Facebook's new cryptocurrency receives backlash from legislators

On Tuesday, Facebook confirmed reports that it is developing a new cryptocurrency called Libra. The corporation explained it initially plans for the service to serve as a payment transfer method for developing nations. However, the firm forecasts Libra’s use in a range of financial products, including lines of credit and loans. The company intends to roll out its digital coin in the first half of 2020.

Legislator Criticism

In its official announcement, Facebook attempted to paint Libra as a continuation of its mission to connect the world. The corporation argued its cryptocurrency would empower the 1.7 billion people who currently don’t have access to financial services. However, several high-profile politicians have pushed back against the social network’s purportedly utopian agenda.

Senator Sherrod Brown (D-Oh.), head of the Senate Banking Committee, commented that Facebook’s history of violating user privacy makes its entrance into the cryptocurrency sector worrisome. He also called for strict oversight on the platform’s “risky” new digital coin.

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Despite its interoperability with Facebook services, Libra official David Marcus said Calibra (Facebook’s name for the new cryptocurrency company) and Facebook data would not be “commingled.”

Representative Maxine Waters (D-Ca.) went even further by asking Facebook to cease development on Libra. The chair of the House Financial Services Committee wants Congress to review the project thoroughly before it goes forward. The social network told CNBC it looks forward to answering lawmaker questions about its new cryptocurrency.

A host of European lawmakers have also criticized Facebook’s new digital coin. French Finance Minister Bruno Le Maire objected to the notion of Libra becoming a “sovereign currency.” Le Maire said he wants the corporation to provide assurances that its payment system won’t be used to facilitate terrorism. Accordingly, he also asked the Group of Seven’s Central Bank Governors to prepare a report outlining the risks associated with Libra next month.

German European Parliament member Markus Ferber expressed concern that without regulation, Libra could become a “shadow bank.” Furthermore, European Data Protection Supervisor Giovanni Buttarelli offered a mixed assessment of Facebook’s big announcement. He expressed some enthusiasm for the introduction of the new financial technology but also cautioned the project requires regulatory scrutiny before launch.

Libra Details

Facebook stated that once it’s finished developing its blockchain, it will transfer control of the token to the Libra Foundation.

After that, the 28-member nonprofit consortium, which includes eBay, Lyft, Mastercard, Spotify, Uber, Visa, and Vodafone, will oversee the project. Furthermore, the organization will contribute funds to the Libra Reserve, a pool of assets that will ensure the coin’s stability.

Because real-world currencies back Libra like the U.S. dollar and the Euro, it will generate interest after being deposited into an individual account. As such, its structure will allow for an infinite generation of new coins without an energy-intensive digital mining process.

Given the corporation’s combined user base is 2.4 billion, Libra has the potential to displace Bitcoin as the world’s largest cryptocurrency.

In tandem with its token announcement, Facebook also revealed it would be launching a new digital wallet subsidiary. The aforementioned new company Calibra and its eponymous product will initially roll out on Facebook Messenger and WhatsApp. Moreover, the corporation stated Calibra accounts would be free, and funds transfers will be available for a nominal fee.

The firm plans to eventually offer a host of Libra-backed financial products through its digital wallet service.

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