Facebook’s new digital currency plan faces scrutiny in Congress

Facebook’s new digital currency called Libra faces intense scrutiny as the Congress begins two days of hearings on the cryptocurrency project on Tuesday, starting with the Senate Banking Committee.

The US Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell have expressed serious concerns on this project and have said that Libra could be used for illicit activity. Mnuchin also told the reporters at the White House that the Treasury Department has, “very serious concerns that Libra could be misused by money launderers and terrorist financers and that this is indeed a national security issue.”

The project by the social media tech giant which is already under severe scrutiny from the regulators and Congress over privacy and market dominance, stirred anger on Capitol Hill last month when it was unveiled with a plan to create a financial ecosystem based on digital currency. Senate and House hearings are underway and the hearing on Wednesday set by the Democratic head of the House Financial Services Committee directed Facebook to suspend the plan until Congress and regulators could review it.

Rep. Maxine Waters, D-Calif. said, “Facebook, with some two billion users around the world, is continuing its unchecked expansion and extending its reach into the lives of its users. She called Libra a new Swiss-based financial system that potentially is too big to fail and could require a taxpayer bailout”.

The Facebook executive David Marcus, who is leading the project said in his testimony which he prepared for Tuesday’s hearing by the Senate Banking Committee that Libra “is about developing a safe, secure and low-cost way for people to move money efficiently around the world. We believe that Libra can make real progress toward building a more inclusive financial infrastructure.”

A powerful financial regulator named Powell told Congress last week that Facebook’s plan “raises a lot of serious concerns, and those would include around privacy, money laundering, consumer protection, financial stability. Those are going to need to be thoroughly and publicly assessed and evaluated before this proceeds.”

Facebook’s challenges in Washington go beyond its digital currency project. Facebook later on Tuesday will be among the four big tech companies including Google, Amazon, and Apple testifying about their impact on the innovation and entrepreneurship of small to medium size companies, in front of a Judiciary subcommittee hearing.