On Wednesday, U.S. Federal Reserve Governor Lael Brainard attacked Facebook’s cryptocurrency project, Libra, stating it faces a “core set of legal and regulatory challenges” before it could be viable for public use.
Brainard said that the idea Libra being a cryptocurrency backed by government currency or other stable assets to avoid unpredictable and drastic fluctuations that are typical of traditional cryptocurrencies, like bitcoin, remains unproven, and has unclear rights for consumers.
“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,” Brainard explained. “Without requisite safeguards, stablecoin networks at global scale may put consumers at risk.”
According to Reuters, cryptocurrencies “still must clear hurdles including the possibility of fraud and their use for activities like money laundering. Theft and fraud losses associated with cryptocurrencies are estimated to have more than doubled to around $4.4 billion in 2019 from $1.7 billion the year before, Brainard said.
‘Given the stakes, any global payments network should be expected to meet a high threshold of legal and regulatory safeguards before launching operations,’ she said.”