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For Immediate Release
July, 01 2020, 12:00am EDT
Contact:
Raúl Carrillo, raul@ourfinancialsecurity.org
Demand Progress Education Fund and AFR Education Fund Reject Recent Changes to the Libra Association's White Paper as Insufficient
The groups released a report illustrating why federal regulators should continue to take a precautionary approach to the corporate power grab.
WASHINGTON
Demand Progress Education Fund and Americans for Financial Reform Education Fund recently released a joint report, making the case for policymakers to take action to prevent the Geneva-based Libra project from evading regulation and going into effect as proposed. The current proposal would result in mass surveillance of Libra users and business partners, systemically dangerous arbitrage of the financial regulatory system, and the concerted encroachment of Facebook and its partners into the financial services sector. It would escalate the dangerous trend toward the commingling of commerce and banking, and it would deepen Facebook's corporate economic and political dominance.
The report lays out a broad set of tools and actions that regulators can and should take. The FTC should exercise its broad mandate to prevent unfair methods of competition that would likely arise from within the Libra ecosystem, especially those rooted in privacy violations. The SEC, CFTC, and the Federal Reserve System should apply prudential regulation to Libra Networks under the color of federal securities regulation, derivatives regulation, banking regulation, or some combination thereof. Conduct regulators like the IRS, FinCEN, and the CFPB should be prepared to take action according to their respective mandates.
The report also argues for statutory changes to constrain corporate data use to a short list of permissible purposes, treat bank deposit "substitutes" as proper bank deposits, and generally impose bright-line bans on Big Tech's involvement in the financial sector. It also calls for policymakers to provide a true public option for basic financial services with mobile access.
The full report can be found here.
"Although some commentators have characterized the April changes to the Libra White Paper as 'scaling back' the ambition of the project, our Black Paper argues the core problems with the business model remain: Facebook and a cartel of junior partners would leverage their platform power to establish a global financial surveillance system on the back of our public money systems," said Raul Carrillo, policy counsel for Demand Progress Education Fund and fellow for Americans for Financial Reform Education Fund.
"The Libra project is a unique attempt by dominant platforms to expand corporate power into new territory," said David Segal, executive director for Demand Progress Education Fund. "The business history of Facebook and its partners suggests they are consistently willing to flout or evade laws regarding data collection, protection, and privacy in order to expand. The increasing combination of social media and payments data is especially troublesome to us, as it reinforces a threat of unfair competition and increased monopolization of our information economy."
"The Association's contention that it need not do anything more than register as a money transmitter flies in the face of everything we know about shadow banking," said Lisa Donner, executive director for Americans for Financial Reform Education Fund. "Without appropriate regulation, Libra wallet balances could become dangerously insecure; a run on Libra could leave consumers entirely unprotected. This is especially concerning because the Libra Reserve fund would be exposed to turbulence in foreign exchange, sovereign debt, and money markets."
Additional Background
Both groups sent a joint letter to the House Judiciary Committee addressing similar themes in April. The letter can be found here.
Demand Progress amplifies the voice of the people -- and wields it to make government accountable and contest concentrated corporate power. Our mission is to protect the democratic character of the internet -- and wield it to contest concentrated corporate power and hold government accountable.
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