Rep. Waters Says Facebook’s Crypto ‘Can’t Compete With Dollar
The chair of the U.S. House Financial Services Committee is doubling down on her calls for Facebook to pause development on its new blockchain, Libra. Rep. Waters: US Can’t Let Facebook’s Crypto ‘Compete With The Dollar’ (#GotBitcoin?)
Two days after calling for a hearing, Rep. Maxine Waters (D-Calif.) appeared on CNBC Thursday afternoon calling for a “moratorium” on Libra development.
“It’s very important for them to stop right now what they’re doing so that we can get a handle on this,” Waters said of the social media giant. “We’ve got to protect our consumers. We just can’t allow them to go to Switzerland with all of its associates and begin to compete with the dollar.”
CNBC’s Waters interview made it clear her concerns are more with Facebook than with the company’s announced cryptocurrency project. Waters highlighted an ongoing investigation by the Federal Trade Commission into potential privacy violations concerning consumer data. She also mentioned a Department of Housing and Urban Development lawsuit that accuses Facebook of violating fair housing laws.
“And while we’re doing that they have moved on to develop this cryptocurrency,” Waters said on CNBC. “We’re now going to move and we’re going to move aggressively and very quickly to deal with what is going on with this new cryptocurrency.”
Waters isn’t alone in calling for public hearings on Facebook’s crypto aspirations, which were announced Tuesday. The U.S. Senate’s banking committee has already scheduled a July 16 hearing on Libra. Facebook blockchain lead David Marcus is reportedly expected to testify, according to The Verge. Rep. Waters: US Can’t, Rep. Waters: US Can’t, Rep. Waters: US Can’t
‘I Don’t Trust Facebook With Anything:’ The World Reacts to Facebook’s Libra
Although Libra hasn’t yet officially launched, pundits, politicians, and developers are already weighing in with warnings, celebrations, and memes.
US representatives from both sides of the aisle have already chimed in.
“Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy,” Representative Maxine Waters, who chairs the House Financial Services Committee, said in a statement. “We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight.”
She’s asked Facebook to stop the project until Congress can understand it further. She is joined by Democratic Senators Sherrod Brown Mark Warner of the Senate Banking Committee and Republican Representative Patrick McHenry.
Sen. Josh Hawley (R-MO) told Yahoo Finance it sounds like Facebook is “expanding their monopoly” with its new cryptocurrency project.
“We need to see exactly what their specific proposals are, but I’m very concerned about Facebook’s behavior on a range of fronts. I’m concerned about their size, I’m concerned about their anti-competitive conduct, I’m concerned about their rampant violations of privacy,” Hawley said.
He even called for an investigation into breaking up the social media giant.
“There needs to be an antitrust investigation. I hope one will go forward, but in the meantime, in the immediate future with this consent decree — if it’s just a fine of a few billion dollars, that’s a speeding ticket to Facebook. They need to get serious,” he said. “Name Mark Zuckerberg. Name him, if he has in fact participated in violating consent decree as reports indicate. And let’s consider some tougher penalties, too.”
“I don’t trust Facebook with anything,” he said.
“Facebook’s new Libra blockchain project has the potential to be a big step forward towards a more global and inclusive financial infrastructure,” said U.S. Congressman Darren Soto, Co-Chair of the Congressional Blockchain Caucus. “We are encouraged by the possibility of increasing access to mobile and digital payments, which will ultimately benefit our society and become a driver of economic growth. While it is yet unclear how this new technology will be regulated, it is crucial Congress continues to protect consumers and the financial well-being of investors, while simultaneously promoting innovation for these virtual currencies.”
“In the Congressional Blockchain Caucus we are working in a bipartisan manner to educate and maximize Blockchain technologies’ potential for the U.S. economy. We applaud the thoughtfulness behind the Libra Association. If efforts to achieve this multi-level cryptocurrency coordination is successful – one that protects consumers and prioritizes user privacy – this could be a significant advancement for the 21st Century economy,” he said.
Pundits Come In Punching
On the private side of things, pundit Jim Cramer was ecstatic.
“The disenfranchised will welcome Mark Zuckerberg as a savior, ” he said on CNBC’s “Squawk on the Street.” He sees it as a solution to the underbanked in American cities where “check cashing places” are the closest consumers can get to money services.
Bankers And Startup Founders See Libra’s Success As Inevitable
“They’re not the first company to launch a crypto payment solution, but they do have immense reach obviously through their Facebook platform,” said NAB’s business banking chief Anthony Healy. “With a billion plus users on its platform, it is clearly a threat.”
“If it’s successful, it’s not just going to have the traditional qualities of a corporate currency like Westfield dollars or, Qantas Frequent Flyer points, it’s really a governance play,” said Asher Tan, founder of CoinJar.
“Like all fintech disrupters, they’re all potential threats, but they’re also opportunities for us to learn, and if some of these emerge as real threats we can learn from them, develop our own capabilities and respond appropriately.”
Crypto grandfather Erik Vorhees is obviously excited about the move.
“Zoom out for a second and realise how far this industry has come,” he tweeted. “The biggest companies in the world are now launching cryptocurrencies. BOOM.”
Spencer Chen of BRD Wallet, thinks crypto people should stop “shitting” on Libra.
Jerry Brito, executive director over at the research non-profit CoinCenter, raised important questions about the future of Libra:
“Of course, there must be more to joining the Investment Token club than merely meeting the outlined requirements (seems like Huawei and Gazprombank might qualify), though it’s not clear to me if it’s a majority vote of the membership or what.”
Changpeng Zhao, CEO of the cryptocurrency exchange Binance, wrote that Facebook has a chance to “reshape the payment industry” and start the “un-dollarisation of the world.”
“Facebook’s initiative, with the Libra cryptocurrency at the center of the project, will have a significant impact on the financial industry and global economies from both a medium and long-term perspective,” he wrote. “Backed by a basket of fiat currency-denominated assets in its initial release, Libra represents a first attempt at creating a world currency, on-chain or not, with everyday usage by billions of individuals and institutions across the globe.”
Europe, on the other hand, is calling for far more scrutiny.
“As a reminder, the principle of e-money in Europe is that a customer credits an e-money account usually from a bank account or a credit card (or more recently from cash-in / cash-out points at partner merchants). This e-money account is opened in the books of an e-money institution and customers can use this e-money to make online payments to merchants who accept it (for example very few today do not accept PayPal). The difference with Facebook’s Libra is almost solely that Libra will be indexed to a basket of currencies rather than being representative of a single currency,” said Emilien Bernard-Alzias of legal firm Simmons & Simmons LLP. “Therefore, Libra project is not significantly revolutionizing the financial market in Europe and does not really challenge the European Central Bank (ECB). As announced in the Libra’s white paper, this project is much more game changing for people having poor access to banking services over the world.”
“The proposed launch of a digital coin (cryptocurrency) by Facebook will require careful scrutiny from several enforcement bodies, including data protection authorities,” said European Data Protection Supervisor Giovanni Buttarelli.
Bruno Le Maire already called upon the Group of Seven central bank governors to prepare a report on Facebook’s project for the upcoming July meetings. Expressing a latent anxiety about the disruption of national currencies for the Euro, he said:
“It is out of question” that Libra “become a sovereign currency… It can’t and it must not happen.”
Markus Ferber, a German member of the European Parliament, was also concerned about Facebook’s supranational spread, adding to the conversation that with more than 2 billion users the tech-giant could become a “shadow bank.”
“Multinational corporations such as Facebook must not be allowed to operate in a regulatory nirvana when introducing virtual currencies,” he said, sounding the alarm for regulators.
“It is no surprise that Facebook Inc.’s ambitious plan to roll out its own cryptocurrency — Project Libra ran into immediate political opposition in Europe, with calls for tighter regulation of the social-media giant,” reflected Robin Matze, Blockchain Lawyer and Advisor to the German Government.
“AML (Anti Money Laundering) laws usually take a risk-based approach. Therefore, Facebook would have to take reasonable measures in order to mitigate that risk.” Matze offered a potential solution to this nebula of risk and regulations, though it may not be what Facebook wants to hear… “The easiest way to be compliant to various jurisdiction is – a fortiori – to apply the strictest regime. This approach is definitely not the cheapest for each jurisdiction but the easiest to manage on a global level.”
On the other hand, TransferWise, a London-based fintech firm focused on money transfers and cross-border payments, thinks Facebook’s global reach works in its favor. The company’s CTO Harsh Sinha said “large companies with large resources” can help facilitate conversations with regulators.
“The reality is that there is quite a bit of regulatory work that goes into putting up a global network of payments but maybe there’s a way to bypass that,” he told CNBC.
Bank of England Governor Mark Carney also appeared more optimistic about the project.
“Anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulations,” the central banker said Tuesday.
We Do Have Our Fun
In the end, however, the joksters came through with the last word. Rep. Waters: US Can’t,Rep. Waters: US Can’t,Rep. Waters: US Can’t,Rep. Waters: US Can’t,Rep.
Facebook’s Crypto Plan Borrows From China
The Chinese precedents suggest the social-media giant needs to focus less on crypto engineering and more on improving the use case for Libra.
Facebook ’s plan to reinvent money owes much to the runaway success of payments via social media in China, only with a crypto spin.
The problem it will bump up against in the U.S. and Europe is that consumers already have decent mobile-payment options using established currencies, regulations and financial plumbing. A few specific cases such as cross-border transfers aside, it also isn’t clear what obstacle Facebook’s cryptocurrency would overcome.
The U.S. social-media giant spelled out Tuesday its plan for a new cryptocurrency, Libra. Sending remittances across borders is the initial focus, but Facebook hopes people will eventually use Libra to pay bills or buy goods and send money to each other on its messaging apps WhatsApp and Messenger.
Facebook wants to leverage its billions of social-media users to expand into digital payments. That approach has worked in China. Tencent’s WeChat service, which started as a WhatsApp-like instant-messaging app, now also runs WeChat Pay, one of China’s two top mobile-payment systems.
WeChat Pay took off in 2014 when the app started to enable its users to send red packets to each other—a common practice during Lunar New Year. Merchants also hand out red packets through WeChat, which has 1.1 billion monthly active users, to attract customers. Peer-to-peer transfers like that didn’t make money directly for Tencent, but they boosted adoption of the service. People can now use WeChat Pay to settle almost everything, including bills online and lunches at restaurants. Third-party mobile payments are ubiquitous in China, with transactions worth 160 trillion yuan ($23.2 trillion) last year, according to data research firm BigData-Research.
It would be difficult for Facebook to achieve the same dominance, both because of privacy concerns and the presence of alternatives. Apple Pay and other services offer mobile-phone payments using the existing financial architecture. Facebook may think cryptocurrency is the best way to assuage consumer fears about its use of personal data. Libra is minted by an independent, not-for-profit organization, while Calibra, Facebook’s subsidiary that offers a digital wallet for using Libra, promised to separate social data from financial data.
But that seems an unnecessarily convoluted way for people to buy coffee at Starbucks . Even though Libra’s price should be relatively stable compared with other cryptocurrencies such as bitcoin—it is backed by a basket of global currencies or other investments—it will still fluctuate. Nobody wants the price of a cup of coffee to change every day.
To succeed in payments, Facebook needs to focus less on crypto engineering and more on understanding how and why its social-media users use payment apps.
Facebook’s Libra Needs Scrutiny, BOE’s Carney Says
Bank of England Gov. Mark Carney says in prepared remarks new cryptocurrency could be ‘systematically important’.
Facebook Inc.’s Libra project should be carefully vetted by regulators, Bank of England Gov. Mark Carney is expected to say Thursday, offering an early insight into how the U.K. central bank will approach the new cryptocurrency.
In prepared remarks for an annual address to bankers in London’s financial district, Mr. Carney says Libra has the potential to be a critical part of the global financial system given the social media giant’s reach and as such will need to be scrutinized by regulators and central banks.
“Libra, if it achieves its ambitions, would be systemically important,” Mr. Carney will say, according to a text of his remarks published in advance by the BOE.
Facebook this week said that Libra, a secure blockchain-based payment system backed by hard assets, would be designed for ordinary users, making it among the boldest efforts yet to bring digital currencies into the mainstream.
Facebook named a series of corporate partners—including financial-services heavyweights Mastercard Inc. and PayPal Holdings Inc., and tech giants Uber Technologies Inc. and Spotify Technology SA —that it said would help create what it described as a “secure, scalable and reliable” cryptocurrency.
It was reported in May that the initiative involved developing a “stablecoin”—a digital asset backed by a basket of global currencies or other investments—unlike other cryptocurrencies, such as bitcoin, whose values can fluctuate sharply.
Facebook and its partners will need to satisfy regulators on issues ranging from anti money laundering to data protection, and central banks will need to consider the implications of Libra for financial and monetary stability, Mr. Carney is expected to say.
All this must happen before the payment system’s formal launch, he will say.
“Unlike social media, for which standards and regulations are being debated well after it has been adopted by billions of users, the terms of engagement for innovations such as Libra must be adopted in advance of any launch,” Mr. Carney says in the prepared remarks.
He is expected to say the BOE will still approach Libra “with an open mind,” acknowledging it may extend access to financial services and lower the cost of cross-border payments.
Libra is just one of a host of innovative payment systems that are upending traditional banking. In many parts of Europe, cash use is shrinking rapidly as consumers use electronic alternatives and smartphone apps to pay for goods and transfer money.
The BOE plans to launch a public consultation on whether to permit nonbank payment providers to hold accounts at the central bank like commercial banks, giving them access to central-bank reserves in times of financial stress, Mr. Carney is expected to say. Such a change would bring down costs for consumers and aid financial stability, he will say.
Mr. Carney also says in the prepared remarks that banks in the U.K. will be tested in 2021 for their resilience to financial risks arising from climate change, a first for a major central bank. Rep. Waters: US Can’t,Rep. Waters: US Can’t,Rep. Waters: US Can’t,Rep. Waters: US Can’t