Facebook launched the whitepaper for project Libra on June 18th, and the news sent the crypto world into a frenzy; everyone was talking about the new blockchain and payment platform. However, Facebook and many crypto enthusiasts were shocked the next day when the Senate Banking Committee announced that they would be holding a Senate hearing regarding Facebook’s new initiative. Facebook has been asked to halt all work on the project until the hearing.
NEW: The top lawmakers on the House Financial Services Committee are targeting Facebook’s new cryptocurrency, #Libra.
Chairwoman Maxine Waters says it’s another example of Facebook’s “unchecked expansion,” urges execs to testify and calls on FB to stop working on the currency. pic.twitter.com/xOklWsfLdx
— Brian Fung (@b_fung) June 18, 2019
The hearing, titled “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations”, will be held on July 16th. The hearing comes as a response to Facebook’s data security flaws that were highlighted during a previous hearing that Facebook CEO Mark Zuckerberg attended.
The banking committee had written to Facebook for answers a month ago. The committee seeks to understand the working of the new currency and if Facebook has asked for regulatory approval before the announcement or not. A Facebook representative said about the hearing:
We look forward to responding to lawmakers’questions as this process moves forward.
Elizabeth Warren, the 2020 Democratic candidate for President, also tweeted against Facebook, saying:
Facebook has too much power and a terrible track record when it comes to protecting our private information. We need to hold them accountable—not give them the chance to access even more user data. #BreakUpBigTech.
Federal Reserve Comes in Favor of Facebook
Jerome Powell, Chairman of the Federal Reserve,gave a statement saying that Facebook had approached the Federal Reserve before announcing the plans for Libra. Powell said this during a press conference which was held after the bank’s two-day policy meeting. He said:
You know, Facebook, I believe, has made quite broad rounds around the world with regulators, supervisors and lots of people to discuss their plans, and that certainly includes us, we’re a long way from that,” going on to note that “digital currencies are in their infancy.
He defended the project. However, he also said that there are a few concerns and that they would have to see what Facebook comes up with. He said they should have a sound product from a safety standpoint. He elaborated:
“You know, there are potential benefits here, there are also potential risks, particularly of a currency that could, you know, have extensive application. So, I would echo what Governor Carney said, which is that we will wind up having quite high expectations from a safety and soundness and regulatory standpoint if they do decide to go forward with something.”
Why is Libra So Important for Facebook?
Facebook has poured in a lot of resources into the project, but the company, according to the white paper, has given up on all its profits. The organization will work away from Facebook’s control, so how does Facebook benefit from the initiative? E-commerce.
Facebook has been trying to get into the e-commerce game for a long time but all it lacked was a universal payment system that could work everywhere. Now that Libra might become a reality in the future, Facebook’s dream of dominating the e-commerce market might finally realize.
Moreover, it has been speculated for quite some time that Facebook will also add payment services to the WhatsApp app, just like what WeChat is doing in China. This also creates another revenue stream for Facebook, one which it has been looking for desperately.
Even though Facebook bought WhatsApp for $19 billion and the app has more than 1.5 billion users, Facebook has still not been able to figure out how to turn WhatsApp into a profitable app. With Libra, they might just have struck gold.