With Facebook planning to roll out its own digital currency, U.S. regulators are expected to push back on the company as they grapple with how blockchain technologies should be regulated.
Facebook’s announcement has already gained considerable interest from regulators across the board. Jerome Powell, the chairman of the U.S. Federal Reserve who previously said that his agency has no jurisdiction over cryptocurrency, already has met with Facebook to learn more about Libra. And just a day after the news hit, the Senate Banking Committee announced plans to host a hearing about Libra next month.
“The thing we may see from Congress is really pressing [Facebook] on what is really your purpose here? What is your use case?” said Timothy Massad, former chairman of the U.S. Commodity Futures Trading Commission. “There will be a lot of skepticism in Congress about that.”
Massad made his comments at Fortune’s Brainstorm Finance Conference in Montauk, N.Y., on Thursday. He joined panelists Perianne Boring, founder of the Chamber of Digital Commerce, and Adam White, chief operating officer of bitcoin futures exchange Bakkt, to explore the regulatory environment surrounding blockchain technologies like Libra.
Facebook has said that one of the impetuses for creating the currency was to serve the unbanked. But to do that, Facebook may also have to do things like provide credit, much like a bank, Massad said. And that’s where congress will push back.
“Is Callibra a bank, and therefore, is Facebook a bank holding company?” he asked.
How regulators approach the topic could very well set the tone for future blockchain innovation in the U.S. Boring said that as it stands, the U.S. has a lot to lose.
“We’re quickly falling behind,” Boring said. “Many developed nations are taking proactive steps to create an inviting environment for companies to innovate and build on blockchain technologies within their jurisdiction. In the U.S., we’re doing the exact opposite.”
It’s a complicated matter, given that the “fragmented” U.S. regulatory system is not set up to handle the various issues that blockchain technologies create, Massad said. There is no regulatory body that can handle the different applications of the technology—from cryptocurrencies to utilities, for example—and all the complicated regulatory hurdles each will present.
“I’ve called for a more comprehensive approach by Congress,” Massad said. “Whether we get that, well, we have a Congress that can’t pass a budget.”
But White, who spent almost the entire last year dealing with regulations for his company, is hopeful that companies like Facebook and Bakkt are pushing regulators in the right direction.
“What we’re going to see come from that is, I think, hopefully great debate,” he said. His hope is that “we’re going to start getting to an environment where we can grow companies here inside the U.S. and not see them go offshore.”