It has been more than three months since Facebook announced plans to launch its digital currency, Libra in June 2020; however, the social media giant has met with regulatory and political skepticism globally.
Zuckerberg’s hearings on Oct. 23
In a Congressional hearing on Oct. 23, Mark Zuckerberg, Facebook’s founder and CEO, testified before the United States House of Representatives Financial Services Committee regarding the Libra project.
The hearing “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors,” was to examine concerns regarding Libra’s impact on privacy, trading risk, discrimination, financial firms, national security, monetary policy, and the stability of the global financial system. Chairwoman Waters’ has expressed her concerns for Facebook in a previous hearing, she has called on Zuckerberg to address existing deficiencies and failures before proceeding any further on the Libra project.
Addressing inclusion and discrimination, Waters said, “Facebook has utterly failed. Facebook’s executive ranks and workforce continue to be mostly white and male.” This was later elaborated by Rep. Green, who asked Zuckerberg the statistics of women leading the companies of the members of the Libra Association, as well as minorities and members of the LBTQ+ community. Zuckerberg responded by saying he had a lack of knowledge of this information.
Rep. Waters brought up the fact that Facebook previously banned cryptocurrency ads on the site due to the fact that they are “frequently associated with misleading or deceptive promotional practices.”
Waters further questioned:
“How did that change? How did cryptocurrency go from deceptive and misleading last year and then becomes a means for financial inclusion this year?”
“It seems to me you shifted your stance because you realized you could use your size and utilize your data to dominate the cryptocurrency market,” stated Chairwoman Waters. She remained skeptical as it seemed that Facebook changed its policies when it benefited the company.
Highlighting innovation in America
Ranking Member Patrick McHenry, started by commenting: “Today is a trial on American innovation.” Directing at Zuckerberg, he said, “You are one of the titans of what we call the digital age.”
Zuckerberg started his statements by addressing the needs of the limitations of the current financial system. He mentioned that “the financial industry is stagnant,” and that there is no “digital financial architecture to support the innovation that we need.” Zuckerberg added that he believes that this problem can be solved and that Libra can help.
Rep. Stivers understands that there are benefits in innovation, also adding that innovation is needed in America, although “no innovation is going to be perfect.”
Rep. Barr started by saying: “Criticism is cheap, anybody can criticize. As you can see here today, politicians in Washington are pretty good at lodging criticism, but creating something of value is significantly more difficult. I would commend you for being an innovator, trying to create something of value.” He believes that congress should review potential opportunities in promoting financial inclusion, to bringing the system to the unbanked and the underbanked communities. “In America, a country built on free enterprise and capitalism, it’s always better to be on the side of innovation, and we should always place the burden on the government to justify regulation and intervention,” Barr added.
‘This isn’t Mark Zuckerberg vs. Xi Jinping’
Libra will be backed mostly by dollars and by highly liquid assets. He mentioned that China is moving quickly to launch a similar idea to Libra, its own central bank-issued digital currency. Although Zuckerberg acknowledges the risks of Libra, but he also said: “If America doesn’t innovate, our financial leadership is not guaranteed.” He added, “I actually don’t know if Libra is going to work, but I believe it’s important to try new things. As long as you’re doing so responsibly.”
McHenry used Alipay as an example of a global payment system, stating that there are 900 million global users. He questioned Zuckerberg further, asking him: “Why not just do a Facebook version of Alipay in order to level this?”
Rep. McHenry’s questioned Zuckerberg about China, regarding the rising number of Chinese technology companies. “Why are we seeing emerging technologies driven by blockchain and cryptocurrency projects driven by elsewhere, such as the case of Libra?”
Zuckerberg responded to McHenry’s line of questioning by saying: “Today, 6 out of 10 of the top tech companies are coming out of China and certainly don’t share our values,” further highlighting that the US should be taking financial leadership by approving Libra.
Rep. Barr asked Zuckerberg to elaborate on the initiatives of other countries who are creating similar platforms. Zuckerberg said that China responded initially with private partnerships with some of its biggest companies in order to race to build a similar system – a digital renminbi. The digital renminbi could be used in China’s Belt and Road Initiative and in its foreign policy to grow its influence in Asia.
Responding to Rep. Gonzalez, Zuckerberg stated that the commitments he made apply solely to Facebook and not to Libra. Gonzalez mentioned he had been closely observing the competition with China. However, he said: “This isn’t Mark Zuckerberg vs. Xi Jinping.”
Chairwoman Waters spoke to the press about China following the hearing, saying:
“I believe that we are big enough, we are strong enough, and we are smart enough to meet the needs and to be competitive in the world, we just have to keep going.”
Facebook would ‘quit’ Libra if the association launches before receiving approvals
“Facebook will not be a part of launching the Libra payments system anywhere in the world even outside the US until the US regulators approve,” claimed Zuckerberg.
Rep. Huizenga asked what would happen if the US regulators decide to launch Libra without gaining approval from the US regulators. Zuckerberg then answered, “Then I believe that we would be forced to leave the association.”
Zuckerberg said Facebook would not be a part of Libra if necessary, although he mentioned that Libra is a “completely separate” entity at this point, in response to Rep. Luetkemeyer.
Facebook’s reputation after the scandals: ‘Have you learned that you should not lie?’
Addressing his reputation, he said, “I get that I am not the ideal messenger for this issue right now. We have faced a lot of issues in the past few years, and I’m sure there are a lot of people that wish there were anyone but Facebook who is helping to propose this.”
Rep. Wagner highlighted the recent departure of several major entities from the Libra Association, pushing Zuckerberg to admit that Libra is a “risky project.”
Rep. Velazquez emphasized the Cambridge Analytica scandal in 2018, where the data privacy of Facebook users was breached. She questioned, “Why should we believe what you and Calibra are saying about customer privacy and financial data?” Referring to the acquisition of Whatsapp by Facebook and making a guarantee at the time with the European Commissioners that Whatsapp and Facebook data would not be linked, Velazquez asked: “Have you learned that you should not lie?”
As Zuckerberg has mentioned that the Libra project is to help the poor and unbanked, Rep. Sherman stated that Facebook is claiming its independence from Libra to avoid any responsibilities.
“Those who are introducing cryptocurrency have got to pause and wonder what effect they’ll have on the power on the United States to oppose sanctions,” stated Sherman.
McHenry further questioned Zuckerberg on choosing Switzerland over the United States for Libra. Zuckerberg answered to McHenry’s line of questioning by saying that Switzerland is where all the international organizations are, which fits into Libra’s global payments system. Zuckerberg said, “Switzerland has been forward-leaning to work through systems like this.”
What did David Marcus have to say?
Although Zuckerberg was the only individual testifying on Oct. 23, David Marcus, Libra’s co-creator, expressed his views on the current financial system and US congress members in an interview with CNBC. Marcus said during his interview that he finds it “odd” that the US Congress members have been pressuring Libra, considering that the project is still at its early stages.
He said, “It’s an idea. It’s a whitepaper. Nothing is operating yet. It’s kind of sad in a way to see all the issues that we currently have with the current [financial] system. The fact that some people are not even open to the idea of exploring the idea of improving those things [financial institution] for their very constituents is kind of odd to me because we’re not dogmatic about the approach.”
Marcus stated that he understands the criticism against Libra and Facebook, adding that the entities need to demonstrate that they can be trustworthy.
The US blocking libra may have national security implications
Ex-federal prosecutor Katie Haun said that the United States blocking Facebook’s Libra will have national security implications. Haun, having formerly worked at the Justice Department’s National Security Division, investigated the use of Bitcoin to facilitate extortion and white-collar crime during her employment.
This article was originally published in Blockchain.News.