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Facebook Libra cryptocurrency a 'serious concern' for Federal Reserve, report says

CNET logo CNET 7/11/2019 Corinne Reichert
a close up of a computer keyboard: Even more regulators are examining Facebook's cryptocurrency, Libra. Omar Marques/Getty Images© Provided by CBS Interactive Inc. Even more regulators are examining Facebook's cryptocurrency, Libra. Omar Marques/Getty Images

The US Federal Reserve System has added its voice to the chorus of doubts raised by lawmakers, politicians and others worldwide about Facebook's newly announced cryptocurrencyLibra . While speaking to House lawmakers Wednesday, Federal Reserve Chairman Jerome Powell said the US central bank has "serious concerns" about Libra, The Wall Street Journal reported.

Facebook last month unveiled the global digital coin, which will be managed by a governing body called the Libra Association and through a wallet named Calibra. Facebook is working alongside 27 launch partners for Libra, including PayPal, Visa, Uber, Coinbase, Lyft, Mastercard, Vodafone, eBay and Spotify, but aims to have 100 members in the Libra Association by 2020.

Libra, set to launch in the first half of next year, is intended to be used to purchase products, send money internationally and make donations.

"While the project's sponsors hold out the possibility of public benefits, including improved financial access for consumers, Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability," Powell said when asked about Libra by Rep. Maxine Waters, according to the Journal.

Both the Federal Reserve System and a separate panel called the Financial Stability Oversight Council are meeting to discuss Libra alongside global policy makers, Powell also reportedly said.

The board of governors of the Federal Reserve System didn't immediately respond to a request for comment, but David Marcus, head of Calibra, last week said the Libra Association is "committed to a collaborative process with regulators, central banks and lawmakers to ensure that Libra helps with the kinds of issues that the existing financial system has been fighting."

Marcus tweeted that Facebook went live with its announcement of Libra so early so that it could have such dialogue and get feedback on implementation.

"Just caught up with comments from @federalreserve Chairman Powell at his @FSCDems Hearing, and I fully agree that legitimate concerns about @Libra_ should be addressed carefully and patiently, and that it shouldn't be rushed. This is why we shared plans early," Marcus tweeted Wednesday afternoon.

Libra has faced considerable skepticism and pushback since being announced, with US and European politicians almost immediately expressing concerns that stem from Facebook's history of data security problems

Waters, chair of the US House Financial Services Committee, previously said Facebook "has repeatedly shown a disregard for the protection and careful use of this data." She also sent a letter to Facebook executives last week asking them to temporarily cease plans to create Libra until security and privacy concerns are addressed.

A Senate committee has scheduled a hearing for July 17 to discuss the cryptocurrency.

In Europe, France's Finance Minister, Bruno Le Maire, reportedly said Libra would be fine if its use is limited to transactions but that Facebook shouldn't be allowed to create a "sovereign currency."

Last week, more than 30 groups, including the Economic Policy Institute and US PIRG, also asked Congress and regulators to impose a moratorium on Libra until "profound questions" are answered.

Earlier this week, India also reportedly said it's considering not allowing the currency to be traded at all.

"Design of the Facebook currency has not been fully explained," Subhash Garg, India's Economic Affairs Secretary, told Bloomberg in an interview Saturday. "But whatever it is, it would be a private cryptocurrency and that's not something we have been comfortable with."

The Libra blockchain will be global, but it'll be up to the Calibra providers to determine where they'll operate the wallet service. It also won't be available in any US-sanctioned countries, or countries that ban cryptocurrencies.

In April 2018, all entities regulated by the Reserve Bank of India were banned from dealing in cryptocurrencies and virtual coins, though it's still legal for individuals to trade currencies like bitcoin. However, last month it was reported that the Indian government is working on draft laws that would propose a jail sentence for any crypto users.

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