a year since Facebook’s chief executive, Mark Zuckerberg, faced U.S. lawmakers over the company’s data-sharing scandal.
Facebook officials appeared to welcome the scrutiny, expressing the desire to work with governments in order to meet Libra’s planned 2020 launch date.
“We are very much aligned with the chairman around the need for public discourse on this,” Facebook spokeswoman Elka Looks said in an email to Reuters. “This is why we along with the 27 other Founding Members of the Libra Association made this announcement so far in advance, so that we could engage in constructive discourse on this and get feedback.”
Meanwhile, Powell caught the attention of markets around the world yesterday when he signaled the Fed could soon cut interest rates, sending global stocks higher and pushing the benchmark S&P 500 stock index over 3,000 for the first time.