Facebook is getting a taste of the regulatory pushback it will encounter as it creates a new digital currency with corporate partners, reports AP.
Just hours after the social media giant unveiled early plans for the Libra cryptocurrency, French Finance Minister Bruno Le Maire insisted that only governments can issue sovereign currencies. He said Facebook must ensure that Libra will not hurt consumers or be used for illegal activities.
"We will demand guarantees that such transactions cannot be diverted, for example for financing terrorism," he said on Europe-1 radio.
Facebook unveiled its much-rumoured currency on Tuesday June 18th and said it will launch publicly early in 2020 with partners such as Uber, Visa, Mastercard and PayPal.
Libra could open online purchasing to millions of people who do not have access to bank accounts and could reduce the cost of sending money across borders. It is easy to see how attractive an alternative like Libra could be to people in countries beset with hyperinflation such as Venezuela.
But Facebook already faces scrutiny over its poor record on privacy and its dominance in social media, messaging and related businesses.
Libra poses new questions for the social network: Given that cryptocurrency is lightly regulated now, if at all, how will financial regulators oversee Facebook's plan? And just how much more personal data will this give the social media giant, anyway?
In contrast to the banking and finance sector, internet companies have been lightly regulated in recent years, and not only in the US.
Companies creating Libra are in for a "rude awakening" if they expect the same model of light regulation, said Karen Shaw Petrou, managing partner of Federal Financial Analytics in Washington.
She expects Libra will fall under US regulations adopted in the wake of the 2008 financial crisis. Which agency will oversee the venture will depend on what the currency system does, she said.
The head of the House Financial Services Committee wants Facebook to suspend plans for a new currency until Congress and regulators are able to study it more closely.
One hurdle Facebook and its partners will face is the potential for criminals to use the new cryptocurrency for money laundering and fraud, given the pseudo-anonymous nature of Libra and other digital currencies.
Facebook said it will comply with all existing financial regulations, though it has not offered many details. The company said its wallet app for using Libra will walk people through a verification process to ensure they are who they say they are.
Sarah Miller, deputy director of Open Markets Institute, which advocates against monopolies, said it was "insanity" to trust Facebook to launch a global cryptocurrency when it is already facing regulatory scrutiny around the world over data privacy.
"The FTC (Federal Trade Commission) needs to rein in Facebook before the corporation puts our financial information and currency systems at risk, too," she said.