It took Facebook announcing a cryptocurrency product to sound the crypto regulation alarm in Washington, but now politicians have turned their spotlight directly at the industry—and turned up their rhetoric.
In his opening remarks at a Senate hearing about digital currency regulation on Tuesday, Sen. Sherrod Brown (D-OH), ranking member of the Senate Banking Committee, railed against Facebook’s crypto plan—and compared it to the 2008 subprime mortgage crisis that caused the recession.
“Before they blew up the economy in 2008, bankers were pitching an ‘innovative’ new product called subprime mortgages,” Brown said. “Just like Facebook – which claims its new currency will help the unbanked and underbanked—these mortgages were supposed to help people who never had access to credit achieve the American dream of homeownership. In reality, those mortgages ripped off millions of families who ended up losing their homes, they wrecked the economy, and they made the staggering inequality in this country even worse... Big tech companies and Wall Street banks are hiding behind innovation as an excuse to take over important public services.”
Indeed, much of the hue and cry in D.C. over Libra appears to stem from the fear that if Facebook’s cryptocurrency catches on, Facebook will become a sort of bank. (Facebook has said it does not wish to function as a bank, but the company’s ambitions to offer financial services have been known for a long time.) Because of Facebook’s giant base of more than two billion global users, it doesn’t even need a huge portion of users to try Libra for the coin to get scale.
Brown’s doom-and-gloom remarks came two weeks after Rep. Brad Sherman (D-CA) said at a Congressional hearing that Libra could “do more to endanger America” than 9/11, by financing “drug dealers, human traffickers, terrorists, tax evaders and sanctions evaders.”
All of the exaggerated rhetoric has reasonable roots: after the Cambridge Analytica scandal and a $5 billion FTC fine, June 18 was arguably terrible timing for Facebook to announce a cryptocurrency push.
To be fair, Libra is not just from Facebook—the coin will be governed by a consortium of “founding members” that includes big trusted consumer names like Visa, MasterCard, PayPal, and eBay. Libra Association named 28 founding members at the time of its announcement and says it will have 100 by the time Libra launches. On the other hand, the members have not actually signed any binding agreements, and could back out at any time if the heat on Libra gets too hot.
Politicians like Sherrod Brown, for now, look intent on keeping that heat on.
Daniel Roberts covers bitcoin and blockchain at Yahoo Finance. Follow him on Twitter at @readDanwrite.