Zuckerberg defends Libra payments system in Congressional hearing
Image credit: REUTERS/Erin Scott
Facebook CEO Mark Zuckerberg defended his plans for the rollout of a digital payments system in a rare personal experience before lawmakers, which frequently descended into Democrats and Republicans airing other grievances related to Facebook.
Democratic representative Maxine Waters, chair of the House Financial Services Committee, demanded hours after Libra was unveiled that development is paused while regulators and lawmakers scrutinise the plans.
The payment system revolves around a digital wallet (Calibra) and currency (Libra) which – unlike most cryptocurrencies – is centralised and backed by real-world assets: primarily the US dollar. Facebook plans for Libra to be used through a dedicated app as well as being incorporated into its own social media and messaging platforms, much like Chinese messaging platform WeChat incorporating WePay. Facebook also revealed an impressive 28-member ‘Libra Association’ formed from payment providers, various online platforms, and non-profit groups and led by new Facebook subsidiary Calibra.
The Libra project has faced serious setbacks in the months since it was announced, including French and German officials threatening to block the launch of the service in Europe, and seven of the 28 founding members of the Libra Association (including PayPal, Visa, and Mastercard) leaving the group before its inaugural committee meeting.
In a rare appearance before lawmakers, Zuckerberg appeared as the sole witness to the House Financial Services Committee to answer queries from members of congress about the project. In a prepared statement, Zuckerberg said that there are more than a billion people in the world without access to a bank account, including 14 million in the US.
“I believe this is something that needs to get built, but I understand we’re not the ideal messenger right now. We’ve faced a lot of issues over the past few years, and I’m sure people wish it was anyone but Facebook putting this idea forward,” he said, acknowledging the series of vast scandals Facebook has faced in recent years. He said that Facebook’s mission was to “[put] power in people’s hands” and added (without a hint of irony) that Libra was an appropriately empowering project for the company to pursue.
Opening the hearing, Waters recommended that Facebook resolve its “many deficiencies” before wading into the financial sector, calling the company out for its poor record on inclusion, enabling racial discrimination by housing advertisers, failing to combat electoral interference from the Kremlin, its record on privacy, and alleged antitrust violations under investigation by a coalition of 47 attorneys-general, among other issues.
Zuckerberg sought to reassure Waters and other critical authorities by promising not to launch Libra anywhere in the world until US regulators had approved it. This was a stronger vow than had been given before, with Facebook’s VP of messaging products David Marcus stating that Libra would not be rolled out until it had “fully addressed regulatory concerns and received appropriate approvals.” However, Zuckerberg did not explicitly agree to Nydia Velázquez’s demand to commit to a full moratorium on Libra pending congressional approval.
Zuckerberg said that Calibra is a regulated subsidiary, so there is a “clear separation” between the social data held by Facebook and the financial data held by Calibra; Calibra would not share customers’ accounts or financial details with Facebook.
Several Republican committee members used their time to discuss competition from China in digital payments and in the wider tech space, welcoming innovation from Facebook as an American company. Zuckerberg – who warned that China is planning to launch its own digital payments system in the coming months – stated that Libra would “extend America’s financial leadership as well as [its] democratic values and oversight”.
In response to often-discussed concerns about the possibility that Libra (like existing cryptocurrencies) could benefit criminals, Zuckerberg committed to forbidding anonymous wallets, although would not commit to forbidding anonymous and end-to-end encrypted transactions. He sat with non-committal politeness through questions about the Libra Association exodus, the possibility of centralising the currency, Twitter’s terms and conditions, and whether it is necessary to create a private currency. Zuckerberg appeared less self-assured in the face of severe questioning about Facebook’s handling of the Cambridge Analytica scandal from Representative Alexandria Ocasio-Cortez, and about its civil rights and equality records from Representatives Joyce Beatty – who described its record as “appalling and disgusting” – and Gregory Meeks.
Meeks accused Facebook of being behind many of the most destructive political movements in the world (“Facebook has been systematically found at the scene of the crime, do you think that is just a coincidence?”). He argued that Facebook had the resources to bring about real change to benefit disadvantaged groups of people – such as by pouring funding into minority depository institutions – but had not demonstrated genuine interest in doing so thus far.
Zuckerberg retained a civil but evasive manner throughout the hearing, even as it was frequently derailed by the airing of grievances unrelated to Libra, including online child exploitation, free speech, deepfakes, and fact checking. However, Zuckerberg appeared to pause briefly in astonishment during questioning by Representative Bill Posey, who asked Zuckerberg if he could confirm that vaccines did not cause any harm to any person on the planet.
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