On June 18, 2019, Facebook unveiled plans for a digital currency called Libra, which the company hopes will "transform the global economy" by offering an alternative to cash, bank transfers, and credit card transactions. The new cryptocurrency will be governed by the Libra Association, a nonprofit, Switzerland-based organization that currently has 28 partners. Facebook also announced the creation of a digital wallet known as Calibra, for use in saving, spending and transmitting the Libra currency.
The Libra/Calibra project has triggered bipartisan anxiety, culminating in two recent congressional hearings – a July 16 Senate Banking, Housing and Urban Affairs Committee hearing and a July 17 House Financial Services Committee hearing. During these hearings, lawmakers repeatedly raised questions about why consumers should put their trust – and cash – in the Facebook-led cryptocurrency given the social media giant's spate of privacy and election-meddling troubles. In addition, members of the House Financial Services Committee sent a letter requesting that Facebook halt development of Libra and Calibra until both Congress and regulators have time to investigate the possible risks it poses to the global financial system.
A company executive testified that the Libra Association will be completely separate from Facebook and governed by a consortium of both companies and nonprofits, but that Facebook will have a seat at the table. The executive added that while the Libra Association was registered in Switzerland, Libra will be regulated by and registered with the Financial Crimes Enforcement Network (FinCEN), which oversees anti-money laundering and sanctions violations. Reports indicate that Calibra has already registered with FinCEN and is in the process of lining up state money transmitter licenses.
Other US officials have also expressed concern about Libra in recent weeks, including leaders of the Treasury and Federal Reserve. On July 10, Federal Reserve Chairman Jerome Powell told lawmakers that the Libra project raises "deep, important, serious questions" about money laundering, privacy, consumer protection and financial stability. On July 15th, US Treasury Secretary Steven Mnuchin stated that the administration is not yet comfortable with Libra and that they have "got a lot of work to do to convince us to get to that place."
For more details about the announcement of Libra and Calibra, see our coverage here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
