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Senators Push Back Against Facebook Cryptocurrency Program

U.S. Sen. Sherrod Brown has stated his opposition to Facebook's cryptocurrency pilot program. He argues the company doesn't respond adequately when its products are shown to harm users.

Facebook logo and bitcoin - use once
(TNS) — Given recent revelations of Facebook’s failure to protect its users, Senate Banking, Housing and Urban Affairs Committee Chairman Sherrod Brown of Ohio on Tuesday argued that the company shouldn’t be allowed to launch a new cryptocurrency.

In a letter to Facebook CEO Mark Zuckerberg, Brown and several other Senate Democrats cited scandal over the company’s use of algorithms on Instagram that have been alleged to harm teenaged girls in declaring that the company “cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient."

“Facebook has repeatedly shown itself indifferent to the harms its products cause,” said the letter from Brown, Hawaii’s Brian Schatz, Connecticut’s Richard Blumenthal, Massachusetts’ Elizabeth Warren and Minnesota’s Tina Smith.

Brown sent the letter as Facebook launched a pilot program to test its “Novi” digital wallet app in Guatemala and the United States. The letter accuses Facebook of violating past pledges to not launch its payment system without approval from financial regulators. Although Novi obtained state-issued money transmitter licenses in nearly every state, Brown’s letter asserts that doesn’t amount to obtaining U.S. regulators’ blessing.

A Novi spokesperson said the company looks forward to responding to the committee’s letter.

The head of Facebook’s financial products division said on Twitter that the company hopes the pilot will demonstrate that stablecoins — which are cryptocurrencies that try to peg their market value to an external reference, like the value of a dollar — can be used for payments “beyond how they are typically used today.”

The company announced plans for a digital currency several years ago, but never launched it. It was initially to be called “Libra” but was later renamed “Diem.”

Brown expressed concerns about Libra’s risks to consumers and the financial system in 2019, and his letter says those concerns weren’t addressed. Brown says U.S. financial regulators are studying the risks that stablecoins pose to financial stability and how to address them. The letter also expresses concern a stablecoin system could be used “by criminals and terrorists to launder their proceeds of crime and finance their terrorist activities.”

“As Federal Reserve Chair Powell said of stablecoins at a July 2021 Senate Banking and Housing Committee hearing, ‘They’re like money funds, they’re like bank deposits and they’re growing incredibly fast but without appropriate regulation,’” Brown’s letter said. “Acting Comptroller of the Currency Hsu recently likened stablecoins to the wholesale funding markets whose collapse precipitated the 2008 financial crisis.”

“Unfortunately, Facebook’s decision to pursue a digital currency and payments network is just one more example of the company ‘moving fast and breaking things’ (and in too many cases, misleading Congress in order to do so),” the letter continued. “Time and again, Facebook has made conscious business decisions to continue with actions that have harmed its users and the broader society ... We urge you to immediately discontinue your Novi pilot and to commit that you will not bring Diem to market.”

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