New York (CNN Business)Mark Zuckerberg returned to Capitol Hill on Wednesday to testify before the House Financial Services Committee over Facebook’s plans for a cryptocurrency project called Libra. Within minutes, however, it became clear lawmakers would expand the focus of the hearing to include a wide range of concerns about Facebook.
“You’re willing to step on anyone — your competitors, women and people of color, even our democracy,” Waters said in her opening remarks. She added, “You’ve opened up a serious discussion of whether or not Facebook should be broken up,” referencing recent antitrust probes of the social media giant.
Zuckerberg, for his part, attempted to defend Libra as necessary innovation for the financial services industry. But he acknowledged the concerns about Facebook in particular launching the effort.
“I believe that this is something that needs to get built, but I get that I’m not the ideal messenger for this right now,” Zuckerberg said. “We’ve faced a lot of issues over the past few years. I’m sure there are a lot of people who wish it was anyone but Facebook who proposed this.”
The stakes are high for Zuckerberg’s performance on Wednesday.Many lawmakers have not ruled out the possibility that they could try to block Libra altogether if they are not satisfied by Zuckerberg’s responses. David Marcus, the Facebook exec who headed up the Libra effort and now runs the company’s subsidiary developing services for users to save and spend Libra, testified
before Congress in July, but many lawmakers weren’t entirely satisfied
with what they heard.
“It is imperative that we get Mr. Zuckerberg in before the committee,” Rep. Sylvia Garcia, a Texas Democrat, said in an interview with reportersas lawmakers were urging Zuckerberg to testify
. “This is his brainchild, his company, he’s the one to have the answers to many of the questions we also raised with Mr. Marcus. Some of the questions that he didn’t answer or didn’t answer fully, I think Mr. Zuckerberg is the one to address those.”
Garcia added: “Until they answer our questions, we cannot allow this to go forward.”
The hearing represents yet another hurdle for the effort to bring Libra
to life, which Facebook (FB)
and its partners had hoped to do by mid-2020. That timeline now appears uncertain
.Five pieces of draft legislation are expected to be discussed during the hearing, many taking direct aim at Libra. One, the “Keep Big Tech Out of Finance Act”
that Waters introduced during the July Libra hearing
, would prohibit Facebook and other internet platforms with annual global revenue over $25 billion from becoming financial institutions or offering cryptocurrencies.
Zuckerberg’s testimony comes days after several of the project’s early partners
jumped ship, potentially making it harder for Libra to gain regulatory approval.
Fitch Ratings analysts said in a recent statement that Mastercard (MA)
and Visa (V)
bowing out of the Libra governance organization, which they did along with fellow payments companies PayPal (PYPL)
, Stripe and Mercado Pago, deprives Libra of “payment specialists with deep regulatory and antitrust experience.” Just one payments company remains in the organization: Dutch firm PayU.
Facebook and Libra’s other backers say they want to work with regulators, and will wait for regulatory approval in order to launch. In the meantime, the group has forged ahead with setting up the early governance structure and articles of association for the Libra Association, which will manage the digital currency. They say
Libra could revolutionize the global payments system, making it easier to send money around the world and potentially benefiting the underbanked.
“People pay far too high a cost — and have to wait far too long — to send money home to their families abroad. The current system is failing them,” Zuckerberg said in his opening testimony.
The digital currency will be managed by an organization
comprised of 21 companies, including Facebook. The social networking firmhas one seat of five on the board. But Facebook’s involvement — and Libra’s potential access to its more than 2 billion users — nonetheless helped make Libra a bigger concern for regulators.
In addition to acknowledging lawmakers’ concerns with Facebook’s track record, Zuckerberg also attempted to defuse fears about Libra’s potential impact on existing currencies. Zuckerberg said Libra “is not an attempt to create a sovereign currency.” He also noted thatLibra will be backed “mostly by dollars,” referencing the Libra Reserve that will back the coin 1:1.
The anticipated makeup of the reserve, beyond Facebook’s statements that it will be comprised of government-backed currencies and debt instruments, has been unclear, leading lawmakers to fear Libra could undermine central banks’ ability to carry out monetary policy.
The hearing will also cover Facebook-related issues beyond Libra. Another piece of legislation to be proposed Wednesday would require Facebook and other internet platforms that profit from collecting and selling ads based on user data to regularly disclose to users what data is being collected and why, as well as spelling out the economic value of their data.
Read more: https://www.cnn.com/2019/10/23/tech/mark-zuckerberg-facebook-libra-hearing/index.html