Facebook’s plans to launch its own ‘Libra’ cryptocurrency have sparked a wave of criticism from lawmakers and businesses over its data privacy and regulatory impact, including calls for the project to be halted.

Hours after Facebook confirmed on Tuesday that it was working on a long-rumoured project to launch a cryptocurrency and digital wallet as part of a push into financial services, representative Maxine Waters, chairwoman of the US House Financial Services Committee, called on the social media giant to testify in congress and put the development on ice to allow authorities to review the plans.


A spokesman for Facebook said: "We look forward to responding to policy makers’ questions as this process moves forward."

The social media giant has joined forces with 28 global companies, including Mastercard, PayPal and Uber, to launch the Libra Association, which will supervise the development of a global, reserve-backed digital currency built on the blockchain network.

This will form part of a wider financial services ecosystem called Calibra, which will be available on Facebook and WhatsApp platforms, as well as a standalone app from the first half of 2020. Facebook said that Calibra would enable more than two billion users around the world to store, save and send money in Libra and highlighted a focus on improving financial inclusion for ‘unbanked’ Facebook users in developing countries.

However, the announcement that Facebook has begun a perhaps inevitable creep into the market for digital payments has sparked alarm from businesses and governments, with many voicing concerns that it could exploit dominance in the social media space to disrupt the global financial market.

In a statement, representative Waters said: “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users.”

Bruno LeMaire, the French finance minister, called on central banking chiefs in the G7 group of nations to write a report within the next six weeks to assess the potential scope of Libra and its impact on consumers, amid fears that a global cryptocurrency could mount a long term challenge to sovereign, reserve-backed currencies.

Le Maire also told French radio that Facebook must provide guarantees that the cryptocurrency “cannot be diverted to finance terrorism or any other illegal activity”.

While lawmakers rushed to weigh up the regulatory impact of Libra, analysts around the world also outlined how Facebook’s move could present a number of challenges.

Jo Howes, commercial director at digital banking software provider Crealogix, commented: “While many in the industry played down the significance of cryptocurrencies since the bursting of the most recent speculative bubble, we have seen several of the larger financial institutions - such as Goldman Sachs, Morgan Stanley and JPMorgan - explore seriously how they might offer cryptocurrency services to their clients.

She added: “Now tech giants are getting on board and this new mainstream deployment from Facebook will bring the conversation straight back to the top of the agenda for the financial industry.”

Ido Sadeh Man, founder and president of Saga Foundation, warned that a lack of competition oversight could result in Libra becoming a “nightmare” for other financial services players.

“There is a lot of sense in the way Facebook's Libra addresses the need in global money,” he said. “However, if the control over the currency remains in the unelected hands of Facebook and its commercial partners alone, this might very well turn the dream into a nightmare for all of us.”

Others were quick to point out the data privacy implications of a digital currency, with consumers potentially wary over how their information may be used, in the wake of scrutiny of Facebook’s role in incidents such as the Cambridge Analytica scandal- concerns that Facebook has sought to allay by publishing data privacy pledges for Colibra users.

David Emm, principal security researcher at Kaspersky, said: “The reality is, many users are still unsure about using cryptocurrency, or even what cryptocurrency is – in fact, just 1 in 10 of us fully understanding how they work, and only 19 per cent have ever purchased any cryptocurrency.”

He said that it was likely to take time for consumers to invest the same level of trust in a digital currency as they do in traditional banking institutions which offer branch services in the real world.

“I don’t think we have the same level of confidence with an online equivalent,” Emm continued, adding: “Whether that’s a currency exchange that holds our digital money for us, or our own digital wallet – if crypto-currencies are to rival real-world currencies, we all need to have the same level of trust.”

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