Facebook Announces New Currency
On June 18, Facebook announced an ambitious plan to develop an alternative financial system using a global currency, backed by blockchain technology, called “Libra.” The frequently criticized social media giant expects to release Libra in 2020.
Facebook stated that a newly formed subsidiary called “Calibra” would oversee the Libra. In a press release, Facebook claims that the currency would be available to anyone with a smartphone and will eventually allow consumers to pay bills, buy groceries, and take public transit. Facebook, or Calibra, would profit from adding a small fee for every transaction.
According to reports, the Libra will be tied to government-backed funds to provide stability, unlike many other famous cryptocurrencies like Bitcoin. So far, there are more than 25 organizations that will help launch Libra, including Visa, PayPal, Uber, and Spotify.
Since the announcement, several lawmakers have expressed concern over Facebook’s ability to provide a secure and safe currency. Maxine Waters, (D-CA) chair of the House Financial Services Committee, has asked Facebook to halt development on the currency until Congress and federal regulators have had the time to look into the issue.
“With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users,” said Waters. “Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action.”
Sherrod Brown (D-OH), ranking member of the Senate Banking Committee, has also expressed concern, saying, “Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy. We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight.”
Facebook will have a difficult time assuring skeptical lawmakers and consumer groups that it has the ability to offer a new global currency that will be safe for consumers, but it will have an opportunity to do in front of the Senate Banking Committee on July 16. The Committee will hold a hearing with David Marcus, a Facebook executive overseeing the company’s blockchain efforts.