By Spencer Feingold
Lawmakers on Capitol Hill are calling on Facebook to halt its plans to develop Libra, a new cryptocurrency that the social media giant unveiled earlier this week.
House Financial Services Chairwoman Maxine Waters requested Facebook agree to a moratorium on Libra's development "until Congress and regulators have the opportunity to examine these issues" and called on company heads to testify in Washington.
"Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data. It has also exposed Americans to malicious and fake accounts from bad actors, including Russian intelligence and transnational traffickers," Rep. Waters (D-Calif.) said in a statement on Tuesday. "With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users."
Libra, to be powered by blockchain technology, will be developed by Calibra, a newly formed financial subsidiary of Facebook ($FB). The said company aims to expand basic financial services to community outside of traditional banking systems — especially in developing countries where roughly 70 percent of small businesses lack access to credit and $25 billion is lost in remittance fees, according to Facebook.
The currency's digital wallet is expected to debut in 2020 across Facebook's platforms.
"They are making a play to compete against central banks, and that is an inherently destabilizing idea," Roger McNamee, the managing director of Elevation Partners and an early investor in Facebook. McNamee, who has been an outspoken critic of the platform, is also the author of "Zucked: Waking Up to the Facebook Catastrophe."
"The regulators are absolutely right to be raising alarm signals, and I think consumers should approach this with extreme caution," he added.
In early May, the Senate's banking committee sent a letter to Facebook CEO Mark Zuckerberg requesting details on the cryptocurrency platform and how the company plans to protect consumers' personal and financial information.
On Tuesday, Sen. Sherrod Brown (D-Ohio), the banking committee's ranking member, said in a statement that "Facebook is already too big and too powerful" and called on the U.S. "financial watchdogs to scrutinize this closely to ensure users are protected."
The heightened scrutiny from federal lawmakers comes as Facebook continues to face criticism for its mishandling of consumer's personal data. The Federal Trade Commission is currently investigating the platform for privacy violations related to the Cambridge Analytica scandal, which allowed personal data to be illicitly harvested from Facebook accounts by a political consulting firm. The company has already set aside $3 billion to pay expected fines.
"Given all the scrutiny Facebook has been under the last year or so and given what a bold endeavor this is, I'm sure they expected to get questions from regulators," Travis Scher, vice president of investments at the Digital Currency Group, told Cheddar on Wednesday. "I'm sure that is baked into their plans already."
Scher added, however, that Libra is a bold initiative and "is just more reason to be excited about this technology."