- Facebook's proposal to
create its own digital currency
called Libra has gotten a lot of basklash
from global regulators.
- Facebook has burned down
the house over and over.
- It's been the subject of acidic
U.S. congressional hearings
and France's finance minister
went so far as to say
that it was an assault
on national sovereignty.
(man speaking foreign language)
Officials in other
countries, including China,
Germany, and Italy has
expressed similar concerns.
Here's what regulators are worried about.
For one, lawmakers worry
that Libra has the potential
to disrupt the monetary system.
If Libra becomes the currency
for Facebook's 2.4 billion or so users,
to say nothing of other
companies that might accept it,
it could become a
globally-significant currency.
How?
Libra is going to be what's called,
in crypto markets, a stablecoin.
It'll be a pegged currency
that maintains, basically,
a one to one value with the U.S. dollar.
That's a different model than bitcoin.
Bitcoin trades freely, and
its value is determined
solely upon what people
are willing to pay for it.
To maintain that peg,
the group that will be
governing this currency,
called the Libra Association,
will maintain a reserve.
For every dollar's worth
of Libra that is created,
one dollar is going to
be put into the reserve.
Theoretically, that
means that this reserve
could hold billions or
even trillions of dollars'
worth of currencies and
short-term securities.
That is a very powerful
tool in capital markets.
If that money got moved
around significantly
from one currency to another,
it could absolutely upset global markets.
(crowd cheering)
Now, that's not to say that Facebook
or the Libra Association
is expected to do something
like weaponize these reserves.
However, this is the first
time that, not a government,
but a private company or
group of private companies
would have that kind of power.
- Look, we don't want it to--
- Facebook and the Libra
Association of companies
backing the project say they are committed
to working with authorities
to achieve a safe,
transparent, and
consumer-friendly implementation
of the digital currency.
Lawmakers, who are already
looking into Facebook
for a number of other reasons,
are not comfortable with Facebook's power.
The tech company is battling
scrutiny on multiple fronts,
from its role in elections to privacy
to even antitrust investigations.
- Facebook is dangerous.
They don't respect the
power of the technologies.
- [Paul] Facebook's business model,
its role in spreading propaganda,
and its controversial
efforts to rein it in
have infuriated lawmakers.
- We will have to make
very strong commitments
so that people trust us
and we will have to honor
those commitments for a
very long period of time
to earn people's trust.
- At the core of a lot of the distrust
among governments is that
Facebook has been criticized
for its handling of user data before,
and Libra would create a traceable record
of all its users transactions.
Just imagine a company
being able to combine
your identity, your online habits,
and your spending patterns.
That is an unprecedented ocean of data.
At this summer's congressional hearings,
Facebook executive David
Marcus said the company
and the Libra Association will keep
the spending data separate
from the user identities.
Lawmakers, of course,
were skeptical of that.
- I have serious concerns
with Facebook's plans.
- [Paul] Regulator scrutiny
is one of the reasons
Libra's viability has
been called into question,
and some key companies that
initially backed the project
have ducked out, with
Visa saying its decision
to work with the project in the future
depends on Libra's ability
to satisfy regulatory expectations.
We'll have to wait and see if
this scrutiny from regulators
makes Libra stronger
or ends up threatening
its existence altogether.
(dramatic mallet percussion music)
