Facebook Inc. got a preview Wednesday of what to expect next week when executives come to testify about plans to launch Libra, a digital currency and online payment system.
At a hearing Wednesday morning, Democrats and Republicans on the House Financial Services Committee peppered Federal Reserve Chairman Jerome Powell with questions about how the central bank would respond to Libra.
As that was going on, the Senate Banking Committee’s ranking Democrat, Sherrod Brown of Ohio, released a letter urging the Fed and other regulatory agencies to “protect [the] economy and consumers from Facebook’s monopoly money.”
But late in the afternoon, a small bipartisan group of House members urged their colleagues to approach cryptocurrency with an open mind.
Digital currencies “have the potential to become a driver of economic change, the potential to further connect our society and increase accessibility, and the potential for the United States to become the global leader and continue on the forefront of these innovations,” said Democratic Rep. Darren Soto of Florida. “Facebook’s Libra and Calibra initiatives have this potential. This could be the starting point of achieving these goals.”
Calibra refers to the Facebook subsidiary that will provide financial services under the initiative.
Davidson and Soto have introduced a bill that would provide cryptocurrencies a safe harbor from Securities and Exchange Commission regulations. Budd and Gottheimer are co-sponsors, along with GOP Reps. John W. Rose of Tennessee and Scott Perry of Pennsylvania, former Democratic presidential candidate Eric Swalwell of California and current candidate Tulsi Gabbard of Hawaii.
Facebook’s David Marcus is set to testify before the Senate Banking Committee on July 16 and is expected to appear at the House Financial Services Committee the next day.
Davidson pointed to Facebook’s decision to organize Libra’s governing body in Switzerland as a reason for his colleagues to embrace the new technology by legislating a permissive regulatory framework for cryptocurrencies.
“If we had the right regulations, it’s quite possible that [Libra] could have been headquartered in Ohio, Florida, New Jersey, North Carolina — somewhere here in the United States, instead of Switzerland,” he said.
Until Libra’s unveiling, lawmakers have largely looked at the advent of cryptocurrencies with a mix of curiosity and worry. While reports of Bitcoin’s wild price fluctuations, hacked digital wallets, and untraceable illicit transactions have drawn global headlines, the cryptocurrency user base has been limited to a relatively small number of enthusiasts rather than the general public.
But the entry of Facebook, with its estimated 2.4 billion users worldwide, into digital currencies has snapped legislators to attention.
“I and other Democrats on the Committee have raised concerns that Facebook’s planned products may ultimately be intended to establish a parallel banking and monetary policy system to rival the dollar,” House Financial Services Chairwoman Maxine Waters, a California Democrat, said at Wednesday’s hearing with Powell.
Many Republicans on the House panel echoed those concerns. In response to questions from ranking member Patrick T. McHenry of North Carolina and Rep. Steve Stivers of Ohio, Powell said he saw Libra as a potential “systemic risk,” and that Libra would have to address concerns over money laundering, data privacy, consumer protection and monetary policy “in a deliberate process that won’t be a sprint to implementation.”
Facebook’s decision to enter the cryptocurrency world has been a mixed blessing, said Kristin Smith of the Blockchain Association, a trade group for the nascent industry.
“It is a little bit of a double edged sword, but I think the edge of opportunity outweighs any negative consequences,” she said. “There is a tremendous amount of interest among members both in the House and Senate who previously did not have interest in cryptocurrencies.”
But, she added, most crypto companies are small startups, not huge, controversial companies like Facebook. “It’s incumbent upon us as the industry to explain that the industry is much more complex and evolving than just this one project,” she said.
How to respond legislatively to Libra, and digital currencies in general, has particularly split the Republican caucus, tugging its conservative and free market philosophies in opposite directions. Cryptocurrencies threaten the U.S. dollar’s position as the world’s reserve currency and the Fed’s ability to set monetary policy. But the very idea of unelected central bankers is anathema to doctrinaire libertarians.
That divide has played out broadly around the tech sector on Capitol Hill.
Correction 10:50 a.m. | An earlier version of this story misspelled Kristin Smith’s name.