Facebook called 'delusional' over Libra plan as Senators dig in

Bitcoin BTC

Bitcoin BTC

Facebook Inc. faced its latest Washington crisis Monday: Treasury Secretary Steven T. Mnuchin joined a parade of policymakers and politicians who have bashed its proposed cryptocurrency, demonstrating the hurdles the company must overcome to make the token a reality. "If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks", he wrote. "This is indeed a national security issue", he added.

The meat and veggies of the deal says: "A large platform utility may not establish, maintain, or operate a digital asset that is meant to be widely used as 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".

Facebook shares slipped 0.5% on Monday to $203.91.

Early Friday, Trump tweeted a barrage of anti-Bitcoin sentiment. Some of Trump's staunchest foes in Congress, including Rep. Maxine Waters (D-Los Angeles), have also faulted Facebook, going so far as to demand that the company halt all work on the coin.

Last week, Federal Reserve Chair Jerome Powell told Congress that Libra raises "serious concerns".

Facebook's cryptocurrency plan has finally found a place where it isn't controversial - because everybody in Washington seems to hate it.

Meanwhile, Facebook had seen the writing on the wall and try to get ahead of Mnuchin's attack by drawing attention to the comments that the head of the social network's financial services arm Calibra, will make to a congressional hearing on Tuesday.

Sen. Sherrod Brown of OH, the senior Democrat on the Senate Banking Committee, sought assurances from Facebook executive David Marcus that the plan wouldn't jeopardize the privacy of its billions of users' data.

"The Libra Association, which will manage the Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena", he said in his remarks.

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"The time between now and launch is created to be an open process and subject to regulatory oversight and review", Marcus' prepared remarks said. Indeed, his remarks kicked off the skeptical line of questioning, which focused heavily on Facebook's historical missteps in privacy rather than the specifics of the crypto project itself. Why trust it as a banker?

"With respect to Facebook's Libra and other developments in cryptocurrencies, our overriding goal is to maintain the integrity of our financial system and protect it from abuse", Mnuchin said.

That comment appeared to resonate with some USA lawmakers, who said cryptocurrency could help lower the costs of sending money and open access to capital. As money service businesses, cryptocurrency money transmitters are subject to compliance examinations, just like every other US bank. Calibra users would have to verify their identity by providing a government-issued ID, Marcus said.

According to Mnuchin, the Financial Stability Oversight Council's Working Group on Digital Assets has been established to enable all financial authorities including the SEC, CFTC, and FinCEN to work together to combat risks posed by crypto.

Since then the social media company has faced criticism from policymakers and financial watchdogs at home and overseas who fear widespread adoption of the digital currency by Facebook's 2.38 billion users could upend the financial system.

Ohio U.S. Sen. Sherrod Brown set a fiery tone at the beginning of the two-hour hearing, calling Facebook "dangerous" and unworthy of Americans' trust.

"What happens in tech is that one big company grows to control a lot of stuff, and if it's allowed to stay there for too long, it slows down the sector, " Timothy Wu, a professor of law, science and technology at Columbia Law School, has said.

Trump said last week that companies issuing cryptocurrency, including Facebook, should be subject to banking regulations.

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