Facebook’s plan to build a digital currency called Libra “cannot go forward” until serious concerns are addressed, US Federal Reserve Chairman Jerome Powell said on Wednesday.
“Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability,” Powell told a US congressional panel, Reuters reports.
“I don’t think the project can go forward” without addressing those concerns, he said.
Any regulatory review of the project should be “patient and careful,” Powell said during a testimony on monetary policy before the US House of Representatives Financial Services Committee.
Powell 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.”
According to Powell, the Fed has established a working group to follow the Libra project and is coordinating with other central banks across the globe.
He also expects a review from the US 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,” he said.
“We are very much aligned with the [Fed] Chairman around the need for public discourse on this,” Reuters quoted a Facebook spokeswoman as saying 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 percent during his three hours of testimony.
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