It took mere hours for lawmakers across the globe to raise red flags after Facebook announced plans for its Libra global cryptocurrency – particularly given the company’s chequered history with information privacy.

Facebook executives will stand before the US Senate Banking Committee on 16 July to answer questions of data security around its proposed Libra cryptocurrency, Reuters reports.

Libra, the incoming cryptocurrency designed by Facebook to disrupt online finance, was announced yesterday and met with mixed reactions. While some are dubbing Libra as a watershed moment for both Facebook and cryptocurrency, others are worried that the new initiative will inherit similar privacy issues that continue to plague the company.

“Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy,” says Democratic Senator Sherrod Brown of Ohio in a statement. “We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight. I’m calling on our financial watchdogs to scrutinise this closely to ensure users are protected.”

Related: Facebook wants to own your money, too – Libra cryptocurrency and digital wallets explained »

The Libra cryptocurrency won’t quite be running “out of a Swiss bank account”. Facebook is also launching the eponymous not-for-profit subsidiary, The Libra Association, in partnership with 27 other founding members including Uber, Spotify, Visa and Mastercard. Each member has contributed at least US$10 million to The Libra Association, which will form the asset pool to back the cryptocurrency. Facebook says it hopes to have 100 members as part of the NFP by Libra’s 2020 launch.

According to David Marcus, cofounder of Libra “Facebook will have no special rights, and will be one member among many of the Libra Association” upon the launch.

Other US government representatives aren’t fans of the Libra project either. Shortly after its announcement, Maxine Waters, chairwoman of the United States House of Representatives’ Financial Services Committee, called for a “moratorium” on the initiative.

“Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action,” Waters urged.

Related: The Facebook-Cambridge Analytica saga: illegal data gathering, campaign manipulation and more »

As Business Insider notes, this isn’t the first time the US Senate Banking Committee has expressed concerns over a Facebook-made cryptocurrency. After reports from the Wall Street Journal in May that Facebook had a blockchain-based payments solution in the works, Senator Brown and Republican Senator Mike Crapo of Idaho, chairman of the Committee, cosigned a letter to Mark Zuckerberg, Facebook CEO, seeking more information on Facebook’s intentions.

“What privacy and consumer protections would users have under the new payment system?” the letter reads.

Despite functionality being built into existing Facebook apps including Whatsapp and Messenger, according to Facebook both the Libra cryptocurrency and its Calibra digital wallet will share no account or financial data with user’s personal accounts.

In addition, Facebook won’t hoard access to Libra. In a blogpost, Marcus, who will also lead the Calibra project, says users will have “many wallets to choose from” to utilise Libra – from different companies.

Russia says no thanks

In an interview with local radio station Kommersant FM, Anatoly Aksakov, Chairman of the Russian State Duma Committee on Financial Market, said Russia would not legalise the use of Libra.

“With regard to the use of Facebook cryptocurrency as a payment instrument in Russia at this stage – my opinion is that in our country it will be banned,” said Aksakov.*

“In theory, we should talk about the possibility of organising all kinds of exchanges, trading platforms and sales of such currencies. We, I believe, will limit or prohibit the creation of such sites. Those who want to acquire these tools using foreign legislation can do it at their own risk.”

Libra may not even be a real cryptocurrency

Several experts have piped up since Facebook released Libra’s accompanying white paper, typical for new cryptocurrency launches. “Except that Libra isn’t really a cryptocurrency,” writes MoneyWeek commentator Dominic Frisby.

According to Frisby, the white paper is full of quintessential cryptocurrency buzz words such as ‘blockchain’, ‘decentralised’ and ‘permissionless’.

“Yet as far as I can see, Libra is not really decentralised or permissionless. And a blockchain that is not decentralised and does not carry the rewards of mining is not a blockchain. It is just a database,” writes Frisby.

Real Money reporter Kevin Curran seems to agree. Curran told The Street, “I don’t think that’s [Libra] necessarily what you would call a pure cryptocurrency.”

The original idea for cryptocurrencies, Curran explains, was to create a means of trade agnostic to corporate or government interests, “and this is for the time being completely centralised under Facebook’s umbrella for 2019, and then divided up among 27 and then potentially a 100 different corporations in the long term,” he continued.

“That doesn’t sound like it’s overly centralised in the long term, but it’s still corporate. It’s still pegged to existing currencies, so it has governmental interest in it and it just kind of defeats what the overall purpose of the original white papers defending Bitcoin or Ethereum or different fully decentralised currencies had in mind.”

*statements made in Russian were translated through Google Translate

 

Further Reading:

• Facebook wants to own your money, too – Libra cryptocurrency and digital wallets explained »
• Facebook head of brand gives her top three tips for building brand in the digital age »
• The blockchain blues – how forced transparency will transform the industry »
• Sydney blockchain company launches cryptocurrency loyalty program »
• The inevitable takeover of cryptocurrencies – if you can’t beat them… »

 

 

 

Image credit:Sophie Smith