U.S. Federal Reserve Governor Lael Brainard has warned that a stablecoin like Facebook's planned Libra could make central banks’ efforts to conduct monetary policy “complicated.”
“It should be no surprise that Facebook’s Libra is attracting a high level of scrutiny from lawmakers and authorities,” she said, according to Reuters. “Libra, and indeed any stablecoin project with global scale and scope, must address a core set of legal and regulatory challenges before it can facilitate a first payment.”
Her comments come after reports of it looking unlikely for Facebook to secure the regulatory approval needed to launch Libra next year. Politicians, officials and regulators have all expressed concerns about the project, and how it could lead to financial instability, as well as be used for money laundering. As a result, many of the companies that signed up as founding members have cut ties with the crypto.
Yet, David Marcus, one of the Facebook executives leading the currency project, insisted that "it wasn’t a tough week" for the company. In fact, Libra said it has 180 potential members in the wings that meet the organization’s membership criteria. Over 1,500 entities have indicated interest in joining the project.
“It’s kind of odd that all of this is happening at the stage of this project, because it’s a project. It’s an idea. It’s a whitepaper. Nothing is operating yet,” Marcus said regarding the scrutiny from worldwide regulators. “It’s kind of sad, in a way, to see all the issues that we currently have with the current system.”
However, Brainard said those backing Libra still need to address a variety of regulatory questions, including how to prevent the currency from being used for illegal activities across borders, as well as the protections or recourse that would be put in place for consumers using the currency.
“Consumers need to be cautioned that stablecoins are likely to be starkly different from sovereign-issued currency in legal terms,” she said.