Federal Reserve Chairman Jerome Powell has had more time to think about Facebook’s Libra project and is now singing a much different tune.
On Wednesday, Powell testified before the House Financial Services Committee as part of a semiannual report to Congress. The chairman fielded several questions about Facebook’s cryptocurrency plans, a grilling led by Rep. Maxine Waters, chairwoman of the Committee and a staunch critic of the Libra project.
But unlike earlier comments in which Powell expressed that the Federal Reserve and other central banks weren’t “too concerned” with cryptocurrencies in general, including Libra, the Fed Chairman today signified a sharp turn in its stance on Facebook’s project.
“While the project’s sponsors hold out the possibility of public benefits, including improved financial access for consumers,” he said, “Libra raises many serious concerns regarding privacy, money laundering, consumer protection, and financial stability.”
What’s more, Chairman Powell later said that, in his view, Facebook’s Libra “cannot go forward” without broadly satisfying these various concerns.
Powell intimated that the Federal Reserve is now taking a very close look at Libra and has developed a working group within the Fed to explicitly focus on Facebook’s plans. “We are coordinating with our colleagues in the government in the United States, with other regulatory agencies, [and the] Treasury; we’re coordinating with central banks and governments around the world to look into this,” Powell said.
Facebook has been on the receiving end of pointed scrutiny ever since first announcing its plans to launch a cryptocurrency run by a consortium of Silicon Valley titans. Just last week, Waters once again publicly called on Facebook to halt its plans and “immediately agree to a moratorium on any movement forward on Libra.” According to Waters, Facebook’s Libra intends to establish a parallel banking and monetary policy system to rival the U.S. dollar, which creates dire “national security” concerns to the United States and could adversely affect the global economy.
Chairman Powell seemingly agreed with Waters’s concerns, though he admitted that Facebook’s project could potentially carry benefits for consumers in terms of broader financial access. “I’ll just add that the process of addressing these concerns should be a patient and careful one and not a sprint to implementation,” Powell said in today’s testimony.
Powell also clarified that it is precisely the potential scale of Facebook’s Libra that is of concern to the Fed, and one which cannot necessarily be broadly applied to other cryptocurrencies, such as Bitcoin. “It’s really due to the possibility of quite broad adoption,” he said. “Facebook has a couple billion plus users, so you have for the first time the possibility of a very broad adoption.”
“If there were problems there associated with money laundering, terrorist financing, any of the things that we’re all focused on, including the company, they would immediately rise to systematically important levels, just because of the mere size of Facebook’s network.”