Members of the United States Congress House Financial Services Committee have called on Facebook to suspend its Libra cryptocurrency project. Part of their concerns centre on the perceived “national security” threats of the project being run from Geneva.
Committee chairwoman Maxine Waters is one of five senior committee members demanding a “moratorium on any movement forward on Libraexternal link” as US lawmakers prepare for a hearing on the projectexternal link on July 17.
Facebook set up the Libra Association in Geneva in May and released some details of how the digital payments system would work the following month. It plans to issue a Libra cryptocurrency backed by a basket of central bank-issued currencies to allow users to make payments as easily as sending text messages.
But the move has caused concern in many countries, including the US, where it has come under the scrutiny of Congress.
“It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar. This raises serious privacy, trading, national security, and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers, and the broader global economy,” reads the committee letter, which was sent to Facebook bosses on Tuesday.
“Failure to cease implementation before we can [examine the implications in a committee hearing], risks a new Swiss-based financial system that is too big to fail.” The expression “too big to fail” is usually applied to large banks that would disrupt national economies if they collapse.
Launching next year
The letter indicates that a big concern for the committee is that the cryptocurrency would be controlled outside of the US. Facebook plans to launch Libra next year, at which point the Geneva-based Libra Associationexternal link plans to take control of the stockpile of central bank money that would control the value of the cryptocurrency.
The association plans to have 100 members by then, who would also be responsible for rubber-stamping transactions carried out with Libra. This body currently comprises of 28 “Founding Members”. These entities range from Visa, eBay, Spotify, Uber and Vodafone to venture capitalists, blockchain companies and NGOs such as Mercy Corps.
Switzerland, and particularly Geneva, has broadly welcomed the arrival of the Libra Association as a sign that the “Crypto Nation” is firmly established as a global blockchain hub. It is believed the choice of location may also have been influenced by Facebook’s Libra project head Davis Marcus having grown up and started his professional career in Geneva.
In a statement emailed to swissinfo.ch, Facebook said that it “looks forward to working with lawmakers as this process moves forward, including answering their questions at the upcoming House Financial Services and Senate Banking Committee hearings”.
*Maxine Waters was incorrectly referred to as Maxine Walters in an earlier version of this article.