Credit union trade groups to Facebook: Not so fast

Credit union trade groups are urging lawmakers and regulators to take a cautious approach to Facebook’s proposed digital currency.

In a letter addressed to the Senate Banking Committee’s Chairman Sen. Mike Crapo and Sen. Sherrod Brown, D-Ohio, the ranking member of the committee, the National Association of Federally-Insured Credit Unions expressed support in examining the regulatory concerns associated with Libra.

David Marcus, who leads Calibra, the social media company’s cryptocurrency subsidiary, testified on Tuesday before the committee.

“Credit unions have long supported efforts to combat criminal activity in the financial system, and NAFCU has consistently recognized the importance of the Financial Crimes Enforcement Network and BSA/AML regimes,” wrote Max Virukus, who serves as NAFCU’s associate director of legislative affairs.

Facebook unveiled details about Libra in June. The social media giant advocated that moving money around the globe "should be as easy and cheap as sending a text message." Libra would allow users to complete Libra transactions under pseudonyms.

Facebook will not have full control over Libra, though it expects to maintain a leadership role through the rest of this year. There are 28 founding members in the Libra Association who helped support the cryptocurrency initiative, and that number could climb to 100.

Many have admonished Facebook for moving into the payments arena. Federal Reserve Chairman Jerome Powell appeared before the House Financial Services Committee and Senate Banking Committee last week and expressed skepticism about the cryptocurrency plan. Powell questioned the feasibility of implementing Libra and cast doubt that Facebook would be able to launch Libra within a year.

Other critics have pointed to the Cambridge Analytica scandal where data from millions of Facebook users was harvested without their consent. This past week the Federal Trade Commission voted to issue a $5 billion fine against Facebook. The fine is the largest issued in FTC’s history, surpassing a $22.5 million fine Google paid in 2012.

NAFCU previously called for a national data security standard after the Cambridge Analytica scandal and again urged Congress to take up the issue.

The Credit Union National Association is keeping an eye on the regulatory aspect as well, according to Lance Noggle, CUNA's senior director of advocacy and senior counsel for payments and cybersecurity.

"We don't know when this is actually going to happen," Noggle said in an interview with Credit Union Journal. "Facebook says they're not going to introduce this until there's proper regulatory sign offs. And it looks like the regulators and politicians are very interested, but it seems to be complex to introduce this in the way that they are, so I think our members, like they do with bitcoin, will remain watchful."

The House Financial Services Committee is scheduled to hold its Facebook hearing tomorrow.