As in yesterday’s HFSC hearing (see Client Report FEDERALRESERVE50), today’s Senate Banking session with FRB Chairman Powell included bipartisan concerns about the risks of Facebook’s proposed payment system. Chairman Crapo (R-ID) was particularly interested in how financial-privacy protections would apply to Libra and if it or another cryptocurrency could threaten the U.S. dollar’s status as the world’s reserve currency. Chairman Powell said that the FRB does not have the authority to apply bank privacy protections to Libra and that there is no near-term threat to the dollar’s status. Ranking Member Brown (D-OH) argued that allowing tech companies to take over the payment system undermines democracy, criticizing private corporations for taking on the role of governments by creating their own currencies, monetary policy, and payment systems. This follows his letter yesterday to FRB Chairman Powell in which he urged the FRB to create its own real-time payments system so that large companies do not control the payments system.
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