Authorities react to Facebook’s digital currency, as US Senate Banking Committee sets up to scrutinise it
Facebook has begun to see the reaction from authorities around the world to its plan to launch a digital currency in 2020.
Rumours of the currency began circulating earlier this year, but last week Facebook confirmed its ambitious cryptocurrency scheme was called Libra, which aims to make payments possible as early as next year.
The currency is to be linked to Facebook’s mobile messaging applications, Facebook Messenger and WhatsApp, which have more than one billion users, but would also be available via stand-alone software called Calibra.
But Facebook’s plans for a digital currency face a number of hurdles, including winning over regulators and allaying concerns over the privacy implications of the scheme.
Into this comes the news that the global cryptocurrency will face scrutiny from the US Senate Banking Committee on 16 July.
According to Reuters, the hearing will investigate Libra, as well as any data privacy considerations it may raise, the committee said on Wednesday.
A committee spokesperson told Reuters that so far no witnesses have been announced, but a source in Washington familiar with the matter reportedly said that David Marcus, who oversees Facebook’s blockchain efforts, is expected to testify.
Representative Maxine Waters, a Democrat who also chairs the House Financial Services Committee, reportedly said earlier this week that she planned to call Facebook to testify, and she asked the company to halt the project while policymakers studied it.
Facebook has previously said that Libra could provide a low-cost way of transferring funds or paying for goods and services, and could potentially for the first time put such financial transactions within the reach of users without bank accounts, but with access to mobile phones.
Libra builds on the rise of cryptocurrencies such as Bitcoin, which were initially conceived as being independent of existing currencies or governments.
But it will differ from existing schemes in ways intended to offset some of cryptocurrencies’ disadvantages, including their typical volatility and their use in money-laundering and sales of illegal drugs and other contraband.
Libra is to be tied to an array of government-backed assets from around the world, to ensure its stability.
Facebook said compliance checks would be carried out on individuals and groups who want to use Libra, and that verification and other anti-fraud procedures typical of banks would be employed.
Libra is to use a closed blockchain, developed by Facebook itself, that is only accessible by selected people and groups, in a difference from the typical cryptocurrency blockchain that can run on any internet-connected computer system.
Facebook also said it would give refunds to those who lose Libras due to hacking or digital theft.
It said it would keep Libra data separate from the customer data it uses to sell advertising.
The company said it aimed to promote “better, cheaper, and open financial services”.
And in a further effort to assuage regulatory concerns, decisions around the ongoing maintenance of the cryptocurrency are to be made by the Libra Association, a Geneva-based consortium, with Facebook stepping back from a leadership role after 2019.
The group has already been joined by 28 financial, not-for-profit and commerce firms, including Mastercard, PayPal, eBay and crypto-exchange Coinbase.
There have been calls for the social network to be broken up, and even CEO Mark Zuckerberg himself has previously called for “a common regulatory framework” to hold companies accountable.