Zuckerberg fails to assuage lawmakers on Libra
WASHINGTON — As Congress continues to seek answers about the proposed Libra cryptocurrency, Facebook CEO Mark Zuckerberg's responses to lawmakers Wednesday further cast doubt on the project’s future.
Appearing before the House Financial Services Committee, Zuckerberg was pressed on a number of concerns surrounding Libra, including how the public can trust Facebook to spearhead a financial project, why several companies have walked away from the coalition formed to develop the cryptocurrency, and how the Libra network will comply with U.S. financial regulations.
Zuckerberg acknowledged that Libra is a “risky project.” Lawmakers seemed frustrated when he failed to provide details such as which regulators the company has consulted with on the plan. While Zuckerberg said Facebook would not be behind the actual launch — leaving that instead to the Libra Association of various companies — the CEO acknowledged concerns about his company's privacy record.
Facebook has “work to build trust on this,” Zuckerberg said of privacy controls in Calibra, the digital wallet that Facebook would offer to hold users' Libra currency.
The trust issue came up numerous times in committee members' questioning.
“Facebook has had a history of problems safeguarding users' data,” said Rep. Nydia Velazquez, D-N.Y. “Why should we believe what you and Calibra are saying about protecting customer privacy and financial data?”
Rep. Ann Wagner, R-Mo., asked why payments firms like PayPal, Mastercard and Visa decided not to participate in the Libra Association. Zuckerberg said he it was because Libra is “a risky project and there’s been a lot of scrutiny.”
When Rep. Carolyn Maloney, D-N.Y., pressed him on which U.S. regulators Facebook and the Libra Association are hoping to satisfy before launching the cryptocurrency, Zuckerberg said “probably all of them for different things,” without naming any specific U.S. financial regulators.
Zuckerberg’s appearance before the committee highlighted the multiple questions surrounding the impact cryptocurrency could have on the financial system, including how it would comply with anti-money-laundering laws.
Velazquez noted that the G-7 released a report last week saying global stablecoins could have “significant adverse effects” on monetary policy.
“Mr. Zuckerberg, we do not want to break the international monetary system,” Velazquez said.
Maloney questioned whether Facebook will support anonymous wallets, which she said pose money-laundering risks.
“I am concerned that the use of anonymous wallets would make Libra attractive to those that are looking to launder money,” Maloney said. “It's my understanding that the Libra wallet won't be anonymous, but I haven't heard anything about competing wallets. … Will you commit that you won't have anonymous wallets, that it be transparent?”
Zuckerberg responded that he “will commit that Facebook will do what you are saying.”
With the cryptocurrency plan under heavy scrutiny in Washington, Zuckerberg has attempted to distance Facebook from the Libra Association, a coalition of companies that Facebook created to develop the cryptocurrency.
Rep. Blaine Luetkemeyer, R-Mo., asked Zuckerberg if he would be willing to stop the project if he can’t see a clear path forward. He replied that Facebook could potentially leave the Libra Association.
“I will certainly stop Facebook's part of it,” Zuckerberg said. “The independent Libra Association is a separate thing that exists at this point, and if I feel like Facebook can't be a part of it in keeping with the principles that have been laid out, then Facebook won't be a part of it.”
Still, many Republicans defended Zuckerberg.
Rep. Patrick McHenry, R-N.C., the committee's top Republican, said he didn’t want Congress’s scrutiny of Facebook to restrict innovation.
“I have my own qualms about Facebook and Libra and the shortcomings of Big Tech, there are many,” McHenry said in his prepared opening remarks. “But if history has taught us anything, it’s better to be on the side of American innovation, competition, and most importantly the freedom to build a better future for all of us.”
Rep. Andy Barr, R-Ky., warned that stifling innovation or projects like Libra could have negative implications for national security.
“I was very interested in your testimony, Mr. Zuckerberg, when you alluded to the risks of not innovating and the danger of the U.S. falling behind some other countries or foreign companies who are creating similar platforms,” Barr said. “I think that the American competitiveness angle and the competition with China is a national security issue and the fact that Facebook and the Libra Association is launching into innovation ... is positive for our national security.”
In an interview with American Banker, Rep. Josh Gottheimer, D-N.J., said that Zuckerberg gave the committee “high-level” answers about how Libra would be regulated but that he did not provide enough details.
“To me, there were still a lot of holes to be filled in here ... and even from today’s hearing, there’s plenty of questions that I think we need to get to the bottom of,” Gottheimer said. “He’s addressing certain issues and he’s doing so in certain high-level answers and I think the details are still important to understand.”
Following the hearing, other Democrats expressed frustration with what they viewed as Zuckerberg’s lack of preparedness to create a digital currency like Libra.
Rep. Sylvia Garcia, D-Texas, told reporters she was surprised that the Libra Association did not have a board chair.
“I learned that they have no chair of the board at the association, which completely stunned me,” Garcia said. “You don’t form an association and not have someone to be the chair of the board.”
Rep. Madeleine Dean, D-Pa., said Zuckerberg didn’t give the committee the details they needed.
“He distanced himself from all details — it’s in formation, it’s in discussion, it’s in negotiation,” Dean told reporters. “When he was asked by the arguments they were making in federal court, he didn’t know the arguments they were making. That level of not knowing surprised me for this level of brain power and expertise.”