Fed Chairman Powell: Facebook's Libra raises 'many serious concerns'

The Federal Reserve is raising red flags over Facebook's new digital currency.

Continue Reading Below

TickerSecurityLastChangeChange %
FBFACEBOOK INC.185.85-4.54-2.38%

At a hearing on Wednesday in the House Financial Services Committee, Chairman Jerome Powell said the central bank supports "responsible innovation" in the banking industry if risks are managed.

But he remains a skeptic of Facebook's Libra, the cryptocurrency platform the social media giant announced last month.

"Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial security. These are concerns that should be thoroughly and publicly addressed before proceeding," he told the panel.

Given Facebook's billions of users, any problem arising from the new digital currency would rise to "systematically important levels," he added.

To oversee the offering, the Fed set up a working group to oversee the offering and is working with other U.S. agencies and international regulators on the issue.

"The process of addressing these concerns, we think, should be a careful, patient one and not a sprint to implementation," he said in response to questioning from Chairman Maxine Waters, D-Calif.

Powell could not say whether the U.S. government would designate Libra as a systemically important financial entity, subjecting it to stricter regulatory scrutiny, but said it's "highly likely" the Treasury Department's Financial Stability Oversight Council considers it.

In a letter to the heads of the Senate Banking Committee, Facebook's David Marcus, who heads the Menlo Park, California-based firm's digital wallet Calibra, said feedback from Congress, central banks, regulators and others is necessary.

"We understand that big ideas take time, that policymakers and others are raising important questions, and that we can’t do this alone," he wrote.

Marcus also assured lawmakers that consumer privacy would be a top concern and no information from Libra would be shared with Facebook or other third-party organizations without explicit consent.

"We are committed to taking the time to do this right," he wrote. "Calibra customer account information and financial data will not be used to improve ad targeting on Facebook or across its family of social media and messaging products."

CLICK HERE TO GET THE FOX BUSINESS APP

Marcus will testify in front of the panel on July 16. The House Financial Services Committee is holding a hearing on Libra the next day.