WASHINGTON - Facebook's proposed digital coin Libra would "extend America's financial leadership" while helping cash-strapped people around the world, chief executive Mark Zuckerberg said in remarks prepared for delivery to lawmakers released Tuesday.
In the testimony released a day ahead of Zuckerberg's appearance before a House of Representatives committee, the head of the world's biggest social network described the planned cryptocurrency as an important financial innovation.
"While we debate these issues, the rest of the world isn't waiting. China is moving quickly to launch similar ideas in the coming months," Zuckerberg said in his prepared remarks.
"Libra will be backed mostly by dollars and I believe it will extend America's financial leadership as well as our democratic values and oversight around the world. If America doesn't innovate, our financial leadership is not guaranteed."
The comments come amid intense scrutiny from regulators and lawmakers around the world, with many skeptical about the impact of the global digital currency planned for 2020.
Zuckerberg acknowledged that Facebook's missteps on privacy and data protection have led many to conclude that "we're not the ideal messenger right now" for the digital coin but argued that the plan would be beneficial for many people including those outside the banking system.
'FINANCIAL INCLUSION'
"People pay far too high a cost -- and have to wait far too long -- to send money home to their families abroad," Zuckerberg said.
"The Libra project is about promoting financial inclusion through a safe, low-cost, and efficient way of sending and receiving payments around the world. Research shows that access to financial services can help people lift themselves out of poverty ... We believe this is a problem that can be solved, and we want to be part of that solution."
Facebook has said Libra would not launch without approval from regulators, and the plan has been criticized by officials on both sides of the Atlantic.
Zuckerberg noted that the planned currency would not be controlled by Facebook but governed by an independent board which includes companies and nonprofit organizations.
US Treasury Secretary Steven Mnuchin said at a separate hearing Tuesday a Libra launch would be "premature" and that various issues such as protection against money laundering and other illicit activity still need to be worked out.
Last week, French Finance Minister Bruno Le Maire said Italy, Germany and France would take unspecified steps in the coming weeks "to show clearly that Libra is unwelcome in Europe."
The Group of 20 economies said the proposed digital currency creates "serious" risks of money laundering, fraud and illicit finance and the G7 said Libra should not launch "until the legal, regulatory and oversight challenges and risks are adequately addressed."
Zuckerberg, expected to face harsh questioning in the House Financial Services Committee hearing, said Facebook "will continue talking to regulators about our efforts" on Libra.
"We understand that whatever approach we take to promote financial inclusion must address regulatory concerns, including money laundering and terrorism financing, sanctions, and potential currency disruption and systemic risk," he said.
"I know that the Libra Association is mindful of those things as it proceeds."
The Libra Association has lost key partners including PayPal, Mastercard and Visa, but it has unveiled its charter with 21 founding members.
Analyst Daniel Ives at Wedbush Securities said Libra faces an uphill battle due to the "massive regulatory pushback" on the plan.
"Realistically, it is unlikely Facebook can succeed without partner support, as the company lacks the infrastructure to handle a project of this magnitude in our opinion," Ives said in a note to clients.
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WASHINGTON — Facebook executive David Marcus on Sunday tried to calm the fears of officials threatening to block its proposed digital currency, saying Libra won't be controlled by a single company.
The head of Facebook's Libra currency project sought to address the main issue raised by France's Economy Minister Bruno Le Maire: the potential for a company to have the power to undermine a government's control of its currency.
Marcus said it has been "very clear to us from the very beginning that a payment networks such as the Libra network shouldn't be controlled by one company."
Speaking at a forum, hosted by the Group of 30, he repeated the company's commitment to work with regulators to address their concerns.
He added that the Libra Association -- comprised of 21 companies -- will "welcome competition to benefit local access and strive for the lowest cost possible for consumers."
But, he cautioned, "the status quo is not an option any longer."
Central banks and government finance officials have long worried about the challenges posed by digital currencies, and the risk they can be used for money laundering and financing terrorism.
Libra is different from other digital currencies like Bitcoin because it would be a "stablecoin" tied to national currencies.
But Le Maire told reporters on the sidelines of the annual meetings of the World Bank and International Monetary Fund in Washington last week that European governments "will not allow a private company to have the same power, the same monetary power as sovereign states," and will take steps to block Libra from Europe.
Agustin Carstens, former Mexican central banker and longtime skeptic of digital currencies, agreed that technology can help provide access to the financial system to people who have been excluded.
But Carstens, now head of the Bank for International Settlements, said Sunday that the best course would be to "maximize the use of technology with what we've proven that works, that provides stability."
Marcus remained cautiously optimistic.
"We recognize that a change of this magnitude can't be operating without a great sense of responsibility," he said, but he added: "We can actually work together to solve these issues."
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WASHINGTON - Group of 20 finance leaders on Friday agreed to set strict regulations on cryptocurrencies such as Facebook's Libra, warning that issuance of such "stablecoins" should not be allowed until various global risks they pose have been addressed.
The agreement came after a G7 working group warned that when launched on a wide scale, stablecoins - digital currencies usually backed by traditional money and other assets - could threaten the world's monetary system and financial stability.
Finance chiefs of the G20 major economies agreed that while stablecoins could have potential benefits of financial innovation, they give rise to a set of "serious" public policy and regulatory risks.
"Such risks, including in particular those related to money laundering, illicit finance, and consumer and investor protection, need to be evaluated and appropriately addressed before these projects can commence operation," the G20 finance leaders said in a statement issued after their meeting.
Bank of Japan Governor Haruhiko Kuroda said the G20 will kick off debate on how to regulate stablecoins based on proposals it receives from standard-setting bodies like the Financial Stability Board (FSB) and the Financial Action Task Force (FATF).
The FSB and the FATF are expected to report their findings on stablecoins to the G20 next year. That reduces the chance Facebook will meet its goal of rolling out Libra in 2020.
"Policymakers have expressed concerns over various risks stablecoins pose. Until they are addressed, stablecoins should not be issued. That was something agreed by the G20 members," Kuroda told a news conference hosted by Japan, which chaired this year's G20 gatherings.
BROADER MONETARY IMPLICATIONS
The G20 has also asked the International Monetary Fund (IMF) to examine the economic implications, including monetary sovereignty issues, according to the group's press release.
"Some emerging countries have concerns on what could happen if stablecoins backed by a huge customer base become widely used globally," said Kuroda, who was among the global finance leaders gathered in Washington this week for the IMF and World Bank fall meetings.
"But this is not just a problem for emerging economies. It could have a broader impact on monetary policy and financial system stability," he said.
The G20 agreement underscored concerns among global policymakers about stablecoins such as Libra, which suffered a defection of a quarter of its original members that had initially backed the project.
German Finance Minister Olaf Scholz on Friday redoubled his criticism of Libra, saying creation of a new world currency should be prevented.
"We now know that both the G7 and G20 are quite cautious about stablecoins," a Japanese Ministry of Finance official who attended the G20 talks told reporters.
"Personally, I feel that such strong concerns held by policymakers may have been among reasons why some companies decided to pull out of the Libra project," the official said.
While setting regulations on stablecoins, policymakers will also debate ways to make existing cross-border settlement and payment systems more efficient, BOJ's Kuroda said.
But such efforts will be confined to private-sector settlements, he said, adding that the G20 did not discuss the idea of central banks issuing digital currencies.
"The BOJ, too, has no plans for now to issue digital currencies," Kuroda said.
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WASHINGTON — Facebook's controversial plans for a new digital currency will again come under scrutiny of finance officials from Group of Seven economies Thursday, who worry it undermines their hold over the global financial system.
Libra, which would be backed by reserve assets unlike cryptocurrencies like Bitcoin, faces a steady drumbeat of stern warnings from central bankers and financial regulators, who have promised close oversight and tough regulation.
European Central Bank board member Benoit Coeure is due to present a report on digital currencies to the G7 finance ministers, who are gathering on the margins of the annual meetings of the International Monetary Fund and World Bank.
Earlier this year, G7 ministers tasked Coeure with studying the risks that digital currencies like Libra pose for states and central banks, which are currently the only institutions with the power to issue fiat money.
France, which currently holds the G7's rotating presidency, expects to issue a statement following the meeting, according to a person with knowledge of the matter.
But the ministers already called for tough regulations, warning of the "serious regulatory and systemic concerns" around digital currencies.
Since the July meeting in France, warnings from officials have only grown louder, with French Economy Minister Bruno Le Maire announcing a month ago he would block Libra in Europe.
LIBRA MEMBERS DROP OUT
If it enters circulation, Libra would offer an alternative to traditional bank financial transfers, a disruptive change that has aroused resistance and skepticism.
Mark Zuckerberg, Facebook's co-founder and chief executive, was in Washington as well Thursday, and is due to testify before the US Congress next week on the social media network's impact on financial services.
Le Maire stepped up his opposition in a Financial Times opinion piece Thursday that called Facebook's digital currency a threat to states' sovereignty.
Lael Brainard, an influential member of the US Federal Reserve board, said Facebook's proposed currency presented a host of risks and regulatory challenges for preventing money-laundering and assuring financial stability, and could be a challenge to the traditional role played by banks
"There are likely to be financial stability risks for a stablecoin network with global reach," she said in a speech Wednesday. "If not managed effectively, liquidity, credit, market, or operational risks -- alone or in combination -- could trigger a loss of confidence and a classic run."
China, which is not a G7 member and decided two years ago to block cryptocurrency transactions, has recently sped up plans to introduce its own digital money.
Libra also has faced challenges from within after major financial and commercial players in recent weeks have backed out of the project, including Visa, Mastercard, eBay, Stripe, PayPal and the online travel firm Bookings Holdings.
The Libra Association, which will oversee Facebook's proposed currency, was officially launched Monday in Geneva.
The 21 founding members include the online payments company PayU, the telecoms firms Vodafone and Iliad, as well as tech outfits Uber, Spotify and Farfetch, blockchain operations such as Anchorage, Xapo and Coinbase and the venture capital firms Andreessen Horowitz, Ribbit Capital and non-profits Kiva and Mercy Corps.
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SAN FRANCISCO -- Facebook's digital currency alliance lost more companies on Friday amid heavy criticism from regulators around the world on the planned Libra global cryptocurrency.
Credit card giants Visa and Mastercard, online marketplace eBay and digital payments firm Stripe each announced they had changed their minds about being founding members of the Libra Association assembled to promote the digital currency.
"Mastercard has decided it will not become a member of the Libra Association at this time," the company said in an emailed statement.
"We remain focused on our strategy and our own significant efforts to enable financial inclusion around the world. We believe there are potential benefits in such initiatives and will continue to monitor the Libra effort."
A Visa spokesperson offered a similar statement, indicating the company was dropping out of the alliance but could rejoin in the future.
"We will continue to evaluate and our ultimate decision will be determined by a number of factors, including the association's ability to fully satisfy all requisite regulatory expectations," Visa said.
Silicon Valley-based eBay said: "We highly respect the vision of the Libra Association; however, eBay has made the decision to not move forward as a founding member."
Stripe also said it would follow the progress of Libra and remain open to working with the association at a later date.
"Stripe is supportive of projects that aim to make online commerce more accessible for people around the world," Stripe said. "Libra has this potential."
FIERCE SCRUTINY
Libra Association confirmed that the companies would no longer be founding members, but said that it would continue building an alliance of businesses, social-good organizations, and others to implement the cryptocurrency.
The original list of founding members was cut to 23 factoring in the departures from the group on Friday.
"Although the makeup of the association members may grow and change over time, the design principle of Libra's governance and technology, along with the open nature of this project, ensures the Libra payment network will remain resilient," spokesman Dante Disparte said in response to an AFP inquiry.
"We are focused on moving forward... to achieve a safe, transparent, and consumer-friendly implementation of a global payment system that breaks down financial barriers for billions of people."
An list of founding members is to be announced at an inaugural Libra Association council meeting on Monday, according to Disparte.
The departures on Friday came after US senators sent letters to several financial firms noting that they could face "a high level of scrutiny from regulators" if they participated in the new currency plan.
Last week, digital payments firm PayPal said it was quitting the alliance of companies and organizations promoting Libra.
Facebook executives have claimed the new digital coin could help lower costs for global money transfers and help those without access to the banking system.
French economy and finance minister Bruno Le Maire has warned that under current circumstances, Libra posed a threat to the "monetary sovereignty" of governments and could not be authorized in Europe.
Facebook chief Mark Zuckerberg is set to testify October 23 hearing in the US House of Representatives on the Libra plan.
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WASHINGTON — Facebook chief executive Mark Zuckerberg will testify at the US House of Representatives this month on the social network's plan for a global digital currency, officials announced Wednesday.
The House Financial Services Committee said in a statement that Zuckerberg would be the sole witness at the October 23 hearing on "An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors."
The move comes with Facebook's planned digital coin Libra facing heavy criticism from regulators and lawmakers in the United States and Europe.
Earlier this year, David Marcus, Facebook's executive heading the digital coin effort, defended the plan for more than two hours at a Senate Banking Committee meeting and said the cryptocurrency would not be launched without regulatory approval.
Marcus and other Facebook executives have claimed the new digital coin could help lower costs for global money transfers and help those without access to the banking system.
French economy and finance minister Bruno Le Maire has warned that under current circumstances, Libra posed a threat to the "monetary sovereignty" of governments and could not be authorized in Europe.
Last week, digital payments firm PayPal said it was quitting the alliance of companies and organizations promoting Libra, raising questions over Facebook's ability to launch the coin early next year as planned.
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SAN FRANCISCO - Pioneering digital payments firm PayPal on Friday said it is abandoning an alliance intended to oversee the Facebook-backed Libra cryptocurrency, which has come under attack by regulators.
"PayPal has made the decision to forgo further participation in the Libra Association at this time," the California-based company told AFP.
"We remain supportive of Libra's aspirations and look forward to continued dialogue on ways to work together in the future."
International outcry is mounting over Libra -- with central banks and governments railing against Facebook's upstart cryptocurrency and questions over how it would be regulated.
"It requires a certain boldness and fortitude to take on an endeavor as ambitious as Libra -- a generational opportunity to get things right and improve financial inclusion," association head of policy Dante Disparte said in response to an AFP inquiry.
"The journey will be long and challenging. We're better off knowing about this lack of commitment now, rather than later."
Facebook unveiled plans in June for Libra -- which will roll out in 2020 -- to be backed by a basket of currency assets to avoid the wild swings of Bitcoin and other virtual units.
The non-profit Libra Association, based in Geneva, will oversee the blockchain-based coin.
Facebook envisions Libra as a new global cryptocurrency, pledging to deliver a stable virtual money that lives on smartphones and could bring over a billion "unbanked" people into the financial system.
"The type of change that will reconfigure the financial system to be tilted towards people, not the institutions serving them, will be hard," Disparte said.
"Commitment to that mission is more important to us than anything else."
Mastercard, Visa and other financial partners enlisted to oversee Libra are reportedly having second thoughts as regulators unleash ire on the project and dig for information from members of the association.
Other Libra backers include ride-hailing apps Lyft and Uber.
The head of the association said last week that the project's leaders aimed to "reassure" regulators worried about the virtual money.
In leaked comments from a meeting of Facebook employees in July, Facebook chief executive Mark Zuckerberg said he remained optimistic about Libra despite harsh comments from public officials in several countries.
"The public things, I think, tend to be a little more dramatic," he said.
"But a bigger part of it is private engagement with regulators around the world, and those, I think, often, are more substantive and less dramatic... That's where a lot of the discussions and details get hashed out on things."
COOK'S VIEW
In an interview published Friday in French newspaper Les Echos, Apple chief executive Tim Cook said he was uncomfortable with the idea of a company taking over roles typically reserved for governments.
Without specifically naming Facebook, Cook said issuing currency, like national defense, is best left to states.
Facebook and some two dozen partners released a prototype of Libra as an open source code for developers interested in weaving it into apps, services or businesses.
Martin Chorzempa, a research fellow at the Peterson Institute for International Economics, questioned whether Libra would be able to fulfill its vision.
In particular, Libra will need to comply with regulations that require collecting personal information about customers in order to expose crimes such as money laundering or fraud.
"It is not clear to me that Libra is anywhere near being able to perform those know-your-customer requirements that would allow them to legally serve these communities," Chorzempa said.
"Libra would have to work with governments to make sure they are compliant or get those rules changed, and that is a difficult process."
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SAN FRANCISCO, United States - Mastercard, Visa and other financial partners being enlisted to oversee Facebook-backed cryptocurrency Libra are having second thoughts as regulators unleash ire on the project, according to a report Tuesday.
A Libra Association created by Facebook to independently manage the digital money still had its initial group of backers on Tuesday.
But a Wall Street Journal report said some of those on it were reconsidering their roles due to opposition expressed by governments digging for information about the project.
Visa referred AFP to comments made by chief executive Alfred Kelly in an interview in August with CNBC in which he said the company had signed a non-binding letter of intent with the association but was "not a member of anything."
Kelly went on to say Visa would not join the association if it isn't satisfied when it comes to complying with regulations.
The association, which is working on a charter that will outline involvement by founding members, declined to comment and Mastercard did not immediately respond to a query.
The head of the Libra Association said last week that the project's leaders aimed to "reassure" regulators worried about the virtual money.
Bertrand Perez, director general of the Geneva-based non-profit association, said Libra will be backed by a basket of currency assets and short-term government bonds to avoid the wild swings seen with bitcoin and other cryptocurrencies.
Hashing out details
Facebook's plans for Libra have meet with concern by governments and critics of the social network behemoth, whose reputation has been tarnished by its role in spreading fake information and extremist videos.
Last month, France's economy and finance minister Bruno Le Maire warned that under current circumstances Libra posed a threat to the "monetary sovereignty" of governments and could not be authorized in Europe.
Officials have also raised concerns about how the currency would be regulated, particularly how it would comply with regulations about combatting money laundering and financing of terrorism.
"We are carrying out a normal course of work with regulators to show them that, in terms of anti-money laundering, the (Libra) system will be at least equivalent to the conventional monetary system," Perez said.
Besides Facebook, backers of Libra include payment giants Visa, MasterCard and PayPal, as well as ride-hailing apps Lyft and Uber.
The Libra Association is set to expand, as over 100 companies and organizations have expressed an interest in joining, Perez said.
Facebook has promoted Libra as an opportunity to provide online commerce and financial services at minimal cost to more than a billion "unbanked" people -- adults without bank accounts or those who use services outside the banking system such as payday loans to make ends meet.
In leaked comments from a meeting of Facebook employees in July, Facebook chief executive Mark Zuckerberg said he remained optimistic for Libra despite harsh comments from public officials in several countries.
"The public things, I think, tend to be a little more dramatic," he said.
"But a bigger part of it is private engagement with regulators around the world, and those, I think, often, are more substantive and less dramatic... That's where a lot of the discussions and details get hashed out on things."
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CHANTILLY, France -- Group of Seven finance chiefs cast a cloud over prospects for Facebook's Libra digital coin on Wednesday, insisting tough regulatory problems would have to be worked out first.
The massive social media company's plan to launch a digital coin has met with a chorus from regulators, central bankers and governments saying it must respect anti-money-laundering rules and ensure the security of transactions and user data.
But there are also deeper concerns that the powers of big tech companies increasingly encroach on areas belonging to governments, like issuing currency.
"The sovereignty of nations cannot be jeopardized," French Finance Minister Bruno Le Maire told journalists after chairing the first day of the two-day meeting.
"The overall mood around the table was clearly one of important concerns about the recent Libra announcements, and a shared view that action is needed urgently," he added.
German Finance Minister Olaf Scholz said Facebook's plans do not "seem to be fully thought through", adding that there were also data security questions.
"I am convinced that we must act quickly and that (Libra) cannot go ahead without all legal and regulatory questions being resolved," Scholz told journalists.
France, which chairs the Group of Seven advanced economies this year, has asked European Central Bank executive board member Benoit Coeure to set up a G7 task force to look into cryptocurrencies and digital coins like the Libra.
Coeure presented a preliminary report to ministers and central bankers at the meeting, in the quaint chateau town of Chantilly, north of Paris.
Central bankers say that if Facebook wants to take deposits, it needs a banking licence, which would subject it to the strict regulation that goes with operating in that industry.
Some central bankers also say that allowing people to transact anonymously is a non-starter given financial sector regulations that require payments firms to hold basic information about their customers.
JAPAN: GLOBAL CONSENSUS NEEDED
Bank of Japan Governor Haruhiko Kuroda said the G7 task force was likely to evolve over time into something including a broader range of regulators beyond the group, given the huge impact Libra could have on the global economy.
"If the Libra is aspiring to be used globally, countries must seek a globally coordinated response," Kuroda said.
"This is not something that can be discussed among G7 central banks alone."
G7 finance ministers are also concerned about how best to tax big tech companies, with France keen to use its presidency of the two-day meeting to get broad support for ensuring minimum corporate taxation.
G7 governments are concerned that decades-old international tax rules have been pushed to the limit by the emergence of companies like Facebook and Apple, which book profits in low-tax countries regardless of the source of the underlying income.
The issue has become more vexed than ever in recent days as Paris defied US President Donald Trump last week by passing a tax on big digital firms' revenues in France, despite a threat from Trump to launch a probe that could lead to trade tariffs.
Their bilateral dispute aside, France and the United States are in favor of rules ensuring minimum taxation as part of an effort among nearly 130 countries to overhaul international tax rules.
Although a G7 agreement would set the tone for the broader push, an agreement among all of the G7 ministers on a minimum rate or range of rates is likely to prove elusive as Britain and Canada have reservations, a French Finance Ministry source said.
"If we don't agree at the G7 level on the broad principles for taxing digital companies today or tomorrow, then quite frankly it will be complicated to find among 129 countries at the OECD," Le Maire said.
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CHANTILLY, FRANCE - The finance ministers of France and Germany on Wednesday expressed serious reservations about Facebook's planned Libra cryptocurrency because of its possible impact on global financial stability.
Facebook last month unveiled its plans for Libra in an announcement greeted with concern by governments and critics of the social network behemoth around the world.
The issue was at the forefront of the minds of ministers and central bankers from the G7 group of most developed economies as they kicked off a two-day meeting in Chantilly outside Paris on Wednesday.
"The G7 finance ministers and central bankers who are here have serious concerns," said German Finance Minister Olaf Scholz.
"They want to be sure that all existing regulations are adhered to, and if they should be changed in the future, so that we can guarantee the stability of the international financial system," he added.
"We are talking about currency stability, security, data protection, and democratic control," he added.
French Finance Minister Bruno Le Maire, who has warned about Libra repeatedly since the launch announcement, said "the conditions are not yet in place today for Libra to be introduced."
He said he hoped the G7 would consider the necessity of a "framework or a regulation" and also "what would be the conditions that would make such an instrument feasible."
"Today, we cannot accept that an exchange instrument comes into being when it does not respect any of the precautionary rules that all sovereign currencies are required to abide by."
Their comments echoed warnings issued on Monday by US Treasury Secretary Steven Mnuchin, who was also present at the meeting.
He said Facebook must meet "a very high standard" before it moves ahead with Libra, saying US regulators have already expressed concerns to the company.
Mnuchin that these kinds of virtual currencies have in the past been associated with money laundering and illicit activities.
"Whether they're banks or non-banks, they're under the same regulatory environment," Mnuchin told reporters at the White House.
Libra is widely regarded as a challenger to dominant global player bitcoin. Expected to launch in the first half of 2020, Libra is designed to be backed by a basket of currency assets to avoid the wild swings of bitcoin and other cryptocurrencies.
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WASHINGTON - Facebook must meet "a very high standard" before it moves ahead with its planned digital currency Libra, US Treasury Secretary Steven Mnuchin said Monday.
Mnuchin said US regulators have already expressed concerns to Facebook about the plan for a global cryptocurrency, noting that these kinds of virtual coins have in the past been associated with money laundering and illicit activities.
"Whether they're banks or non-banks, they're under the same regulatory environment," Mnuchin told reporters at the White House, adding that Facebook "will have to have a very high standard before they have access to the financial system."
Facebook last month unveiled its plans for Libra, widely regarded as a challenger to dominant global player bitcoin. Expected to launch in the first half of 2020, Libra is designed to be backed by a basket of currency assets to avoid the wild swings of bitcoin and other cryptocurrencies.
Mnuchin said the US Treasury welcomes "responsible innovations" that can improve the efficiency of the financial system but added: "Our overriding goal is to maintain the integrity of the financial system and protect it from abuse."
'NATIONAL SECURITY ISSUE'
He said US regulators have met with Facebook officials on this question, and how Facebook can protect against the new virtual coin being used for criminal activity.
"This is indeed a national security issue," the Treasury chief said.
Facebook, he added, must implement safeguards against the use of Libra for money laundering and terrorist financing and comply with other financial regulations.
Commenting on Facebook's claim that Libra could lower costs and help people without access to traditional financial services, Mnuchin said, "That's fine (but) they've got a lot of work to do to convince us they can get to that place."
Mnuchin's comments echoed concerns voiced by Federal Reserve Chairman Jerome Powell and regulators around the world, as well as by lawmakers set to open hearings this week on the plan by Facebook and its partners in the Libra project.
HEARING SET TUESDAY
David Marcus, who heads Facebook's digital wallet and blockchain efforts, said in testimony prepared for delivery Tuesday that he expects regulators to carry out an extensive review of the Libra project.
"The time between now and launch is designed to be an open process and subject to regulatory oversight and review," Marcus was to say in his remarks, which were released by the Senate Banking Committee.
"We know we need to take the time to get this right. And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals."
Marcus said that Libra, whose association will be based in Geneva, will be supervised by the Swiss Financial Markets Supervisory Authority, but would also register with the US Treasury's FinCEN (Financial Crimes Enforcement Network) to comply with anti-money laundering regulations.
Facebook "will work with the Federal Reserve and other central banks to make sure Libra does not compete with sovereign currencies or interfere with monetary policy," Marcus added.
The companies behind Libra include payment giants Visa, MasterCard and PayPal, as well as ride-hailing apps Lyft and Uber.
Central bankers around the world have said they would carefully study the proposed currency and last week US President Donald Trump weighed in.
"I am not a fan of bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air," he said.
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LONDON - Bitcoin slumped more than 10 percent over the weekend to a two-week low as fears of a crackdown of cryptocurrencies grew on mounting scrutiny of Facebook's planned Libra digital coin.
Bitcoin fell 11.1 percent from Friday to $9,855 early on Monday, its lowest since July 2. The original cryptocurrency slumped 10.4 percent on Sunday alone, its second-biggest daily drop this year. It was last up 0.5 percent at $10,245.
Politicians and financial regulators across the world have called for scrutiny of Facebook's Libra coin, with concerns ranging from consumer protection and privacy to its potential systemic risks given the social media giant's global reach.
US President Donald Trump criticized bitcoin, Libra and other cryptocurrencies last week, demanding that firms seek a banking charter and subject themselves to US and global regulations if they wanted to "become a bank".
Bitcoin, which initially shrugged off Trump's tweet, fell sharply after US Federal Reserve Chairman Jerome Powell called for a halt to Facebook's project until concerns from privacy to money-laundering were addressed.
"Together they have increased the tail risk that the US will look to crack down on it in some way," said Jamie Farquhar, portfolio manager at crypto firm NKB Group in London.
Underscoring the growing attention on Facebook's plans, Japanese authorities have also set up a working group to look at Libra's possible impact on monetary policy and financial regulation, government sources told Reuters.
European Central Bank policymaker Benoit Coeure is due to deliver a preliminary report on the matter at a meeting of G7 finance ministers this week in Chantilly, north of Paris.
Bitcoin climbed nearly 55 percent in nine days after Facebook unveiled its plans for Libra on June 18, touching an 18-month high of nearly $14,000. The project has boosted hopes among some investors that cryptocurrencies could gain wider acceptance.
(Reporting by Tom Wilson Editing by Andrew Heavens)
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LONDON - Facebook's planned virtual unit Libra, already under heavy attack from US President Donald Trump and global regulators, faces skepticism among the wider cryptocurrency community as well.
One theme -- besides Brexit -- dominated discussion among the movers and shakers from London's financial technology or FinTech industry as gathered for their annual get-together: the future of virtual currencies.
"Can I just ask you to raise your hand if you would not be willing to use Libra?" asked the moderator at an event at London's recent 'FinTech Week'.
In the room, filled with about 100 experts and media who closely track the sector, about two-thirds of participants raised their hand to express distrust at the upstart currency.
Helen Disney, founder and boss of Unblocked Events, which promotes the blockchain technology that powers many cryptocurrencies, acknowledged growing doubts over who exactly would oversee and regulate Libra's operation.
POWER TO THE PEOPLE
People are "concerned about how the governance... would work", Disney told AFP.
"The cryptocurrency community is very libertarian in thinking," its "about giving power to the people, democratization of finance, keeping away from big banks and companies who control (the) economy," she said
Last week's gathering came one month after Facebook announced to the world its plans for the virtual currency.
Libra, which is widely regarded as a challenger to dominant global player Bitcoin, is expected to launch in the first half of 2020.
Whereas Bitcoin is decentralized, Libra will be co-managed by 100 partner firms, including Facebook's newly-minted financial services division Calibra.
The companies behind Libra -- which will be backed with a basket of real-world currencies -- include payment giants Visa, MasterCard and PayPal, as well as taxi-hailing services Lyft and Uber.
To access Libra on smartphones, users will go through a virtual wallet that will also be named Calibra.
While Facebook boasts an enormous customer base dotted across the globe that should facilitate Libra's uptake, it has also been plagued by privacy concerns that could make users hesitate.
"Can't wait for a cryptocurrency with the ethics of Uber, the censorship resistance of Paypal, and the centralization of Visa, all tied together under the proven privacy of Facebook," said Sarah Jamie Lewis, head of non-profit research organization Open Privacy.
Libra has meanwhile raised eyebrows among the world's financial regulators, including the Bank of England, the European Central Bank and the US Federal Reserve.
But Disney believes that Libra will finally force regulators to present clear regulation guidelines, as demanded by the cryptocurrency community itself.
"We have been waiting for a long time for a clearer signal (regarding) the regulation of cryptocurrencies and digital assets," she said.
But James Bennett, head of cryptocurrency research firm Bitassist, argues that Libra should not be seen in the same light as Bitcoin.
"In the long run, people may realize that Libra is not a cryptocurrency," Bennett said at the FinTech Week event.
"A true cryptocurrency should be resistant to attacks by all parties, from sovereign states to global corporations," he said, adding that "cryptocurrency is a type of money used to transfer value over the internet that cannot be stopped, confiscated or destroyed by any single entity".
BASED ON THIN AIR
Trump has meanwhile unleashed a vicious attack on virtual currencies, slamming them for their alleged shadowy nature and arguing that Libra had no standing nor dependability -- unlike the dollar.
"I am not a fan of Bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air," Trump tweeted Thursday.
source: news.abs-cbn.com
WASHINGTON - US Federal Reserve Chairman Jerome Powell said on Wednesday that Facebook's plan to build a digital currency called Libra "cannot go forward" until serious concerns are addressed, comments that pressured the project and dented the price of the original cryptocurrency bitcoin.
The strong comments from the most powerful U.S. financial regulator underscored the growing regulatory hurdles facing the proposed cryptocurrency, which has drawn scrutiny from policymakers globally.
"Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability," Powell said during his semi-annual testimony on monetary policy before the U.S. House of Representatives Financial Services Committee.
"I don't think the project can go forward" without addressing those concerns, he added later.
Powell said any regulatory review of the project should be "patient and careful." He noted that existing rules do not fit digital currencies.
"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."
"We are very much aligned with the Chairman around the need for public discourse on this," Facebook spokeswoman Elka Looks said in an email. "This is why we along with the 27 other Founding Members of the Libra Association made this announcement so far in advance, so that we could engage in constructive discourse on this and get feedback."
Powell's comments about Libra hit the price of bitcoin, which fell as much as 7% during his three hours of testimony.
Late last month, bitcoin climbed back to near $14,000 and has rallied by more than 30% since June 18, when Facebook announced plans to launch Libra. By mid-afternoon on Wednesday bitcoin was trading at $12,268.99, down 2.4% on the day.
Facebook shares, too, took a hit during Powell’s appearance before the committee, although they largely recovered that lost ground and were trading 1.3% higher at $201.89 a share.
WORKING GROUP
It was 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. Facebook officials are scheduled to testify about the project later this month in Congress, where senior lawmakers have raised data privacy and other concerns.
"What Facebook is planning raises serious privacy, trading, national security, and monetary policy concerns for consumers, investors, the U.S. economy and the global economy," said Representative Maxine Waters, who chairs the House banking panel.
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 a review from the U.S. Financial Stability Oversight Council, a panel of regulators charged with identifying broad risks to the financial system.
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."
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WASHINGTON -- Federal Reserve chairman Jerome Powell said Tuesday the US central bank will be closely scrutinizing Facebook's newly announced cryptocurrency Libra with an eye toward potentially regulating the virtual coin.
Powell became the latest official to voice concern over the global virtual currency unveiled last week by Facebook and an array of partners which aims to lower transaction costs and bring more services to people without access to the banking system.
"We're looking at it very carefully," Powell said at an event sponsored by the Council on Foreign Relations. "Given the possible scale of it, I think that our expectations from a consumer protection standpoint, from a regulatory standpoint, are going to be very, very high."
The Libra coin plan, backed by financial and nonprofit partners, represents an ambitious new initiative for the world's biggest social network with the potential to bring crypto-money out of the shadows and into the mainstream.
But the plan has already prompted calls in Europe for close regulatory scrutiny and several US lawmakers have said they more information from Facebook.
Several analysts have said the new currency could create a regulatory conundrum due to the global reach of Facebook, which has more than 2 billion users.
Powell, speaking at the forum in New York, said that "authority for overseeing Libra is going to be in a number of places but I think the big picture is we're going to be looking really carefully at it."
Facebook said the new virtual coin would be overseen by a nonprofit Libra Association based in Geneva which would maintain a real-world asset reserve to keep its value stable.
source: news.abs-cbn.com
LONDON - Bitcoin surged to a near 16-month high above $11,000 Monday, overshadowing showings across stock, foreign exchange and commodity markets, with investors looking ahead to the week's G20 summit.
Bitcoin reached $11,251.21, surpassing $10,000 for the first time since March last year, as the cryptocurrency sector got a huge boost from Facebook's unveiling of its own digital unit Libra, analysts said.
"The strong resurgence in the bitcoin price is mainly due to the renewed mainstreaming interest in cryptocurrencies and the technology which underlines them," Naeem Aslam, analyst at trading group ThinkMarkets, said.
"Projects like Facebook's Libra have provided much-needed tailwind for this space."
The social network plans to launch Libra next year, with the backing by a basket of real-world currencies and a consortium of companies including Visa, MasterCard, PayPal and Uber.
"Bitcoin volatility is likely to persist, with $12,000 and $15,000 as the next two critical resistance levels," said OANDA senior market analyst Edward Moya.
Bitcoin has risen about 20 percent this month alone but is still well off record levels near $20,000 seen at the end of 2017.
Elsewhere Monday, oil prices nudged higher as rising US-Iran tensions continued to fuel supply concerns.
Stock markets were largely steady ahead of a crunch meeting between US President Donald Trump and Chinese counterpart Xi Jinping at the weekend summit of 20 major economies.
Markets are waiting to see if Trump and Xi can break an impasse in their trade war when they meet on the sidelines of the event in Japan.
Global equities last week rallied after Trump hailed positive telephone talks between the pair, fuelling hopes of a possible end to their long-running tariffs battle.
"No one thinks the US and China will do a deal in Osaka, but there is some hope that we will have a positive development that marks a shift in the rhetoric and a re-energizing of talks following the breakdown in the recent discussions," said Neil Wilson, chief market analyst at Markets.com.
The dollar meanwhile dropped Monday, continuing to face pressure from expectations that the Federal Reserve could lower US interest rates as soon as July as the economy shows signs of softening amid the trade war with China.
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SAN FRANCISCO/NEW YORK -- Facebook Inc announced ambitious plans on Tuesday to launch a new global cryptocurrency called Libra, part of an effort to expand into digital payments that immediately raised privacy concerns.
The social networking giant has linked with 28 partners including Mastercard, PayPal and Uber to form Libra Association, a Geneva-based entity governing the new digital coin, according to marketing materials and interviews with executives. No banks are yet part of the group.
To facilitate transactions, Facebook also created Calibra, a subsidiary that will offer digital wallets to save, send and spend Libras. Calibra will be connected to Facebook messaging platforms Messenger and WhatsApp.
The whole system is scheduled to launch in the first half of 2020.
Facebook executives and others associated with Libra have big aspirations. They hope it will not only power transactions between established consumers and businesses globally, but offer unbanked consumers access to financial services for the first time.
Facebook is also betting Libra can squeeze more revenue out of its suite of apps, something already happening on Chinese social networks like WeChat.
Representative Maxine Waters, chairwoman of the US House Financial Services Committee, called for Facebook executives to testify before Congress and asked the company to halt development of Libra until lawmakers and regulators have reviewed the project.
"With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users," Waters said in a statement.
Other regulators, lawmakers and government officials around the globe also quickly issued critical statements. France's finance minister said he had asked central bank heads from G7 countries to write a report on the project by mid-July.
A Facebook representative said the company looked forward to answering lawmakers' questions.
Before Tuesday's announcement, Facebook was already facing significant backlash over mishandling user data and not doing enough to prevent Russian interference in the 2016 US presidential election. Those issues have led some government officials to call for Facebook to incur penalties, or be forcibly broken up.
Kevin Weil, who runs product for the Libra initiative, said Facebook hoped to bring global regulators to the table by publicizing its plan.
"It gives us a basis to go and have productive conversations with regulators around the world," he told Reuters. "We're eager to do that."
The name "Libra" comes from Roman weight measurements, the astrological sign for justice and the French word for freedom, said David Marcus, who heads the project for Facebook.
"Freedom, justice and money, which is exactly what we're trying to do here," Marcus said in an interview.
Facebook shares closed up 0.1 percent.
UNREGULATED SECTOR
Facebook is using one of the least-regulated areas of finance for its foray into the sector.
Bitcoin, the best-known digital coin, was created in 2008 as an alternative to traditional currencies that are controlled by governments and central banks. Some countries have explored ways to regulate the market since then, but crypto trading remains largely unsupervised.
In the meantime, investors have lost hundreds of millions of dollars through steep price drops and crypto-exchange hacks. The market has also faced money-laundering and terrorist-financing allegations.
But Facebook's status as a Silicon Valley behemoth touching billions of people around the world could help legitimize what has so far been a niche and volatile market.
Other Libra Association members include companies like Visa , Spotify, eBay and Vodafone, as well as venture capital firms like Andreessen Horowitz.
They hope to have 100 members by Libra's launch. Each gets one vote on substantial decisions and firms must invest at least $10 million to join.
The group aims to raise money through a private placement in coming months. Facebook does not plan to maintain a leadership role after 2019.
Though there are no major banks among the inaugural members, there have been discussions with them, said Jorn Lambert, executive vice president for digital solutions at Mastercard.
Big lenders are waiting to see how regulators and consumers respond to the project before deciding whether to join, he said.
Some Libra backers acknowledged that consumer privacy brawls or regulatory resistance could hinder their lofty goals, and detailed some steps they are taking to preempt those issues.
For instance, Calibra plans to conduct compliance checks on customers who want to sign up, using verification and anti-fraud processes that are common among banks.
The subsidiary will only share customer data with Facebook or external parties if it has consent, or in "limited cases" where it is necessary, Facebook said. That could include for law enforcement, public safety or general system functionality.
Sri Shivananda, PayPal's chief technology officer, said the project was still in its "very, very early days" in terms of getting necessary regulatory approvals and consumer buy-in.
And, Mastercard's Lambert said that if the project receives too much pushback, "we might not launch."
source: news.abs-cbn.com
SAN FRANCISCO/NEW YORK - Facebook Inc revealed plans on Tuesday to launch a cryptocurrency called Libra, the latest development in its effort to expand beyond social networking and move into e-commerce and global payments.
Facebook has linked with 28 partners in a Geneva-based entity called the Libra Association, which will govern its new digital coin set to launch in the first half of 2020, according to marketing materials and interviews with executives.
Facebook has also created a subsidiary called Calibra, which will offer digital wallets to save, send and spend Libras. Calibra will be connected to Facebook's messaging platforms Messenger and WhatsApp, which already boast more than a billion users.
The Menlo Park, California-based company has big aspirations for Libra, but consumer privacy concerns or regulatory barriers may present significant hurdles.
Facebook hopes it will not only power transactions between established consumers and businesses around the globe, but offer unbanked consumers access to financial services for the first time.
The name "Libra" was inspired by Roman weight measurements, the astrological sign for justice and the French word for freedom, said David Marcus, a former PayPal executive who heads the project for Facebook.
"Freedom, justice and money, which is exactly what we're trying to do here," he said.
Facebook also appears to be betting it can squeeze revenue out of its messaging services through transactions and payments, something that is already happening on Chinese social apps like WeChat.
The Libra announcement comes as Facebook is grappling with public backlash due to a series of scandals, and may face opposition from privacy advocates, consumer groups, regulators and lawmakers.
Some Facebook adversaries have called for the company to incur penalties, or be forcibly broken up, for mishandling user data, allowing troubling material to appear on its site and not preventing Russian interference in the 2016 presidential election through a social media disinformation campaign.
It is not clear how lawmakers or regulators will react to Facebook making a push into financial services through the largely unregulated world of cryptocurrency.
In recent years, cryptocurrency investors have lost hundreds of millions of dollars through hacks, and the market has been plagued by accusations of money-laundering, illegal drug sales and terrorist financing.
Facebook has engaged with regulators in the United States and abroad about the planned cryptocurrency, company executives said. They would not specify which regulators or whether the company has applied for financial licenses anywhere.
Facebook hopes it can bring global regulators to the table by publicizing Libra, said Kevin Weil, who runs product for the initiative.
"It gives us a basis to go and have productive conversations with regulators around the world," said Weil. "We're eager to do that."
MAJOR PARTNERS
Bitcoin, the most well-known cryptocurrency, was created in 2008 as a way for pseudonymous users to transfer value online through encrypted digital ledgers. Early developers believed that the world needed an alternative to traditional currencies, which are controlled by governments and by central banks.
Since then, thousands of bitcoin alternatives have launched, and Facebook is just one of dozens of blue-chip companies dabbling with the underlying technology. But its status as a Silicon Valley behemoth that touches billions of people around the world has created significant buzz around Libra's potential.
Partners in the project include household names like Mastercard Inc, Visa Inc, Spotify Technology SA , PayPal Holdings Inc, eBay Inc, Uber Technologies Inc and Vodafone Group Plc, as well as venture capital firms like Andreessen Horowitz.
They hope to have 100 members by Libra's launch during the first half of 2020. Each member gets one vote on substantial decisions regarding the cryptocurrency network and firms must invest at least $10 million to join. Facebook does not plan to maintain a leadership role after 2019.
Though there are no banks among the inaugural members, there have been discussions with a number of lenders about joining, said Jorn Lambert, executive vice president for digital solutions at Mastercard. They are waiting to see how regulators and consumers respond to the project before deciding whether to join, he said.
The Libra Association plans to raise money through a private placement in the coming months, according to a statement from the association.
PRIVACY, REGULATORY CONCERNS
Although Libra-backers who spoke to Reuters or provided materials are hopeful about its prospects, some expressed awareness that consumer privacy concerns or regulatory barriers may prevent the project from succeeding.
Calibra will conduct compliance checks on customers who want to use Libra, using verification and anti-fraud processes that are common among banks, Facebook said.
The subsidiary will only share customer data with Facebook or external parties if it has consent, or in "limited cases" where it is necessary, Facebook said. That could include for law enforcement, public safety or general system functionality.
Transactions will cost individuals less than merchants, Facebook said, though executives declined to provide specifics. Each Libra will be backed by a basket of government-backed assets.
The company plans to refund customers who lose money because of fraud, Facebook said.
Sri Shivananda, Paypal's chief technology officer said in an interview that the project is still in its "very, very early days," and there were conversations in progress with regulators.
Mastercard's Lambert characterized Libra similarly, noting much needed to happen before the launch.
If the project receives too much regulatory pushback, he said, "we might not launch."
(Reporting by Katie Paul and Anna Irrera Editing by Lauren Tara LaCapra and Lisa Shumaker)
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