Facebook should not be prohibited from proceeding with the creation of Libra if they comply with applicable regulatory frameworks and continue to engage with regulators to establish “clear rules of the road” moving forward.
Another Senator present at the July 16 Senate hearing was Mike Crapo, Chair of the US Senate Committee on Banking, Housing, and Urban Affairs itself. Crapo has also served on a number of other committees during his tenure in the Senate: Budget, Finance, Judiciary, and Indian Affairs. In contrast to his Democratic colleague and fellow committee member Sherrod Brown, Senator Crapo argues less antagonistically toward David Marcus. Rather than emphasizing a mistrust of Facebook due to its past transgressions, Crapo takes an action-orientated stance and expresses concern for the privacy and data rights of consumers.
Senator Crapo argues that the creation of Libra is an event that should spur Congress to establish the “rules of the road” for digital currencies in a manner that respects the rights of consumers. Crapo leans heavily into the claim that “Congress needs to act to give individuals real control over data” because of the vast amounts of user data generated by both social media and financial activity. According to Crapo, if Facebook and the Libra Association are permitted to proceed, they must do so with an understanding of the following three premises:
- Individuals are the rightful owners of their data;
- Individuals should be granted privacy rights which must in turn be protected through avenues of informed consent;
- Individuals are entitled to know what data is being gathered and how it is being used.
Senator Crapo’s stance shares commonalities with the view of Benoit Coeure, Executive Board Member of the ECB. In the past, Coeure worked as the Deputy Director General of the French Treasury, and he has held numerous other posts at the French Treasury between 1997 and 2011. On September 17, 2019, Coeure delivered a speech called “Digital challenges to the international monetary and financial system” at the Central Bank of Luxembourg-Toulouse School of Economics conference. In short, he sees the potential of digital currencies to transform the market, so long as the private actors creating these currencies “conform to international anti-money laundering and know-your-customer regulation.”
Unlike his ECB colleague Yves Mersch, Coeure is much less suspicious of digital currencies, and speaks of the need to meet the changing demands and expectations of consumers in the digital era. Coeure is open to the potential benefits of “stablecoins” in particular, and argues that the possibility of “something special about these currencies that could allow them to compete more effectively with the US dollar” is worth entertaining, but only with the understanding that proper regulatory frameworks must be enforced. For as Coeure states, “regulatory hurdles will be set very high for these initiatives to get off the ground.”
As Coeure’s speech concludes, his view again diverges from his colleague Yves Mersch. Coeure reminds his audience that rather than disallowing the creation of private currencies, one course of action available to policy makers is to ensure “that private systems will thrive in a space that respects our common global policy priorities.” For Coeure, such an environment will allow “market-based and public payment systems [to] effectively complement each other,” therefore addressing the changing demands of modern consumers and the necessity to comply with established and emerging financial regulation.
Today, more than four months after Facebook’s Libra announcement, the fate of the digital currency remains uncertain. Reactions from the general public to Facebook’s plan have been mixed at best, trending from skeptical unease to incredulous outrage. Additionally, the combination of regulatory uncertainty and heightened scrutiny from policy makers has caused a number of Facebook’s prominent corporate partners to revoke their initial support for the initiative, canceling plans to join the Libra Association. The Verge reports that as of October 11, PayPal, Visa, Mastercard, eBay, and Stripe have all officially exited the nascent corporate coalition, giving rise to increased skepticism of Facebook’s capacity to act as a successful shepherd of Libra from day one.
Despite the lonely road ahead, Congressional hearings are set to continue, and Facebook CEO Mark Zuckerberg is scheduled to testify before the House Financial Services Committee on October 23, 2019. While the Facebook founder’s strategy for the upcoming hearing remains unknown, if recent attrition at the Libra Association is any indication, Zuckerberg would do well to speak directly to his allies in the private sphere and make the case for Facebook as a competent and responsible partner, even if government officials and central bankers are unlikely to agree.
Sources for this post
- US Senate – Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations
- Chair Mike Crapo’s Statement at Facebook Hearing
- ECB Board Member Benoit Coeure – Digital challenges to the international monetary and financial system
- The Verge – Facebook’s Libra Association crumbling as Visa, MasterCard, Stripe, and others exit