Trump lashes out at Libra

US president says Facebook’s system will need a banking licence if it wants to be a bank; Jerome Powell says Libra not likely to be allowed to launch in 12 months
Donald Trump
Donald Trump

The US president has become the latest person to criticise Facebook’s proposed Libra system for its potential financial stability risks.

In a series of tweets, Trump said Libra would have to seek a banking charter if it wanted to operate like a bank. “Facebook Libra’s ‘virtual currency’ will have little standing or dependability,” he said.

Trump also criticised crypto assets more broadly, saying he was “not a fan” of bitcoin and similar assets, adding they are “not money”, are highly volatile and their value is based “on thin air”.

“Unregulated crypto assets can facilitate unlawful behaviour, including drug trade and other illegal activity,” Trump said. He promised the US dollar would remain the world’s “dominant currency”.

Trump’s comments on Libra follow testimony by Federal Reserve chair Jerome Powell, in which he dampened expectations of a quick launch for Libra. Facebook has said it plans to launch the currency in 2020.

“I think we need to do a very careful, patient, thorough assessment of what the risks really are,” Powell told Congress. “The idea that this will be going into implementation within 12 months, I think, is not going to be proven right. We’re going to take more time than that.”

Powell said it was a challenge that there was “no single credible regulatory agency” that can oversee Libra, as it will operate on a state, federal and international level. He noted the Fed was still working to understand the “basics” of the platform.

Facebook launched Libra in June, saying the system would be designed to boost financial inclusion and facilitate straightforward cross-border payments. It is based on a form of blockchain and backed by a pool of assets that is likely to be dominated by the US dollar, which is meant to hold the value of Libra stable – in sharp contrast to the violent moves seen in the price of bitcoin.

Regulators have been quick to respond, and the G7 has formed a group to investigate Libra and other “stablecoins” under the leadership of the European Central Bank’s Benoît Cœuré.

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