Libra, the underfire planned cryptocurrency from Facebook (NASDAQ:FB), has been described as a monetary threat by senior US bank executives in a meeting with the Federal Reserve.
Libra has been heavily scrutinized by regulatory bodies and financial institutions across the globe since it was first announced back in June and has been dealt a further blow following a meeting of the Federal Advisory Council this month. Members of the council include M&T Bank CEO Rene Jones, KeyCorp’s Beth Mooney, and Brian Moynihan, CEO of Bank of America.
“Facebook is potentially creating a digital monetary ecosystem outside of sanctioned financial markets — or a ‘shadow banking’ system […] As consumers adopt Libra, more deposits could migrate onto the platform, effectively reducing liquidity, and that disintermediation may further expand into loan and investment services,” banks said, according to the minutes of the council meeting obtained by Bloomberg.
Further Scrutiny from Lawmakers
These concerns were reiterated by two US lawmakers, Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.), in a letter to the Fed’s chairman Jerome Powell. “The Facebook/Libra proposal, if implemented, could remove important aspects of financial governance outside of U.S. jurisdiction,” wrote Hill. The same letter also discussed the development of a digital dollar and enquired as to what legal, regulatory, or national security issues might prevent the Fed from developing a digital currency.
The Federal Advisory Council’s apprehension towards Libra is just one of a series of regulatory concerns leveled at the Facebook-led project, which has thrown into doubt whether the coin will ever actually be launched. Yesterday reports emerged that Visa (NYSE:V) and Mastercard (NYSE:MA) were reconsidering their backing of Libra. Visa’s CEO Alfred Kelly stated that although the company had signed a letter of intent with the Libra Association, the company was not a member of anything and would not sign up until the association produced proof of compliance.
Last week, Mark Zuckerberg refused to confirm whether Libra would be launched as planned in 2020, creating further doubt as to whether the coin will ever see the light of day.