October 09, 2019
Brown, Schatz Warn Payments Providers Of Risks With Libra Association
WASHINGTON – Today, U.S. Senator Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee and U.S. Senator Brian Schatz (D-Hawai‘i), a member of the Senate Banking Committee, sent letters to the CEOs of Visa, MasterCard, and Stripe to express deep concerns over Facebook’s Libra Association and to urge potential member companies to proceed with caution until Facebook is able to provide real answers. PayPal left the Libra Association on Friday.
“We are concerned because key questions remain unanswered about the risks the project poses to consumers, regulated financial institutions, and the global financial system. We urge you to carefully consider how your companies will manage these risks before proceeding,” the senators wrote.
Citing public reporting, the senators explained that Congress, financial regulators, and potential Libra Association member companies have struggled to get sufficient details from Facebook about risks that Libra may pose, including facilitating criminal and terrorist financing, destabilizing the global financial system, interfering with monetary policy, or exposing consumers to risks currently limited to accredited investors.
For a PDF copy of the letters, click here.
The full text of the letter to Visa CEO Alfred Kelly follows:
Dear Mr. Kelly,
We write to share our deep concerns about Facebook’s Libra crypto-currency project and the formation of the Libra Association. We are concerned because key questions remain unanswered about the risks the project poses to consumers, regulated financial institutions, and the global financial system. We urge you to carefully consider how your companies will manage these risks before proceeding, given that Facebook has not yet demonstrated to Congress, financial regulators—and perhaps not even to your companies—that it is taking these risks seriously.
Public reporting suggests that potential Libra Association member companies have struggled to get sufficient details from Facebook about the management of the significant risks that Libra may pose. Even though Facebook is the driving force behind Libra and offers the largest user base for the new crypto-currency, the company has not provided a clear plan for how it will prevent Libra from facilitating criminal and terrorist financing, destabilizing the global financial system, interfering with monetary policy, or exposing consumers to risks currently limited to accredited investors. In fact, in response to questions from Congress about the potential risks posed by Libra, Facebook deflects the responsibility of addressing these risks on to potential Libra Association members, such as your companies, as well as other participants in the payments ecosystem.
Facebook is currently struggling to tackle massive issues, such as privacy violations, disinformation, election interference, discrimination, and fraud, and it has not demonstrated an ability to bring those failures under control. You should be concerned that any weaknesses in Facebook’s risk management systems will become weaknesses in your systems that you may not be able to effectively mitigate.
These risks are not hypothetical. The New York Times recently reported a proliferation of online child sexual abuse, due in large part to tech platforms like Facebook. In fact, 12 million of the 18.4 million reports of child sexual abuse photos and videos around the world last year were attributed to Facebook Messenger. It is chilling to think what could happen if Facebook combines encrypted messaging with embedded anonymous global payments via Libra. Your companies should be extremely cautious about moving ahead with a project that will foreseeably fuel the growth in global criminal activity.
Facebook appears to want the benefits of engaging in financial activities without the responsibility of being regulated as a financial services company. Facebook is attempting to accomplish that objective by shifting the risks and the need to design new compliance regimes on to regulated members of the Libra Association like your companies. If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities.
We urge you to proceed with caution until Facebook is able to provide real answers to you, Congress, and financial regulators about how it will manage the various and significant risks posed by Libra. We also urge you to consider Facebook’s inability to manage current risks from its core business lines when making a decision about whether to proceed with Libra.
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