The cryptocurrency market got a boost last month when Facebook released a white paper on Libra, its digital token it plans to roll out next year.
While the social media giant gave legitimacy to a market that is in need of some, the fact that it is Facebook could do more harm than good.
Ever since the Cambridge Analytica scandal broke in March of 2018, Facebook has been on the radar of regulators, lawmakers, and advocacy groups. The social media giant was already reeling from criticism that it enabled the spread of fake and inflammatory news in the lead up to the 2016 Presidential election when the Cambridge Analytica scandal emerged. The now defunct political consulting firm was able to access data on more than 87 million Facebook users without their consent. That sparked a series of investigation culminating with Facebook Chief Executive Mark Zuckerberg appearing before Congress.
Since then critics continue to slam the social media giant, arguing it is damaging society and hasn't done enough to protect users privacy and clean up its news feed. Fake news and bots are still common on Facebook and other social media properties owned by the company. Those same critics are also concerned about the impact a Facebook-owned digital currency will have on society, prompting some law markets to cry foul.
Earlier this month a group of five Democrat lawmakers called on Facebook to halt development of Libra and its digital wallet Calibra. In the open letter to Zuckerberg, Chief Operating Officer Sherly Sandberg and David Marcus, chief executive of its Calibra wallet the politicians said Facebook’s crypto efforts raise serious concerns about privacy, trading and national security.
"We write to request that Facebook and its partners immediately agree to a moratorium on any movement forward on Libra- its proposed cryptocurrency and Calibra-its proposed digital wallet," the lawmakers led by Maxine Walters, chair of the House Financial Services Committee wrote. "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."
Although Libra will be operated by the Libra Association, a nonprofit group based in Geneva, Switzerland, it does count a lot of for-profit companies as members, including Mastercard, PayPal, Uber, and Visa. The aim of the group is to make sure Libra is widely available and is secure. Facebook stands to make money off of the digital wallet Calibra is developing and will be used to store and exchange the cryptocurrency.
The lawmakers, who said Facebook provided little in terms of details in the white paper, want the company to suspend production while they look into the product and its implications. "Because Facebook is already in the hands of over a quarter of the world's population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action," wrote the Democrats. "During this moratorium, we intend to hold public hearings on the risks and benefits of cryptocurrency-based activities and explore legislative solutions. Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail."
It is those public hearings that cryptocurrency players are worried about. After all, not everyone in Congress understands how cryptocurrency works nor are they fans of Facebook. That could end up shining a negative light on Libra, hurting the efforts to legitimize cryptocurrency.
It’s the reason the Blockchain Association has offered to brief members of the committees that will hold hearings on Libra. Still, Kristin Smith, director of external affairs at the Blockchain Association told Roll Call it's not likely Facebook will get a pass during congressional hearings. “Congress thinks Facebook has lost the trust of some of the public,” Smith said in the report. “It’s probably pretty good politics to beat up on them right now.”