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JUST IN: Lawmakers Grill Mark Zuckerberg About The Big Plan Facebook Created To Upend The Way We Send Money Around The Globe

Published by on October 23rd, 2019.


Facebook CEO Mark Zuckerberg is testifying before the House Financial Services Committee on Wednesday to answer questions from lawmakers about its ambitions in the finance sector through the Libra currency it announced earlier this year.

  • The hearing comes after key partners like Paypal, Visa, and Mastercard backed out of the project earlier this month following heavy scrutiny of the project from lawmakers.
  • In his opening testimony, Zuckerberg reiterated that the company will not support launching the Libra system at all until all regulatory concerns have been met.
  • He also said that he believes pressing forward with Libra is important for the United States to keep up with China, which he said is moving forward with similar ideas.
  • Visit Business Insider’s homepage for more stories.

Facebook CEO Mark Zuckerberg is testifying before the House Financial Services Committee on Wednesday, where lawmakers grilled him about Libra, the global currency and payments network the company announced in June as well as issues relating to allegations of advertising discrimination on its platform.

The committee questioned Zuckerberg on issues such as whether Facebook should be trusted to handle financial data, how developing a new digital currency could impact the dollar, how Facebook is working with regulators and lawmakers, what the company is doing to address other issues unrelated to Libra on its platform, as well as a slew of other pressing concerns that have been mounting since the project was announced.

The hearing comes at a pivotal time for the Libra project; earlier this month, several early partners dropped out of the effort, including payments and finance firms Visa, Mastercard, and PayPal. Shortly thereafter, the remaining members of the Libra Association — the consortium of 21 firms that will govern the network and currency — met to formalize the organization’s council, elect a board of directors, and appoint members of its executive team.

The move indicated that the plan was moving full steam ahead despite heavy scrutiny from lawmakers and the exit of several key founding members.

In her opening remarks, Chairwoman of the committee and Congresswoman Maxine Waters (D-CA) once again called for a moratorium on the project until Congress can examine the issues that come with a large tech firm like Facebook being involved in the development of a digital currency. Waters urged Facebook to fix the company’s problems before expanding into a new industry — highlighting issues ranging from a lack of diversity in Facebook’s leadership to its failure to protect consumer data. She also criticized the company’s decision not to fact-check political ads, saying that it could lead to voter suppression.

“Your claim to promote freedom of speech does not ring true,” Waters said, adding that it seems like Zuckerberg believes he’s above the law and that such concerns raise a “serious discussion” about whether Facebook should be broken up.

During the first hour of the hearing, lawmakers probed Zuckerberg on a variety of concerns about Libra and Facebook in general. Such issues that were brought up include the recently announced policy that Facebook won’t fact check political ads, the departure of several Libra Association founding members, the proliferation of child sex abuse material on Facebook, and Facebook’s decision to share data with messaging app WhatsApp following its acquisition despite initially telling European regulators that it wouldn’t do so.

That latter point is particularly important considering Facebook has said that no data from Calibra, its subsidiary wallet app for Libra, would be shared with the social network. When Congresswoman Nydia M. Velázquez asked Zuckerberg if he learned that he should not lie based on the decision to share data with WhatsApp — for which Facebook was fined $122 million in 2017 — he responded by saying he disagreed with the characterization.

When asked why believed partners such as Paypal, Visa, and Mastercard abandoned Libra, Zuckerberg replied that he believes it’s because it’s  “a risky project” that has come under heavy scrutiny.

How Facebook and the Libra Association will work with regulators and Congress was a major theme during the hearing. When asked if he would be willing to stop the project if he sees that it can’t go forward anymore, Zuckerberg indicated that he would be open to pulling Facebook out of the effort. “If I feel like Facebook can’t be part of it keeping with the the principles I laid out, then Facebook won’t be a part of it,” he said.

 

Zuckerberg’s opening testimony

In his opening testimony, which was made public on Tuesday, Zuckerberg said his company would not participate in rolling out Libra until all regulation concerns have been met. Waters pressed Facebook executive David Marcus on this point during a previous hearing back in July, and did not interpret his answer as a commitment back then.

“Facebook will not be a part of launching the Libra payments system anywhere in the world unless all US regulators approve it,” Zuckerberg says in his opening remarks. “And we support Libra delaying its launch until it has fully addressed US regulatory concerns.”

Lawmakers and critics have expressed concern about Facebook’s involvement in the financial system for a number of reasons: the blunders it has made when handling the personal data of its social network’s members in the past, its sheer size and scale — which lawmakers worry could enable Libra to grow too quickly to properly manage — and the potential risk for the system being used by criminals or to finance terrorism.

“I believe this is something that needs to get built, and I understand we’re not the ideal messenger right now,” he said. “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.”

The Facebook CEO reiterated that his company will not be leading the project moving forward — that task now rests with the recently formalized Libra Association — adding that the organization is currently talking with elected officials in Congress. He also said that any payments processed through Facebook or its subsidiaries — including any eventual Libra-based transactions or those that occur through Instagram Shopping and Facebook Messenger today — are subject to “comprehensive anti-money laundering, counterterrorist financing, and sanctions monitoring.”

There have also been concerns about whether companies like Facebook should be involved in the financial system at all, especially considering the bubbling antitrust related tensions that have surrounded firms like Facebook, Amazon, Google, and Amazon in recent months. A draft bill called the “Keep Big Tech Out of Finance Act” was also discussed at the July hearing, which would prevent a platform company like Facebook from becoming a registered financial institution in the United States.

In his testimony, Zuckerberg addressed this point as well.

“Monetary policy is in the province of central banks, not Libra,” Zuckerberg’s testimony says. “The Libra Association has no intention of competing with any sovereign currencies or entering the monetary policy arena. . .We expect the regulatory framework for the Libra Association will ensure that the Association cannot interfere with monetary policy.”

Zuckerberg also provided more insight about why Facebook is becoming involved in a project like Libra at all. During his prepared testimony, he said that a project like Libra could be critical for ensuring that the United States maintains its positional as a leader in finance and doesn’t get left behind as other global powers like China push ahead.

“While we debate these issues, the rest of the world isn’t waiting,” Zuckerberg says in his testimony. “China is moving quickly to launch similar ideas in the coming months. Libra will be backed mostly by dollars and I believe it will extend America’s financial leadership as well as our democratic values and oversight around the world. If America doesn’t innovate, our financial leadership is not guaranteed.”

But Libra isn’t the only subject the committee is seeking answers on. The hearing is being held to discuss Facebook’s impact on the housing sector as well, coming after the Department of Housing and Urban Development filed a claim in March alleging that Facebook was “encouraging, enabling, and causing housing discrimination” by allowing would-be landlords to restrict who could see housing ads on the basis of race, color, sex, familial status, and other factors.

Zuckerberg recapped the changes Facebook has made to its ad platform to prevent such abuse, including requiring that advertisers go through an ads-purchasing process that prohibits targeting by age, gender or zip code.

“This has been a challenging few years for Facebook,” Zuckerberg said at the end of his opening remarks. “I know we have a lot to do, but I also know that the problem of financial under-inclusion is solvable, and I believe that we can play a role in helping to find the solution.”

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