US Senators Brian Schatz (D-HI) and Sherrod Brown (D-OH) have sent letters to payment companies Stripe, MasterCard and Visa, urging them to “proceed with caution” over their membership in the Libra Association, the Facebook-led consortium behind the planned digital currency, Libra.
Citing “key questions” about the risks posed by the Libra project to consumers, financial institutions and the global financial system, the letter calls on the companies to “carefully consider how [they] will manage the risks before proceeding” until Facebook makes it clear it is taking the project’s risks “seriously.”
MasterCard, Visa and Stripe were among the companies cited in a recent WSJ report as harboring doubts about the project, which has been the subject of unprecedented backlash since its announcement in June, with criticism from lawmakers worldwide ramping up throughout the course of the past few weeks.
Bankers, politicians and economic pundits the world over have reeled at the ambitions of the Libra project, a digital currency issued from a Swiss bank account and pegged to a basket of foreign currencies. They have variously described it as typical Silicon Valley overreach, a threat to state-sanctioned “fiat” currencies, and a potential breach of anti-money-laundering and terrorist financing provisions. One of the prospective members of the association, PayPal, has already dropped out of the project.
In their letters, the Senators suggested that Libra Association member companies had not been fully briefed on the potential risks posed by the project, and that Facebook, when pushed for answers, “deflects the responsibility of addressing these risks on to potential Libra association members.”
“You should be concerned that any weaknesses in Facebook’s risk management systems will become weaknesses in your systems that you may not be able to effectively mitigate,” wrote the congressmen. Alluding to a recent New York Times report on the proliferation of child sex abuse on social media platforms, the Senators added that the companies should be “extremely cautious about moving ahead with a project that will forseeably fuel the growth in global criminal activity.”
“Facebook appears to want the benefits of engaging in financial activities without the responsibility of being regulated as a financial services company,” they said.
Sen. Brown made similar comments in a Senate hearing on the project earlier this year, saying Facebook was “playing like a toddler who's gotten his hands on a book of matches, burned down the house over and over, and called every arson a learning experience.”