When it comes to Facebook’s Libra, the US government has made one thing clear: they don’t trust the tech giant and its plan to release an alternative financial system based on the highly debated blockchain technology.
In a Senate hearing today, a Facebook executive was grilled by lawmakers in the Senate Banking Committee over the plan to issue its digital currency and its possible effect on the global banking and financial ecosystem.
Facebook announced a month ago that it would roll out a new form of digital money, called Libra, which the tech superpower claims to be a stable coin. Unlike its predecessor, Bitcoin, the Silicon Valley giant claims that Libra is a cryptocurrency backed by real-world money and government certificates, and is also supported by a group of corporations such as Mastercard, Paypal, and VISA.
Libra is set to be available for circulation early next year, but a few weeks following Facebook’s announcement, staunch government opposition has proved difficult for Libra to push through with its most ambitious plan.
“Facebook has said ‘just trust us’” Senator Sherrod Brown, Democrat of Ohio, said at the hearing. “And every time Americans trust you, they seem to get burned.”
Many governments around the world have echoed concerns on how Facebook will handle such an ambitious feat. Many claims that because of the company’s reputation in data security, it is hard to trust Facebook in handling people’s money.
“Trust is primordial”
“Do you really think people should trust Facebook with their hard-earned money?” Senator Brown asked Facebook’s exec, David Marcus.
As a response, Marcus said that the company would do its best to protect people’s money, as well as, prevent fraud and other illegal activities that malicious actors may carry out using Facebook’s Libra.
One of the significant critiques against Facebook’s digital money comes from the fact that cryptocurrencies are not well regulated and criminal element can leverage the technology and use Libra for money laundering and other forms of illegal payments.
“We’ve made mistakes in the past,” Mr. Marcus said. “We have been working, and are working hard to get better.”
“Trust is primordial,” he added.
Keep Big Tech Out Of Finance Act
The Senate hearing comes a day after a copy of a draft proposal in the Senate penned by Democrat senators surfaced that practically bans major tech companies from issuing digital currencies.
A new draft proposal for the bill, bluntly named as “Keep Big Tech Out Of Finance Act,” that circulates among Democrats majority that leads the U.S. House Financial Services Committee, proves that the US government is serious about its position against Libra and other similar ventures in the future.
According to the proposed bill, no tech company should be allowed to issue any form of financial services. “A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as a medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,” reads a copy of the bill obtained by Z6Mag.
Global fiscal and legislative resistance vs. Libra
Furthermore, while the bill does not specify any company, it clearly refers to Facebook, and it’s planned blockchain-based currency, Libra. The “large platform utility” is defined as a technology company with “[an] annual global revenue of $25,000,000,000 or more” and one that is “predominately engaged in the business of offering to the public an online marketplace, an exchange, or a platform for connecting third parties.” This definition seems to be crafted to include Facebook rather than exclude other companies.
It is also worth noting that the proposed legislation also prohibits “large platform utilities” from affiliation with “persons who are a financial institution.” This further includes Facebook’s proactive workaround against possible future laws that may prohibit them from owning Libra.
European officials have also expressed concern regarding Libra, citing that the system, if widely adopted, could shake the global economy and rival national banks. French Finance Minister Bruno Le Maire sent a letter to officials from the G7 and International Monetary Fund calling for a group to examine Libra’s impact on the global financial system. Le Maire said that Libra must not become a “sovereign currency,” while a German politician noted Facebook’s potential to become a “shadow bank” to the global financial system.
Aside from European officials, Japanese lawmakers are also investigating the possible impact of Facebook’s Libra in global banking and financial systems ahead of the G-7 Meeting of the country’s finance ministry to be held in France this week.