The US Congress has asked Facebook to pause development on its Libra cryptocurrency until lawmakers have had more time to investigate the ramifications of the company’s actions.
In a letter from the Democratic heads of the house committee on financial services and its subcommittees, the legislators ask the company to “immediately cease implementation plans”.
“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 letter says.
“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.”
Although Facebook has spearheaded the development of Libra, and will be creating the first consumer “wallet” for the currency through its Calibra subsidiary, the actual development of the service will be handed over to the Libra Association, an arms-length organisation headquartered in Geneva, Switzerland.
The association is run nominally by a consortium of Libra’s initial backers, including Visa, Lyft, Vodafone and Coinbase, of which Facebook is just one partner among many. But in practice, the social network retains a significant amount of control, even paying the salaries of the body’s “roughly half-dozen employees”, according to the industry news site the Information.
The duration of the moratorium on development need not be that long: the congressional committee is convening a full hearing examining Libra on 17 July.
But the letter, which was delivered to Mark Zuckerberg, Sheryl Sandberg, and Libra’s chief executive, David Marcus, suggests the company is in for a bumpy ride when the hearing takes place.
“The scant information provided about the intent, roles, potential use, and security of the Libra and Calibra exposes the massive scale of the risks and the lack of clear regulatory protections,” it says. “If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger US and global financial stability.
“These risks are even more glaring in light of Facebook’s troubled past, where it did not always keep its users’ information safe. For example, Cambridge Analytica, a political consulting firm hired by the 2016 Trump campaign, had access to more than 50 million Facebook users’ private data which it used to influence voting behaviour.”
Maxine Waters, the chair of the house committee on financial services, has been one of the leading congressional Democrats calling for the impeachment of Donald Trump. “Ninety per cent of the calls and mail I’m receiving in my office support impeachment of Trump and so do I,” she wrote in April.