The Libra cryptocurrency project should be sufficient motivation for the Federal Reserve launch a real-time payments system, a senior government official wrote Thursday.
Federal Trade Commission (FTC) commissioner Rohit Chopra wrote a letter to the Fed – the U.S. central bank – supporting the potential development of the “FedNow Service,” the potential high-speed payments system the group is now examining.
And, joining other government officials worldwide, Chopra criticized Libra, the Facebook-led cryptocurrency project first unveiled in June.
“The vague and scant details on the tech platform’s proposed shadow global central bank have sounded international alarm bells, particularly in light of Facebook’s ongoing scandals and reputation for abuse,” he wrote. “The laundry list of risks raised by the Libra project will take time to unpack and address. I share the serious concerns raised by Chairman Jerome Powell and Governor Lael Brainard.”
However, he sees getting a public sector solution to the current payments system as more important, writing:
“Regardless of Libra’s ultimate fate, the proposal’s emergence underscores the appetite for real-time payments and the urgency of intervention by the Federal Reserve.”
He sees demand for fast payments, noting the “pent-up frustration” with large bank fees and noting that “other real-time technologies” have been spreading rapidly.
It is not yet clear what FedNow could look like, nor how it would operate. The project will not go live until 2024.
Though there is no indication that FedNow will utilize blockchain at any point, two U.S. lawmakers have written to the Fed to inquire about its views toward the technology. Last month, Reps. French Hill (R-Ark.) and Bill Foster (D-Ill.) outlined a number of questions for the Fed, noting that the dollar’s global supremacy may be at risk if other nations develop a widely adopted digital fiat currency first.
The Fed plans to respond to the letter at an indeterminate future date
Libra’s co-creator says users’ social and financial data will not be linked.
Facebook’s Libra co-creator Christian Catalini, said that users’ social media information and financial data tied to the stablecoin will remain separate. The head economist at Calibra revealed that Libra plans to make profits from advertisements and by not selling private data of users.
Libra Co-creator and the head economist at Calibra Christian Catalini confirmed that users’ social media data and financial data would always remain separate. Facebook has been facing criticism from authorities all over the world as the social media giant has a lousy track record for keeping their users’ data safe.
Advertisement based model to make profits.
According to the Computer World report, The Libra co-creator said that there will be measures in place, from encryption to access control, to ensure that data does not get linked. He also added that from Facebook’s perspective, the idea is to show more ads to sell more ads that would generate revenue for them.
Facebook will not force users to use its Calibra wallet.
Catalini also revealed that Facebook does not plan on forcing Libra coin holders to use its Calibra digital wallet. The social media giant would allow competing wallets to store the cryptocurrency. Data privacy will be another metric on which Calibra will compete to win users, he added.
However, Libra is facing scrutiny from regulators all over the world. The initial plan of Facebook was to launch its cryptocurrency next year, but with so much regulatory uncertainty, it is likely that the launch of Libra might not happen as planned by the social media giant.
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Australia Is Looking to Grill Libra Even Harder
Financial regulators in Australia are looking to put more pressure on Libra.
Libra Is Getting Reamed… Again
A new report suggests that Facebook and Libra executives failed to follow proper Australian protocols. This is raising concerns with members of the Australian government, who are now looking to learn all they can before the currency is set to debut in 2020.
Facebook’s Libra has had a rocky history. The coin was first introduced back in June of 2019 to rather lackluster reception. The company claimed it was in the process of building the global cryptocurrency as a means of helping people in developing nations buy goods and services through Facebook.
Many users scowled at this idea. Following the Cambridge Analytica fiasco in 2018 and several other scandals, many didn’t fancy the idea of Facebook potentially monitoring their financial habits or gaining access to their monetary data. After all, it’s not like Facebook had been responsible with separate financial data in the past.
A new survey suggested that less than three percent of Facebook users would even consider using Libra should it ever reach fruition. Executives like Mark Zuckerberg and David Marcus – the head of Facebook’s blockchain division – have spent the last several months trying to convince the public and members of the American Congress that their intentions are noble, and that they are working hard to prevent money laundering and keep customer data safe.
But for many, these notions just aren’t flying. The Australian regulators in question cite a very “poor” meeting that occurred between them and representatives of Libra back in October. They now want to use the full extent of their powers to get the entire story on Libra – something not even the U.S. has been privy to.
Elizabeth Hampton – deputy commissioner of the Office of the Australian Information Commissioner (OAIC) – explained in a statement:
If we don’t get answers to questions from the U.S.-based team, we will then need to consider whether formal powers are exercised where available.
The Australian Securities and Investments Commission (ASIC) issued its own report regarding the dangers to not only the public, but the international financial system if Libra is not properly regulated and kept in check. The document reads:
The proposed Libra ecosystem poses many risks and threats including the proliferation of scams based on Libra via mobile apps. We also expect that we may identify more risks and threats once we have more information.
We’re Doing What We Can
Facebook explained that it will continue to work with outside governments to ensure it remains compliant with every region’s distinct laws. A statement reads:
As a member of the Libra Association, we will continue to be a part of dialogue to ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves.
FTC Commissioner Urges Federal Reserve to Launch Public Payments System and Block Libra
Rohit Chopra, Commissioner of the Federal Trade Commission (FTC), has written an open letter to Federal Reserve chairman Jerome Powell to launch their real-time payments system, FedNow, at the earliest to curb megabank monopolies and private sector abuse, November 7, 2019.
Public Sector Curbing Libra
It goes without saying that a public sector version of Libra launched by a government undertaking would be much more leniently regulated and easily integrated into the financial system.
However, by now it is clear that true innovation comes from the public sector, and governments ride on their tail to absorb the benefits. Acknowledging this scenario, Chopra urges the Federal Reserve to launch FedNow, but this is likely to take till 2023 at the earliest.
According to Chopra, the private sector has not been able to meaningfully meet the need for faster payments, and this has opened the door for projects like Libra to reinforce new standards in the payment space. Commissioner Chopra says this as though Facebook itself is not a private sector entity.
He goes on to detail Facebook’s poor track record in the realm of data management and the lack of disclosures regarding Libra. In all fairness, information regarding Libra and the consortium’s plans are scanty at best. But maybe it wouldn’t be this way if Congress actually asked Mark Zuckerberg questions about Libra, instead of hounding him about the social environment at Facebook.
Public vs Private Monopolies
Essentially, Commissioner Chopra’s argument is to stop a private payment monopoly by creating a public sector monopoly. This would, obviously, bode well with bureaucrats and any elected representative, but does it meaningfully change the end result?
A monopoly is a monopoly, but the government has always believed they are more capable of running things despite historical evidence standing against them. Of course, for the most part, their intent is in the right place, but private monopolies have also been governed well.
Payments, in particular, is a retail focused segment as banks aren’t riddled by the same liquidity issues that the common man faces.
FedNow taking 4 years to launch versus Libra’s proposed one-year deadline is a testament to the private sector’s ability to streamline things. The advent of PayPal and Stripe have revolutionized payments. Using Libra as an excuse to impose a public monopoly over an entire sector is unjustified.