Lawmakers in the United States have reached out to three major financial firms partnering with Facebook’s Libra project to urge them to reconsider their involvement.
Senator Sherrod Brown of Ohio and Senator Brian Schatz of Hawaii wrote to the CEOs of Stripe, Mastercard and Visa, highlighting the risks posed by the stablecoin to consumers, mainstream finance and the global financial system. Asking the firms to reconsider their support for the project, the letter also warned of risks to their own businesses from collaborating with Libra.
Facebook is currently struggling to tackle massive issues, such as privacy violations, disinformation, election interference, discrimination, and fraud, and it has not demonstrated an ability to bring those failures under control.
The lawmakers told the CEOs, “You should be concerned that any weaknesses in Facebook’s risk management systems will become weaknesses in your systems that you may not be able to effectively mitigate.”
The development comes in another tumultuous week for Facebook’s stablecoin, following the decision of PayPal to withdraw its support for the project.
To make matters worse, the Libra Association this week lost its head of product Simon Morris, just five months after he was appointed.
Despite saying he was “super-excited” to get to work in April, Morris’ LinkedIn profile shows he was out the door in August, just two months after the project was publicly announced.
Meanwhile, the Bank of England has become the latest regulator to put its stamp on Libra’s plans, after announcing new rules for crypto and stablecoin launches in the UK.
In a meeting of the central bank’s Financial Policy Committee this morning, the bank said, “Libra has the potential to become a systemically important payment system”, and as a result would be held to “the highest standards of resilience and be subject to appropriate supervisory oversight.”
The terms of engagement for innovations such as Libra must be adopted in advance of any launch. UK authorities should use their powers accordingly.
The news only compounds the challenges being faced by the project, which continue to mount as regulators worldwide take steps to mitigate the potential risks to the broader financial system.
Libra is still currently scheduled to launch globally in 2020.
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