The banking industry has been immensely critical of Facebook’s Libra, and this past week was no exception. A number of representatives from United States banks added more warnings.
Major banks filed an official complaint to the central bank stating that Libra would pose a major threat to the United States’ monetary policies. The report stated, “As consumers adopt Libra, more deposits could migrate onto the platform, effectively reducing liquidity, and that disintermediation may further expand into loan and investment services.”
Among the executives that backed the complaint were Beth Mooney of KeyCorp and Brian Moynihan of Bank of America Corp. Congress also echoed concerns with Senator Brown from Ohio questioning how Facebook could be trusted given the security concerns and other scandals that Facebook has faced. Representative French Hill from Arkansas and Bill Foster of Illinois also formally voiced their disapproval with bipartisan support.
“Facebook is potentially creating a digital monetary ecosystem outside of sanctioned financial markets — or a ‘shadow banking’ system,” banks stated in the complaint. European banks had previously been quite critical of the Libra and Facebook, where lawmakers in multiple countries have stated that the currency would never be authorized in the European Union.
While the currency has faced fierce opposition, it is noteworthy that Bitcoin has been one of the highest performing assets in 2019. Most analysts predicted a massive sell off this year given the uncertainty of what makes Bitcoin and other cryptocurrencies have any street value.
While Bitcoin is nowhere near its high, it has kept most of its value defying the odds. However, the currency is not linked to a corporation as powerful or controversial as Facebook. The combination of a media company with the ability to combine consumer and personal data with a currency seems to be a bridge too far for many skeptics.
With Facebook already experiencing data breaches, the question of whether Libra ever launches is still an open one. To add fuel to the fire, Paypal also announced last week that it had pulled out of being one of the backers.