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Cryptocurrency

Facebook defends Libra after US lawmakers call for pause

Democrats want strict oversight of cryptocurrency, warn of global finance risk

Facebook's blockchain head defends Libra after U.S. lawmakers ask the company to pause the cryptocurrency project.   © Reuters

PALO ALTO, U.S.-- Facebook and U.S. lawmakers are at odds over the potential dangers of the social media giant's Libra cryptocurrency project, two weeks after its announcement.

On Tuesday, the California-based company received a letter from Congresswoman Maxine Waters, chair of the House Financial Services Committee, and four House Democrats asking that the company pause the project to give regulators more time to assess Libra's potential risks.

"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," the lawmakers wrote in the letter.

They also warned that Libra and other cryptocurrencies could jeopardize the global financial system.

"If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability," the letter said.

In response to the letter and widespread skepticism about Libra, David Marcus, head of Facebook's blockchain group, reiterated in a Wednesday blog post that the company will not control the currency.

Facebook will only be one of over a hundred members of the Libra Association at its launch, he wrote, and will not have any special rights or privileges.

"Bottom line: You won't have to trust Facebook to get the benefit of Libra," Marcus wrote, in response to a question over whether Facebook can be trusted to manage financial services.

He also explained that Facebook's wallet for Libra, called Calibra, will be only one of many digital wallets built on the platform, and that the social media giant will not see financial data from Calibra.

There has been widespread distrust of Facebook and criticism of its mishandling of user data since Cambridge Analytica's interference in the 2016 presidential election was revealed. Many in Congress are wary of Facebook having access to sensitive data, such as people's finances, through Libra.

The Senate Banking Committee will hold a hearing about Libra on July 16, while the House Financial Services Committee will hold its first hearing on the cryptocurrency on July 17.

Marcus will be testifying at both hearings, Facebook has confirmed.

"We look forward to working with lawmakers as this process moves forward, including answering their questions at the upcoming House Financial Services and Senate Banking Committee hearings," said a Facebook spokesperson.

Marcus also touched upon other issues in his blog post, including the feasibility of Libra addressing the issue of underbanking, which Facebook has said is the project's goal.

But it might not be enough to ease the concerns of lawmakers and observers. Facebook's white paper and supporting documentation regarding Libra issued two weeks ago was immediately met with skepticism and pushback from around the world.

"Libra might lead to major financial instability for emerging economies, especially in the Asian region which is mostly more open to global financial flows than Africa or Latin America," wrote Stephen Grenville, a former deputy governor at the Reserve Bank of Australia, in an op-ed for the Nikkei Asian Review.

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