Fed, Congress Promise Scrutiny of Facebook Cryptocurrency
June 19 2019 - 7:42PM
Dow Jones News
By Dave Michaels
WASHINGTON -- Facebook Inc. began to learn how Washington will
check its push into digital currencies, with leaders of the Federal
Reserve and an influential Senate committee saying they will
scrutinize its rollout.
Fed Chairman Jerome Powell on Wednesday said the central bank
has "significant input into the payments system," the e-commerce
network that Facebook is seeking to disrupt with its Libra
currency. Banking regulators also can enforce anti-money-laundering
controls on such businesses, Mr. Powell told reporters.
"We will wind up having quite high expectations from a sort of
safety and soundness and regulatory standpoint if they do decide to
go forward with something," Mr. Powell said at a news conference
after the Fed held its benchmark interest rate steady.
Facebook this week unveiled its plans for the Libra "stablecoin"
-- a digital asset backed by a basket of global currencies or other
investments. The digital money is supposed to make it easier to
make online payments, particularly for people around the world who
lack bank accounts, Facebook said.
Mr. Powell said Facebook has met with the Fed about the project,
along with regulators around the world. "It's something we're
looking at," he said. Mr. Powell said Fed officials aren't worried
that Libra will displace national currencies or make it harder to
implement monetary policy. "I think we're a long way from that," he
added.
A Facebook spokeswoman declined to comment.
Cryptocurrencies have become a puzzle for global regulators,
with agencies grappling with rules written decades ago to oversee
market intermediaries that don't exist in cryptocurrency networks.
In the U.S., the Securities and Exchange Commission has asserted
authority over cryptocurrencies it sees as securities, or
investments made with the expectation of profits. Other agencies
are charged with enforcing anti-money-laundering laws that apply to
money transactions.
Facebook's Libra would be run at a new subsidiary, called
Calibra, that would be governed along with external partners,
including companies such as Mastercard Inc. and PayPal Holdings
Inc. and tech giants Uber Technologies Inc. and Spotify Technology
SA.. It would operate using a crypto wallet, or digital app that
can be used to pay send money and make payments, using the
cryptocurrency.
Facebook separately is expected to face critics on Capitol Hill,
where the Senate Banking Committee plans to hold a hearing next
month to probe its venture. Sen. Mike Crapo (R., Idaho) announced
that his panel will examine the project on July 16.
The committee's quick move to stage a hearing indicates "there
will be significant political opposition" to Facebook's involvement
with Libra, Cowen & Co. analyst Jaret Seiberg said. "We believe
the initial hearing is critical for Facebook and its digital
currency expectations," he added.
A hearing is also likely in the House, where House Financial
Services Committee Chairwoman Maxine Waters (D., Calif.) has asked
Facebook to put Libra on hold until regulators and lawmakers decide
how to oversee it.
"Regulators should see this as a wake-up call to get serious
about the privacy and national security concerns, cybersecurity
risks, and trading risks that are posed by cryptocurrencies," Ms.
Waters said.
Operators of stablecoin networks are generally regulated by
state money-transmission laws and federal requirements to guard
against money laundering, said Brian Brooks, chief legal officer of
Coinbase Inc., which boasts 30 million customer accounts and
enables people to trade an array of cryptocurrencies.
Speaking at an event in Washington, Mr. Brooks said banking
regulators could have some sway over how Facebook or its partners
manage the basket of assets that back Libra's value.
Mr. Brooks said Washington could permit a wave of innovation
that makes finance cheaper and more accessible for consumers if it
applies the same hands-off approach to crypto assets that it did to
the internet in the 1990s.
"We have to bring regulation which largely was written between
1900 and 1950 in line with technology that was largely written in
2009," said Mr. Brooks, a former general counsel of Fannie Mae. "We
are at a decision point on this asset. There could be great things
ahead, or there could be nothing ahead."
Officials in France and the U.K. also have said they are looking
at Facebook's cryptocurrency plans. "Anything that works in this
world, will become instantly systemic and will have to be subject
to the highest standards of regulations," Bank of England Gov. Mark
Carney said at a central-bank conference in Portugal.
Write to Dave Michaels at dave.michaels@wsj.com
(END) Dow Jones Newswires
June 19, 2019 19:27 ET (23:27 GMT)
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