Watchdog warns of ‘risks and threats’ from Facebook cryptocurrency


Libra will be linked to Facebook’s network of apps and will allow users to quickly transfer money with almost no fees through the company’s Calibra wallet.

Following the announcement, regulators around the world began to flag concerns with the currency, believing it could create significant privacy risks for users, lead to a disruption of the financial system and aid money laundering, fraud and terrorism financing.

Libra may attract a huge user group, maybe even half of the population.

University of Sydney lecturer Dr George Tian

As first reported by The Australian, ASIC met with Facebook in late July and documents revealed it asked the company numerous questions about the planned operation of Libra.

These included what the rights of Libra holders were, how the company would process its transactions, how Facebook would protect spending data and how Libra would comply with anti-money laundering legislation.

The meeting failed to allay the regulator’s concerns, and ASIC and other regulators planned to meet with Facebook again in August. That meeting was postponed until last month.

A person familiar with the nature of the meetings said attendees were “extremely surprised” by how unprepared Facebook was, considering the company plans to launch Libra in mid-2020.

Facebook CEO Mark Zuckerberg.Credit:Bloomberg

Ahead of the planned August meeting, the Office of the Australian Information Commissioner called for greater detail from Facebook, saying the social media company had failed to “meet expectations” on privacy in the past.

The office has said it will now work with local regulators – including ASIC, money-laundering regulator AUSTRAC and consumer and competition watchdog ACCC – to push for clarification on Libra’s operations,

Facebook was approached for comment.

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Dr George Tian, a senior lecturer and blockchain regulation specialist at the University of Technology Sydney, said while governments have wrestled with regulating cryptocurrencies in the past, the scale of Libra has left them particularly concerned.

“Bitcoin and other cryptocurrencies have relatively small user groups, but Libra may attract a huge user group, maybe even half of the population,” Dr Tian said.

“This poses a very serious question for the regulators on how they should treat Libra and what its legal status is. Will it be a true currency, like the dollar, or not really a currency, like Bitcoin?”

With 2.8 billion users on Facebook’s platforms alone, Dr Tian says (along with fraud and money-laundering worries) regulators may be concerned a successful launch of Libra could see it replace the US dollar as the de facto global currency.

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But despite the regulators’ action, Dr Tian believes Australia is unlikely to make any significant moves to ban or limit Libra’s launch locally, believing instead the government will look to the US for guidance.

In a statement, a spokesperson for the OAIC confirmed it was working with local and global regulators to chase more information from Facebook about Libra.

“We remain concerned that Facebook and Calibra have only made broad public statements about privacy, and they have not addressed the information handling practices that will be in place to secure and protect personal information,” the office said.

Michael Bacina, a partner at Piper Alderman, is advising a group of Australian companies petitioning to join the Libra Association, a non-profit tasked with overseeing the proposed currency. He says while regulatory scrutiny is important, it was unjustified at this stage of development.

“Libra hasn’t released anything which could be properly analysed for compliance or non-compliance. To accuse Libra of failing to answer detailed questions about the compliance of software which hasn’t been built yet is very surprising,” he said.

“Questions about the regulatory framework that might apply to Libra could also be raised in the fintech Senate inquiry, once there is something released by Libra or Calibra which can be analysed.”

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