Friday, October 18, 2019
Sen. Sherrod Brown, D-Ohio, ranking member of the Senate Banking Committee, and another member of that panel, Sen. Brian Schatz, D-Hawaii, sent letters in early October to the CEOs of Mastercard, Visa and Stripe urging them to proceed with caution in their work with Libra.
“We are concerned because key questions remain unanswered about the risk the project poses to consumers, regulated financial institutions and the global financial system,” the senators wrote. “We urge you to carefully consider how your companies will manage the risks before proceeding.”
In an Oct. 14, 2019, interview with CNBC, U.S. Treasury Secretary Steven Mnuchin said he has met with Libra officials in recent months and has been “very clear” that if the scheme doesn’t meet U.S. anti-money laundering requirements the United States would take actions against Libra. “And I assume some of the partners got concerned and dropped out until they meet those standards,” Mnuchin told CNBC.
Mnuchin’s comments follow a pledge by the European Union’s finance commissioner to propose legislation establishing a regulatory regime for cryptocurrencies. “Europe needs a common approach to crypto-assets such as Libra,” Finance Minister Valdis Dombrovskis told EU lawmakers. “I intend to propose new legislation on this.”
Meanwhile, the House Financial Services Committee has asked Facebook to place an immediate moratorium on its work on Libra and Calibra, a companion digital wallet. And the panel has called Facebook Chairman and CEO Mark Zuckerberg to testify as the sole witness before an Oct. 23 hearing on the impact of Facebook on financial services.
Rep. Maxine Waters, D-Calif., chairwoman of the committee, has been circulating draft legislation, titled the Keep Big Tech out of Finance Act, that would prohibit large platform utilities, like Facebook, from becoming chartered, licensed or registered as a U.S. financial institution, or otherwise becoming affiliated with regulated financial institutions.
The proposal also would prohibit large platform utilities from establishing, maintaining or operating a digital asset intended to be widely used as a medium of exchange, unit of account, store of value or any similar function.
Libra, which was announced by Facebook in May 2019, is supposed to operate as a “stable coin,” meaning Libra crypto-coins will be backed by a reserve of real assets (for example, dollars or euros) known as the Libra Reserve, which is intended to avoid value volatility. Plans are for those assets to be held by a geographically distributed network of custodians with investment-grade ratings, Facebook stated.
In public statement released on Oct. 11, Visa said it hasn’t closed the door entirely on Libra. “We will continue to evaluate and our ultimate decision will be determined by a number of factors, including [the Libra] Association’s ability to fully satisfy all requisite regulatory expectations,” the statement said.
PayPal struck a similar chord in a statement provided to several news outlets. “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future,” PayPal stated.
In a series of tweets on Oct. 11, David Marcus, a former PayPal executive who has been heading up the Libra initiative for Facebook, thanked Mastercard and Visa “for sticking it out” as long as they did. “The pressure has been intense (understatement), and I respect their decision until there is regulatory clarity for Libra to proceed, vs. the invoked threats (by many) on their biz,” Marcus tweeted. 
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
