By: Jessiya Joseph
Facebook is the world’s largest social network that also owns photo app Instagram, messaging service WhatsApp, and virtual reality company Oculus. In June 2019, the House antitrust committee said it was launching an investigation into Facebook. The Federal Trade Commission and the Department of Justice are both reportedly investigating Facebook over antitrust concerns. 47 Attorney Generals are now investigating Facebook’s potential anticompetitive conduct to determine whether Facebook’s actions subdued competition and put users at risk.
Facebook proposed a new venture of creating its very own digital currency, Libra. Libra has been an important subject in U.S. congressional hearings. Lawmakers worry that Libra has the potential to disrupt the monetary system. If Libra becomes the currency for Facebook’s 2.4 billion or so users, it has the potential to become a globally significant currency.
Libra is incorporated in Switzerland. It would be what’s called in crypto markets, as stable coin. It will be a pegged currency that maintains one-to-one value with the U.S. dollar. This peg will be maintained by a company called Libra Association. It is a newly created currency governing body that includes a total of 21 members that will together drive the project.
For the first time, not a government, but a group of private companies together could hold the power that can upset global markets. Libra Association will function to maintain a reserve. For every dollar’s worth of Libra that is created, one dollar is going to be put into the reserve. Theoretically this reserve has the potential to sustain billions or even trillions of dollars, worth of currencies and short-term securities. Although, the companies are committed to work with the authorities to ensure a safe, transparent and consumer friendly implementation, it remains a concern for many governments. Needless to say, this proposal has gotten a lot of backlash from global regulators. France’s finance minister goes on to say that it is an assault on national sovereignty. Moreover, officials of other countries, including China, Germany, and Italy have experienced similar concerns.
Facebook has been criticized for the way of handling its user data before, and Libra would create a traceable record of all its users transactions. Lawmakers are skeptical about Facebook’s ability to combine user’s identity, online habits, and their spending patterns, should this proposal come into force. Facebook Executive David Marcus has presented himself once before, in the Summer Congressional Hearings of 2019, reassuring the privacy of the user identity and the spending data. Currently, Libra’s viability is still under regulatory scrutiny and is unlikely to come into force anytime soon.
The House that was already concerned about Facebook’s likely anti-competitive nature, heard Mark Zuckerberg’s prepared remarks at the Financial Services Committee Hearing, regarding its proposal to create its very own digital currency. While the hearing was supposed to be about Facebook’s push to create Libra, about half of the topics were related to its controversial political ads policy and Facebook’s record on diversity. Zuckerberg told lawmakers repeatedly that Facebook would not support launching the cryptocurrency unless it received approval from all US regulators. Indeed, Facebook is the brains behind this idea, but it is just one of the 21 partners in the Libra Association. Facebook is willing to leave the Libra Association, if the approval does not come through.
But the lawmakers continue to be skeptical about how promising Libra could be. Even Zuckerberg at one point conceded that it is a “risky project”, which did not help his situation. Other members of Congress remain skeptical solely because this project is in affiliation with Facebook, questioning his very credibility, honesty, and motive behind Libra. Moreover, the members of Congress seemed to also have an issue with Libra’s Association’s place of incorporation being Switzerland and not the U.S. They would probably be little more assured if it incorporated in the U.S. One of the Congressional members went on to say, “Today Facebook is more like a country, than like a company.”
Zuckerberg’s testimony may still not have been enough to address the many questions lawmakers have about Libra. Near the end of the hearing, which lasted more than six hours, the committee’s ranking member Rep. Patrick Henry said he is not sure the committee members had “learned anything new here.”
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