Over the past two days, Federal Reserve Chair Jerome Powell has told members of both chambers of Congress that he has “many serious concerns” about Facebook’s Libra cryptocurrency. Those include issues related to privacy and money laundering, as well as the platform’s potential to destabilize monetary policy around the world, should it catch on with Facebook’s 2 billion users. It appears the president of the United States was tuning in.
Gregory Barber covers cryptocurrency, blockchain, and artificial intelligence for WIRED.
Late Thursday, President Donald Trump unleashed a three-tweet squall declaring himself “not a fan of Bitcoin and other Cryptocurrencies,” referring to the use of “Unregulated digital assets” for “drug trade and other illegal activities.” He included Libra in that category, saying the platform “will have little standing or dependability” and would fall prey to similar dependability issues. He suggested Facebook would need to acquire a banking charter to proceed with its efforts. Trump concluded with a patriotic message about the primacy of the US dollar globally, suggesting he’s not comfortable with Libra or other cryptocurrencies to become rivals.
The tweets come as Facebook undergoes scrutiny for its plans from regulators in the US and abroad. Regulators—especially those at central banks like the Fed—are concerned that Libra will operate in a void outside existing frameworks for global monetary policy. They’re grappling with what regulations would hold a private financial network, overseeing its own money supply, appropriately in check. David Marcus, the Facebook executive who will lead the company’s new financial services division, called Calibra, is scheduled to appear in back-to-back hearings in the House and Senate next week.
Facebook has distanced itself from the notion that it will itself oversee any form of monetary policy for Libra or act like a bank. While the company has spearheaded the development of the blockchain platform, it intends to cede control to an association, planned to include at least 100 other organizations by launch, and will be based in Geneva, Switzerland. That association will assume the platform’s management as well as funds used to back the Libra cryptocurrency. It would also theoretically hold responsibility for policing transactions on the platform. In a Facebook post last week, Marcus responded to concerns about illegal activities on the Libra platform, noting that it would be carefully monitored and adhere to Know-Your-Customer anti-money-laundering laws.
Separately, Facebook is developing an in-house application, also called Calibra, that will allow its own users to send payments via WhatsApp, Instagram, or a standalone app. Facebook says those transactions won’t touch the blockchain platform, unless a user sends Libra to a third-party app, and will instead be handled within Calibra. That suggests an experience far more similar to Venmo than Bitcoin, with more typical protocols for combating fraud and illegal behaviors.
Among those displeased with Trump’s anti-cryptocurrency tweets were right-wing provocateur Mike Cernovich and the social media company Gab, a popular home for alt-right personalities. Gab turned to cryptocurrency to keep itself afloat after being shut out by traditional payments companies.