Lael Brainard – the Federal Reserve governor – is back in the news. This time, she’s attacking the cryptocurrency project Libra, and to be fair, she’s not the only one.
Brainard: Can We Trust Libra?
Libra has been very controversial since it first emerged last June. Many have had mixed to negative reactions towards the cryptocurrency, claiming that it cannot be trusted given that it’s a subsidiary of Facebook, a social media conglomerate that has been attached to several scandals over the years.
Arguably the biggest one that comes to mind is Cambridge Analytica, which involved Facebook selling users’ private data to third parties for advertising purposes. Users had not given their permission for information to be sold, nor had they realized that such action was taking place.
This led to a firestorm in the media, and head honcho of Facebook Mark Zuckerberg had to deal with the humiliation of being grilled on live television in front of a Senate panel that had many questions regarding how Facebook was handling itself. The company was later slapped with a massive monetary penalty and trust in the social media company fell to all-time lows.
The biggest questions surrounding Libra have to do with how it’s planning to protect users’ financial data. The company stems from a parent corporation that ultimately abused privacy privileges, so how are executives planning to make up for that? Furthermore, how does Libra intend to close the door to money laundering and other white-collar crime?
Many of these questions remain unanswered at the time of writing. For all the hype and hoopla surrounding Libra, it’s been a relatively secretive project indeed, gathering steam only behind closed doors. Zuckerberg has commented, however, that he’s willing to cooperate in any way with U.S. legislators and even said that his company Facebook will have to exit the Libra Association granted regulators do not give the full “go ahead” on the project.
This is all fine and dandy, but many political authorities still don’t trust the antics, one of which is Brainard. At a recent conference in Germany, she took aim at Libra, claiming that there were simply too many risks behind the project and that it called into question the “rights and responsibilities of various market participants” in the financial space.
The Stable Coin Status Raises Questions…
In addition, Brainard had serious questions about the fiat currencies that are allegedly supporting or backing the stable coin project. At press time, it is said that Libra will be supported by a basket of standard fiat currencies ranging from the euro to the Singapore dollar. Brainard commented:
What would set Facebook’s Libra apart, if it were to proceed, is the combination of an active-user network representing more than a third of the global population with the issuance of a private digital currency opaquely tied to a basket of sovereign currencies.