Don’t expect Mark Zuckerberg’s plan for a new digital currency named Libra to happen any time soon after the Facebook CEO’s floundering performance in front of Congress on Wednesday. He went very well-coached, but that preparation quickly dissolved as he faced questions from Maxine Waters and AOC.
“You have opened up a serious discussion about whether Facebook should be broken up,” Waters said, following a litany of the company’s offenses.
“Each month, 2.7 billion people use your products. That’s over a third of the world’s population. That’s huge,” Waters said. “That’s so big that it’s clear to me, and to anyone who hears this list, that perhaps you believe you’re above the law.”
That growth has victims, she added:
And it appears you’re aggressively increasing the size of your company and are willing to step on or over anyone, including your competitors, women, people of color, your own users, and even our democracy, to get what you want. All of these problems I have outlined, and given the company’s size and reach, it should be clear why we have serious concerns about your plans to establish a global digital currency that would challenge the US dollar.
Zuckerberg endured hours of prickly questioning from lawmakers Wednesday as he defended the company’s new globally ambitious project to create a digital currency while also dealing with widening scrutiny from U.S. regulators.
Representatives also grilled Zuckerberg on Facebook’s track record on civil rights, hate speech, privacy and misinformation — not surprising given the litany of scandals Facebook has been dealing with over the past two years.
The House Financial Services Committee’s immediate focus was Facebook’s plans for the currency, to be called Libra. Zuckerberg took pains to reassure lawmakers that his company won’t move forward with Libra without explicit approval from all U.S. financial regulators.
Still, many members of the panel appeared unconvinced.
Rep. Maxine Waters, the California Democrat who chairs the panel, said the Libra project and the digital wallet that would be used with it, Calibra, “raise many concerns relating to privacy, trading risks, discrimination … national security, monetary policy and the stability of the global financial system.”
Furthermore, Waters told Zuckerberg, “You have opened up a discussion about whether Facebook should be broken up.”
The social media giant has sparked public and official anger at every turn, from its alleged anticompetitive behavior to its shift into messaging services that allow encrypted conversations, to its refusal to take down phony political ads or doctored videos.
The breakup specter — the worst-case scenario for Facebook and other tech behemoths — has been raised by prominent politicians, notably Sen. Elizabeth Warren, a leading Democratic presidential candidate.
The Justice Department, the Federal Trade Commission, the House Judiciary antitrust subcommittee and attorneys general in several states are all conducting investigations of Facebook and other tech giants amid accusations that they abuse their market power to crush the competition.
Zuckerberg was on the defensive at the hearing, his first testimony to Congress since April 2018, parrying criticism but also acknowledging lapses. He conceded at one point that the Libra project is “risky,” acknowledging several high-profile companies such as Visa, MasterCard and PayPal had signed on as partners in the currency’s governing association but have recently bailed.
Under continued criticism of Facebook’s handling of hate speech and potential incitements to violence on its site, he said, “We’re not perfect. We make a lot of mistakes.”
Trust was a central theme of the hearing. Given Facebook’s history “why should congress regulators and the public trust you to create what amounts to the world’s largest bank, what really amounts to shadow sovereign government?” asked Rep. Madeleine Dean, a Democrat from Pennsylvania.
Responded Zuckerberg: “Well congresswoman, we are not creating a bank. We are helping an organization create a payment system.”
Zuckerberg held up China as a strong reason for encouraging innovation as embodied in the Libra project.
“While we debate these issues, the rest of the world isn’t waiting,” he said. “China is moving quickly to launch similar ideas in the coming months.”
Facebook also has cited competition from China as a compelling reason against breaking up the company.
Zuckerberg’s China argument found a ready echo from some Republicans on the committee, such as Rep. Patrick McHenry of North Carolina, who stepped up to defend the Libra project and urge lawmakers not to put “innovation on trial.”
But Democrats, in a rare tilt, allied themselves with President Donald Trump and his Treasury secretary, Steven Mnuchin, who have publicly criticized the Libra plan. Mnuchin and other regulators, including Federal Reserve Chairman Jerome Powell, have warned that the digital currency could be used for illicit activity such as money laundering or drug trafficking.
Zuckerberg touted his optimistic vision of Libra and what it could mean for people around the world who don’t have access to bank accounts.
A bulk of the hearing also focused on Facebook’s record on diversity and civil rights. Rep. Joyce Beatty, a Democrat from Ohio and vice-chair of the Congressional Black Caucus, lambasted Zuckerberg over his company’s track record on both.
Demanding yes or no answers, Beatty asked Zuckerberg, for instance, how many of Facebook’s stable of big law firms are a minority or woman-owned or how many women or minority partners work on the company’s cases.
She told Zuckerberg Facebook works with civil rights groups only because of “the number of lawsuits you’ve had.”
A subdued-looking Zuckerberg didn’t get in much in the way of answers and Beatty ended her questioning by saying “this is appalling and disgusting” and told Zuckerberg that “you have ruined the lives of many people, discriminated against them.”
Facebook’s Mark Zuckerberg Won’t Proceed On Libra Without U.S. Approval
Facebook CEO Mark Zuckerberg aims to reassure Congress on Wednesday that his company won’t try to evade financial regulators as it prepares its planned digital currency Libra.
In prepared remarks released Tuesday ahead of a hearing before the House Financial Services Committee, Zuckerberg says that Facebook “will not be a part of launching the Libra payments system anywhere in the world unless all U.S. regulators approve it.”
That’s a stronger statement than Facebook official David Marcus made in July, when he said the company will not offer Libra until it has “fully addressed regulatory concerns and received appropriate approvals.” Marcus leads the Libra project at Facebook.
Zuckerberg is trying to defend Libra and alleviate concerns that the currency could sidestep regulators. Analysts say Libra could avoid regulation and launch in countries where it’s not receiving pushback, but this does not appear to be Facebook’s intention.
Instead, Zuckerberg is pushing an optimistic vision of Libra and what it could mean for people around the world who don’t have access to bank accounts.
“The financial industry is stagnant and there is no digital financial architecture to support the innovation we need,” his statement reads. “I believe this problem can be solved, and Libra can help.”
Libra has seen several high-profile defections among other companies that originally supported it, including Visa and MasterCard.
While some critics see those departures as evidence of Libra’s likely failure, U.S. regulators appear to view it as enough of threat that they are considering the possibility of the Federal Reserve launching its own competitor currency.
“At the Federal Reserve, we will continue to analyze the potential benefits and costs of central bank digital currencies, and look forward to learning from other central banks,” Fed Gov. Lael Brainard said in a speech last week.
Zuckerberg’s remarks also play the China card, urging regulators to act quickly.
“While we debate these issues, the rest of the world isn’t waiting. China is moving quickly to launch similar ideas in the coming months,” Zuckerberg says in the statement. Marcus made a similar argument over the summer.
In 2018, when Zuckerberg spent two days testifying before Congress on privacy, competition and a host of other issues, his notes cited competition from China as a reason against breaking up Facebook.