In his testimony, Facebook’s Zuckerberg tried to deflect the heavy criticism of their planned cryptocurrency Libra by playing the patriotism card over and over during a six-hour hearing of the House Financial Services Committee on Wednesday.
Zuckerberg warned the committee that China is moving quickly to launch a digital version of its currency in the coming months and it is intent on “exporting” its currency around the world.
“But I also hope we can talk about the risks of not innovating. 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. 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.”
However, almost every member of the committee was not buying it and ripped Zuckerberg apart over Facebook’s failures in the past and pushed him to gain the public’s trust again before launching a grandiose project like Libra.
Regulators should view Libra as an instrument of American geopolitical power, CEO Mark Zuckerberg argued several times.
During the hearing politicians hammered Zuckerberg on Libra could be used for money laundering, disrupt the global financial system, or give Facebook far too much control over data.
And Zuckerberg retorted with banking the unbanked – the billion people globally who don’t have accounts – and possibly lifting millions out of poverty.
“I get that I’m not the ideal messenger for this right now. We’ve faced a lot of issues over the past few years and I’m sure there are a lot of people who wish it were anyone but Facebook that was helping to propose this.”
“The prospective currency, called Libra, has been called a threat to America’s outsized influence over the global financial system. Since the dollar is the world’s most popular reserve currency, other nations need access to it in order to trade with each other, and much of global trade flows through US banks. That means the country’s government has a unique power to inflict harm on other states and international criminals, by imposing sanctions that cut them out of the system.”
Chair of the Financial Services Committee and California Congresswoman Maxine Waters, stated she was concerned that Libra, would “rival” the dollar is it is allowed to go ahead.
Congressman Brad Sherman of California argued Libra has the potential:
“…to transfer power from the United States government to sanctions and tax-evaders, terrorists, and drug dealers while reducing the importance of the US dollar as the reserve and trade currency.”
Libra has faced a number of serious challenges recently, with key partners pulling out on top of the serious regulatory opposition from politicians in DC.
- On October 4, PayPal was first to pull out, which was a huge blow seeing that head of Facebook Libra David Marcus is the former president of Paypal.
- However, the biggest migration came a week later – when Visa, Mastercard, Stripe, Mercado Pago and eBay.
- Brooking Holdings, which owns travel websites Booking.com, Priceline and Kayak, pulled the plug a few days later.
- Libra is now left with 21 members, including Uber, Lyft, Spotify, Vodafone and venture-capital firm Andreessen Horowitz.
Zuckerberg went on:
“I recognize that some have expressed concerns about the Libra project and Facebook’s role in it. I want to talk briefly about how we are working to address the concerns we’ve heard.”
“First, we’ve heard that people are concerned that we are moving too fast. As we have said from the beginning, we’re committed to taking the time to get this right. We co-wrote a white paper to begin a dialogue with experts and the regulators and policymakers who oversee the stability and security of our financial systems. It was never intended to be the final word on the project. The goal was to signal the direction we want to go and to start a conversation about how to get there. That conversation is ongoing, and we will continue to advocate for responsible innovation in this space.”
“Second, some have suggested that we intend to circumvent regulators and regulations. We want to be clear: Facebook will not be a part of launching the Libra payments system anywhere in the world unless all US regulators approve it. And we support Libra delaying its launch until it has fully addressed US regulatory concerns. We have met with regulators in 30 different jurisdictions. The Association has been focused on regulators and other stakeholders, but Association members—including Calibra, Facebook’s Libra-related subsidiary—are also talking with elected officials, including many here in Congress. This is how democratic oversight and scrutiny should work.”
Ultimately, many politicians are arguing that the responsibility for issuing and managing currency should be left to the state.
Ironically, the US Federal Reserve is not a company or a government agency. Its leader is not an elected official. This makes it seem highly suspicious to many people because it is not subject to either voters or shareholders. We are talking about the central bank for the United States whose decisions affect the U.S. economy, and the world – making it the most powerful actor in the global economy.