Facebook CEO Mark Zuckerberg plans to tell lawmakers that he understands Facebook is not the “ideal messenger” for its cryptocurrency project and he supports delaying Libra’s launch until regulatory concerns are addressed.
Zuckerberg is set to testify before the House Financial Services Committee on Wednesday morning. He’ll try to satisfy lawmakers who are — at the very least — skeptical about its move into cryptocurrency.
“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,” Zuckerberg said in his prepared remarks.
In his testimony, Zuckerberg says Facebook will not be a part of launching the Libra payments system anywhere in the world until U.S. regulators approve. But gaining U.S. approval could be difficult. On Tuesday, Treasury Secretary Steven Mnuchin told the House Financial Services Committee that he’s met with Facebook multiple times about Libra. Mnuchin said he told Facebook its launch was “premature” and that “fundamental issues” remain.
In the hearing on Wednesday, Zuckerberg will go head-to-head with one of his fiercest critics in Congress, Chairwoman Maxine Waters (D-CA). Waters has urged Facebook to shut the Libra project down. After Libra’s co-creator, David Marcus, testified before the committee this summer, Waters said she still had questions for Zuckerberg.
“The first thing he could tell us is why Facebook came up with this idea altogether,” Waters told Yahoo Finance after the hearing. “I think this is Facebook in its effort to broaden its influence and its power and to make more money.” Facebook announced details for its project Calibra, a planned Facebook subsidiary, in June, along with Libra, its new cryptocurrency.
Rep. Sylvia Garcia (D-TX), who serves on the House Financial Services Committee, told reporters she doesn’t think there’s anything Zuckerberg could say in the hearing to get her on board.
“I don’t see any reason for it and it’s going to take a lot of convincing,” said Garcia.
Zuckerberg plans to tell lawmakers the goal is to make sending money easy and secure, and to help people around the world who don’t have access to a bank account.
“People pay far too high a cost—and have to wait far too long—to send money home to their families abroad. The current system is failing them. The financial industry is stagnant and there is no digital financial architecture to support the innovation we need. I believe this problem can be solved, and Libra can help,” said Zuckerberg.
In his prepared testimony, Zuckerberg warns lawmakers that China is moving quickly on similar ideas and “the rest of the world isn’t waiting” while the United States debates about the project.
“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,” said Zuckerberg.
Garcia told Yahoo Finance she doesn’t “want to be sidetracked with worrying about what China and Russia are doing right now on this issue.” Rep. Bill Foster (D-IL), who also serves on the committee, said there are some legitimate concerns about China’s efforts.
”I think that it's incumbent upon the United States to figure out how we will answer it, if an initiative like Libra starts to get real traction — or for that matter, another major country's central bank issues digital fiat currency. I think that's a more immediate threat because it appears as though China is going to launch their digital currency within the next few months. There is a tremendous appetite worldwide, unfortunately for replacing the US dollar as the standard of of exchange worldwide,” said Foster. “This would be a tragedy for United States specifically for monetary stability worldwide.”
In an interview with Yahoo Finance, Foster didn’t explicitly say whether he supported or opposed Libra, but seemed more open to the idea than some of his Democratic colleagues.
“We've gotten, frankly, conflicting answers from the Libra Association and Facebook as to whether this is going to be an anonymously held cryptocurrency that can be traded on the dark web — or whether this is going to be sold exclusively through and traded exclusively through regulated institutions,” said Foster. “There is a huge difference in terms of your ability to detect and prevent things like money laundering, human trafficking, ransomware — a long list of things.”
Last week, the Libra Association formalized its list of 21 founding members —including Facebook, Uber, Lyft and Spotify. MasterCard, Visa, Stripe and PayPal originally planned to be a part of the effort, but recently dropped out.
Though Facebook has spearheaded the project, Zuckerberg says his company will not control the Libra Association. While that may be true on paper, many lawmakers doubt that Facebook — the most influential member of the coalition — won’t have control over the decision-making process.
“I don’t think it’s helps that Facebook is the one leading here. If Mr. Zuckerberg wants to be king, he can be king in the social networks. But I don’t want him to have the additional arsenal of financial data on people,” said Garcia.
In his prepared remarks, Zuckerberg also addressed concerns that he has no intention of “entering the monetary policy arena.”
“I want to be clear: this is not an attempt to create a sovereign currency. Like existing online payment systems, it’s a way for people to transfer money,” said Zuckerberg.
This is the first time Zuckerberg has testified before Congress since April 2018, but it’s at least the third time he’s been to Capitol Hill in recent weeks. Last week, he met with Waters and Rep. Patrick McHenry (R-NC), the top Republican on the committee.
The embattled CEO has been trying to win over lawmakers, as multiple federal agencies, state attorneys general and Congress are all investigating the social media giant.
The House Financial Services Committee hearing will start at 10:00 a.m. on Wednesday.
Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.