Mark Zuckerberg grilled by Congress over Libra and political ads policy
Zuckerberg said Facebook would be 'forced to leave' the governance organization overseeing Libra if the group moves ahead with launching the digital currency without US policymaker approval.
Mark Zuckerberg conceded on Wednesday that there is a scenario in which Facebook might have to rethink its involvement in its controversial cryptocurrency project, Libra, if the currency does not receive appropriate US regulatory approval.
In response to multiple questions on the matter during an hours-long grilling session on Capitol Hill, Zuckerberg said Facebook would be "forced to leave" the governance organization overseeing Libra if the group moves ahead with launching the digital currency without US policymaker approval.
"If at the end of the day we don't receive the clearances," Zuckerberg said, "we will not be a part of the association."
The acknowledgment could have major implications for Zuckerberg and Facebook. The blurry lines between the company and the organization, called The Libra Association, have led to confusion as to where one ends and the other begins.
Zuckerberg returned to Capitol Hill to testify before the House Financial Services Committee over Facebook's plans for Libra. Within minutes, however, it became clear lawmakers would expand the focus of the hearing to include a wide range of concerns about Facebook.
Maxine Waters, the chair of the committee, kicked off the hearing by listing off the company's history of running discriminatory housing ads, failing to protect consumer data and having its platform used for election interference. She also questioned Zuckerberg over his company's policy of not subjecting ads by political candidates to third-party fact-checking.
"You're willing to step on anyone — your competitors, women and people of color, even our democracy," Waters said in her opening remarks.
Other lawmakers pressed Zuckerberg on encryption, censorship, child sex abuse content and Facebook's plan to integrate the data from its messaging apps. Rep. Gregory Meeks, a Democrat on the committee, slammed Facebook for not doing more to support the existing infrastructure to help the unbanked rather than embarking on a massively ambitious project that the CEO conceded was "risky."
Zuckerberg attempted to defend Libra as necessary innovation for the financial services industry, while acknowledging 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."
He also argued that users nonetheless still trust the platform. "I think it's worth remembering that every day, billions of people come to our services because they trust that they can share content, messages, photos, services with the people in their lives," Zuckerberg said.
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 also comes as Facebook is under more scrutiny than ever. Facebook's antitrust headache is only getting worse, as dozens more attorneys general join an investigation into the company. It has been embroiled in a feud with Democratic presidential candidate Elizabeth Warren over truthfulness in political ads.
The hearing represents yet another hurdle for the effort to bring Libra to life, which Facebook 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 and Visa bowing out of the Libra governance organization, which they did along with fellow payments companies PayPal, 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.
Still, 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 prepared remarks.
The digital currency will be managed by an organization comprised of 21 companies, including Facebook. The social networking firm has 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 his prepared remarks, 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 that Libra 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.