Facebook’s cryptocurrency under fire from the Feds

Facebook’s plans to build a digital currency called Libra may be put on hold after US Federal Reserve chairman Jerome Powell on Wednesday said “serious concerns” would need to be addressed before launching.

In June Facebook announced that Libra would launch next year, in a move it has billed as “potentially transformative” for the global finance sector.

The social media giant said it plans to make Libra available to its 2.4 billion monthly users in the first half of 2020.

READ MORE: Facebook reveals its Libra cryptocurrency offering free financial services to its 2.4bn users

Unlike cryptocurrency rivals such as Bitcoin, Libra will be backed by real money, which it is raising by reaching out to high profile tech and financial backers.

To date 28 high profile companies including Mastercard, Visa, Vodaphone, Paypal, Ebay, Spotify and Uber have signed up to be founding members of the Libra Association, requiring each of them to invest a minimum of $10 million (£8 million).

Those plans may need re-addressing after policymakers across the globe have expressed serious concerns for the currency, now echoed by Powell.

“Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability,” Powell said during his semi-annual testimony on monetary policy before the U.S. House of Representatives Financial Services Committee.

“I don’t think the project can go forward” without addressing those concerns, he added later in the hearing.

Powell said that any regulatory review of the recently announced project should be “patient and careful,” while acknowledging digital currencies do not fit cleanly within existing rules.

“It’s something that doesn’t fit neatly or easily within our regulatory scheme but it does have potentially systemic scale,” he said. “It needs a careful look, so I strongly believe we all need to be taking our time with this.”

“We are very much aligned with the chairman around the need for public discourse on this,” said Facebook spokeswoman Elka Looks speaking to Reuters in an email.

“This is why we along with the 27 other Founding Members of the Libra Association made this announcement so far in advance, so that we could engage in constructive discourse on this and get feedback.”

Despite Powell’s concerns, it is unclear how the Fed could stop Libra’s launch going ahead, due to the difficult nature of regulating digital currencies that has developed ahead of many countries’ banking systems’ policies for dealing in it.

Facebook officials are scheduled to testify about the project later this month in Congress, where senior lawmakers have raised data privacy and other concerns.

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