Sen. Dianne Feinstein (D-CA) expressed concerns over Facebook’s plan to create a new digital currency called Libra, which she said could create a “shadow financial system.”
Feinstein sent a letter last week to U.S. Treasury Secretary Mnuchin asking several key questions about Facebook’s plan before she signs off on it.
“I have significant concerns with Facebook’s proposed Libra digital currency and believe that numerous important questions must be answered before it is allowed to go into effect,” Feinstein wrote. “If enough people eventually use Libra, it could create a shadow financial system that would compete with the dollar and other national currencies. I do not believe this is in our national interest.”
Feinstein said it’s unclear why a private company should be able to create its own international currency that could undermine U.S. monetary policy.
“Currencies are managed by central banks that are accountable to elected officials for good reasons. The Federal Reserve has a legal obligation to work for the public interest; a for-profit corporation does not. If enough people eventually use Libra, it could create a shadow financial system that would compete with the dollar and other national currencies. I do not believe this is in our national interest,” Feinstein wrote.
She also questioned which agencies would have jurisdiction for a digital currency like Libra.
“The U.S. financial regulatory structure was not designed with digital currencies in mind. As you know, gaps in oversight of the financial system contributed to the global financial crisis just over a decade ago. We must understand clearly how any digital currencies will be regulated and overseen before they begin operation,” she wrote.
Further, there are national security and law enforcement concerns as digital currencies create opportunities for people who finance terrorism, launder money, and engage in criminal activities. Feinstein urged Mnuchin to work with U.S. regulators to address these and other questions and concerns.