Federal Reserve Chairman Jerome Powell told lawmakers Facebook’s cryptocurrency project raises serious concerns— and it cannot move forward until the company deals with those concerns.
“I just think it cannot go forward without there being broad satisfaction with the way the company has addressed money laundering…data protection, consumer privacy – all of those things will need to be addressed very thoroughly and carefully, and again, in a deliberate process that will not be a sprint to implementation,” Powell said.
Throughout the House Financial Services Committee hearing, lawmakers repeatedly pressed Powell about Facebook’s plan for its Libra cryptocurrency and Calibra digital wallet.
Chairwoman Maxine Waters (D-CA) kicked off the hearing by asking Powell about his concerns about Libra and the Fed’s role in supervising and regulating it.
Powell told Waters the Fed has established a working group to look into the issue, and met with Facebook representatives before the Libra announcement.
In an interview with Yahoo Finance, Waters said the fact that so many lawmakers on both sides of the aisle raised this issue during the hearing shows how big of a concern Libra is.
“We all want innovation, but we want innovation that protects data security,” said Rep. Steve Stivers (R-OH) at the hearing.
Waters explained why her first question was not about the economy or monetary policy — but instead, about Facebook.
“What we have is what appears to be a massive effort that’s going to be centered in Switzerland, that’s going to create competition with our dollar, and we’re not ready for that. I think that we’re going to have to spend a lot of time and do it quickly so that we can get a handle on this because we cannot afford to have cryptocurrency, and this Calibra wallet that’s going to be created to hold this cryptocurrency, without us understanding the impact on our consumers,” Waters said in an interview with Yahoo Finance.
Waters has called on Facebook to halt its work on Libra until regulators and lawmakers can examine it.
In a recent post, David Marcus, Facebook’s head of Calibra, said Facebook is “taking the time to get this right.” He went on to address concerns that consumers can’t trust Facebook.
“Bottom line: You won’t have to trust Facebook to get the benefit of Libra. And Facebook won’t have any special responsibility over the Libra Network. But we hope that people will respond favorably to the Calibra wallet. We’ve been clear about our approach to financial data separation and we will live up to our commitments and work hard to deliver real utility,” said Marcus.
Waters doesn’t buy it.
“I don’t think that we can rely on any representation from Zuckerberg or anybody else,” said Waters. “They’ve got all this data and this data is being monetized. They’re able to, you know, sell this data — and people’s privacy is at stake, and so no, we’re not taking anybody’s word for it.”
Waters and other lawmakers will have a chance to question Facebook about the project next week.
Marcus is set to testify in front of both the House Financial Services committee and the Senate Banking committee next week.
“We’re going to bring them in July 17 and we’re going to begin this discussion. We’re going to unveil what they’re doing, how they’re doing, who all is involved in it, and where they hope to go with all of this,” said Waters.
When Yahoo Finance asked if there is anything that Facebook could say in the hearings to convince her to call off her request for a moratorium, Waters said “no.”
“I think we need time. I think that I would like them to support a moratorium, but we have got to find out exactly how far they’ve advanced at this point. There’s a lot we don’t know about what we’re asking in terms of a moratorium and we’re going to define that very soon. Perhaps we’ll have that information ready when they come before us,” she said.
The House Financial Services Committee will hold its hearing on July 17 and the Senate Banking Committee will hold its hearing on July 16.
In a statement on Wednesday, the top Democrat on the Senate committee warned Facebook’s cryptocurrency could have “far-reaching consequences for billions of individual consumers and the broader financial system.”
“The largest banks and the largest tech companies do not act in the interest of working Americans, but in the interest of themselves and their investors. The Fed must take a proactive role to ensure that the payments system remains accountable to the public,” said Sen. Sherrod Brown (D-OH).
Senators will likely ask more questions about Libra when he goes before the Senate Banking Committee on Thursday.