Financial Action Task Force (FATF) the intergovernmental body responsible for combating and eradicating money laundering and terrorist financing has raised its concerns regarding Libra. According to them, the release of a digital currency on this large a scale can cause hindrance in the detection of money laundering and terror financing. The reason behind these concerns is the decentralized and anonymous nature of blockchain. Illicit activities through cryptocurrency have been happening for a long time.
The task force is also concerned that stablecoins might bring mass adoption to cryptocurrencies. Although backed by fiat currencies, they might act as a tool for money laundering and terrorist financing due to the practicality in payments. Due to their stability, they might land over bitcoin and ethereum, as the top two currencies are considered as commodities for now, while stablecoins are more feasible payment tools. FATF president Xiangmin Liu stated in an interview:
If stablecoins were to become widespread, it could potentially lead to new risks regarding money laundering and terrorist financing
Libra might be the boost crypto needs for now, apart from being a stablecoin, it also promises to solve the issues of transactional costs and latencies. With the launch on this large scale and potentially billions of users in the line, the risk multiplies to a horrific amount. It also threatens the financial systems and conventional monetary systems and would bring regulatory issues due to the decentralized nature.
Congress has already requested Libra to halt its operations and has called Zuckerberg to yet another hearing titled ‘An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors.’ The notorious reputation of Facebook has elevated the risks in the minds of Congress related to cybersecurity, privacy, and other related issues. Congresswoman Maxine Waters has also asked the CEO of Calibra, David Marcus to commit to the moratorium until “Congress enacts an appropriate legal framework to ensure that Libra and Calibra will do what they claim it will do.” The congresswoman also stated her concerns in the letter to Facebook where she pointed out the events of Cambridge Analytica and how Facebook has failed to provide standard privacy. She stated:
These risks are even more glaring in light of Facebook’s troubled past, where it did not always keep its users’ information safe. For example, Cambridge Analytica, a political consulting firm hired by the 2016 Trump campaign, had access to more than 50 million Facebook users’ private data which it used to influence voting behavior.
The hearing of Mark Zuckerberg is scheduled to be on October, 23 which might clear a lot of questions in the mind of the Congress and other regulatory bodies.