A number of U.S. Congress people, including Congresswoman Maxine Waters (D-CA), the Chairwoman of the House Financial Services Committee, yesterday sent Facebook’s top executives a letter requesting the immediate suspension of Facebook’s development of its Libra blockchain digital currency, which Facebook announced in June.
So far, Facebook has only released some basic and experimental code for Libra, with the full release being planned for 2020.
The letter states:
“Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action. During this moratorium, we intend to hold public hearings on the risks and benefits of cryptocurrency-based activities and explore legislative solutions. Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail.”
The rest of the letter focuses primarily on Facebook’s Libra currency being a risk both to the U.S. financial system (more specifically a risk to the U.S. dollar) and other global markets. The letter points to Libra potentially increasing the risk of people or businesses losing all of their money to hackers. The lawmakers reminded everyone that last year, hackers stole a total of $1 billion worth of cryptocurrency from online exchanges.
Yet another concern was that Libra will provide an “under-regulated” platform for illicit activity.
The letter argued that these risks need to be emphasized even more because Facebook hasn’t always kept user’s data safe, and, in fact, has often exchanged it with third-party developers or smartphone manufacturers. In other words, why should Facebook be trusted with people’s money when it couldn’t even be trusted with their text messages and photos?
As fallout from the Cambridge Analytica scandal, Facebook is expected to pay $5 billion in fines to the Federal Trade Commission (FTC, responsible for protecting U.S. consumers) and remains under an FTC consent order over previous privacy violations and misleading statements to its users from the company.
Facebook has also recently been sued by civil rights groups and the U.S. Department of Housing and Urban Development for violating fair housing laws on its advertising platform and through its ad delivery algorithms.
Even though Facebook intends to create a separate entity in Switzerland to handle everything related to Libra, which in theory means it should be bound only by Swiss laws, the U.S. government can still go after Facebook’s core advertising business and social media platform at home. The U.S. feds could make Facebook pay even bigger fines for actions it deems illegal, or by creating new privacy-friendly laws that could severely cripple Facebook’s advertising business model.
Facebook has yet to respond to the letter.