Facebook’s plan to create Libra, a cryptocurrency, triggers Washington fury – Daily News

on Jun19
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Facebook rules daily communication for more than 2 billion people around the world. Now it wants its own currency, too.

The social network unveiled an ambitious plan Tuesday to create a new digital currency similar to Bitcoin for global use, one that could drive more e-commerce on its services and boost ads on its platforms.

But the effort, which Facebook is launching with partners including PayPal, Uber, Spotify, Visa and Mastercard, could also complicate matters for the beleaguered social network. Facebook is currently under federal investigation over its privacy practices, and along with other technology giants also faces a new antitrust probe in Congress.

David Marcus, the head of Facebook’s cryptocurrency operation, said in a tweet Tuesday that Facebook is creating a separate subsidiary, Calibra, to handle the new currency. He said feedback from customers has been “loud and clear” about keeping social media and financial data separate.

The digital currency, called Libra, is scheduled to launch in the next six to 12 months. Facebook is taking the lead on building Libra and its underlying technology; its more than two dozen partners will help fund, build and govern the system. Facebook hopes to raise as much as $1 billion from existing and future partners to support the effort.

Libra will be different, Facebook says, in part because its value will be pegged to a basket of established currencies, such as the U.S. dollar, the euro, the yen and others. Each purchase of Libra will be backed by a reserve fund of equal value held in real-world currencies to stabilize Libra’s value.

The cryptocurrency plan is facing pushback from angry U.S. lawmakers.

Los Angeles Rep. Maxine Waters, chairwoman of the House Financial Services Committee, urged the company to halt development of the token until Congress and regulators can examine it. Other lawmakers demanded hearings and questioned whether the coin, called Libra, will have appropriate oversight.

The scrutiny shows the risks for a corporate titan like Facebook, which already faces deep skepticism in Washington, of moving into a controversial industry like cryptocurrencies. Still reeling from allegations that it failed to protect users’ data, the Silicon Valley power is now entering a space that is known for its lax regulation and resistance to oversight.

“Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data,” Waters, a Democrat, said in a statement. “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.”

Rep. Patrick McHenry, the top Republican on the financial services panel, wants Waters to hold a hearing. He said Congress needs to go “beyond the rumors and speculations and provide a forum to assess this project and its potential unprecedented impact on the global financial system.”

Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, made a point that was common in lawmakers’ statements: regulators must make sure Facebook users are protected. But like others, he didn’t identify a particular watchdog, perhaps signaling uncertainty over who might police Libra.

The Securities and Exchange Commission typically steps in when companies raise money by selling ownership stakes in an asset likes shares. The Commodity Futures Trading Commission has oversight of trading in futures and derivatives but not the underlying digital tokens. States and banking regulators such as the Federal Reserve could also potentially have a role in regulating Libra.

The Associated Press and Bloomberg contributed to this report.

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