Facebook currency project 'cannot go forward' until concerns addressed

10 Jul, 2019

Policymakers globally have already expressed serious concerns about the cryptocurrency, but the strong comments from the United State's most powerful financial regulator further underscores the growing regulatory hurdles for the project.

"Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability," Powell told the US House of Representatives Financial Services Committee, adding later in the morning "I don't think the project can go forward" without addressing those concerns.

Powell said any regulatory review of the recently announced project should be "patient and careful," while acknowledging digital currencies do not neatly fit within existing rules.

"It's something that doesn't fit neatly or easily within our regulatory scheme but it does have potentially systemic scale," he said.

"It needs a careful look, so I strongly believe we all need to be taking our time with this."

It is unclear exactly how the Fed could slow the project if it wanted, given the murky regulatory treatment of digital currencies, but Powell's perspective looms large as the head of one the globe's most powerful regulators.

Facebook officials are scheduled to testify before Congress on the project later this month, where senior lawmakers have raised data privacy and other concerns.

Powell said the Fed has established a working group to follow the project and is coordinating with other central banks across the globe.

He also expects that the US Financial Stability Oversight Council, a panel of regulators charged with identifying broad risks to the financial system, will also review the idea.

Powell noted that he supports financial innovation as long as appropriate risks are identified, but he said the massive platform enjoyed by Facebook immediately sets Libra apart from other digital currency projects.

"Facebook has a couple billion-plus users, so I think you have for the first time the possibility of very broad adoption," he said.

Any problems that could emerge through Libra "would arise to systemically important levels just because of the mere size of Facebook."

Copyright Reuters, 2019

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