The U.S. Department of the Treasury is set to monitor Facebook’s proposed cryptocurrency Libra to weed out potential risks for the global economy.
According to an announcement published by Emanuel Cleaver, II, a congressman for Missouri’s fifth district, the Department of the Treasury confirmed there are various “unanswered questions” when it comes to Libra, and Congress is set to continue to examine them and “closely monitor this market to address any regulatory gaps that it identifies.
The Libra initiative is led by Facebook, but the currency itself is set to be governed by the Libra Association, an organization whose founding members include Uber, Spotify, Lyft, and Coinbase. This, after financial services giants like Visa, Mastercard, and PayPal left it.
The cryptocurrency is set to be backed by a basket of fiat currencies, comprised of the U.S. dollar and short-term U.S. Treasury bonds (50%), the Japanese yen (14%), the euro (18%), the British pound (11%) and the Singapore dollar (7%).
Cleaver’s announcement came after he received a letter from Treasury after writing to the Financial Stability Oversight Council (FSOC), and the Office of Financial Research (OFR) back in August, calling on the regulators to examine both Libra and Calibra, a Facebook subsidiary that’s a founding member of the Association.
In the letter, the Treasury wrote:
It is unclear whether U.S. and foreign regulators will have the ability to monitor the Libra market and require corrective action, if necessary. This concern must be addressed if the Libra is to launch.”
While Cleaver applauded Facebook’s efforts to work with regulators regarding Libra, with Zuckerberg going as far as saying the social media giant will drop pout of the project if it isn’t approved by regulators, he said it’s “absolutely critical” the project is properly examined to ensure it “does not pose a systemic risk to the global economy.”
According to a report by the BBC, members of the Libra Association haven’t yet contributed funds to the project, after enduring an exodus in support over the past month that saw some of its founders – including PayPal, Visa, Mastercard, and eBay – abandon the project.
Testifying before the House of Representatives Financial Services Committee, Zuckerberg recently said he isn’t sure the cryptocurrency project is going to work.
Featured image via Pixabay.