Mark Zuckerberg is a proud American. And Facebook, despite being used by 2.7 billion people around the globe, is first and foremost an American company with American values.
At least, that was the line Facebook’s chairman and CEO took, repeatedly, when testifying before the House Financial Services Committee on October 23.
In fact, he first said it a day earlier, when Facebook released the text of his opening statement.
Pointing out that the Libra Association now controls the Libra stablecoin—which Facebook proposed and created—Zuckerberg said, “I want to be clear: Facebook will not be part of launching the Libra payments system anywhere in the world until U.S. regulators approve it.”
In response to a question, he added that Facebook would leave the Libra Association if necessary, abandoning the cryptocurrency it created in hopes of disrupting the financial industry’s status quo by creating a true global currency.
“[A]t the end of the day,” he said, “if we don’t receive the clearances that we feel like we need to move forward and the association chooses to move forward without us, then we will be in a position where we will not be a part of the association.”
…all others pay cash
Zuckerberg repeatedly turned to the issue of trust, saying that Libra or something like it needed to get built.
“The current system is failing,” he said, “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.”
At the same time, he added, “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. “
With Facebook’s 2.7 billion global users, Libra has been widely feared and condemned, most recently by the G20. On October 18, that group of governments and central bankers from large economies passed a proposal to ban any “global stablecoin” until international regulations are in place and a host of problems resolved. Most notably, the concerns that Libra could grow so big it would challenge national currencies and possible destabilize the economy.
That also led to the political pressure that forced seven of the Libra Association’s biggest names, including Mastercard, Visa, PayPal, and eBay, to drop out in mid October.
Rep. Maxine Waters (D-Calif.), chair of the House Financial Services Committee, set the tone early.
“Last year, Facebook banned all cryptocurrency ads on his platform because, and I quote, they are frequently associated with misleading or deceptive promotional practices, unquote,” she said. “Seems fair. Then earlier this year, Facebook rolled back the cryptocurrency ad ban, bought a blockchain company, and announced his own cryptocurrency.”
She then asked, what changed?
“How did cryptocurrency go from being misleading and deceptive last year and then becomes a means for financial inclusion this year?” Waters said. “It seems to me that you shifted your stance because you realize that you can use your size and your users’ data to dominate the cryptocurrency market.”
She also attacked Facebook over Russian election ads and the current policy of allowing politicians to lie in ads—which Zuckerberg basically said comes down to not wanting to censor political speech.
The best zinger came from Rep. Nydia Velazquez (D-NY). Discussing the cause of a fine Facebook received from the EU asked him, “Have you learned you should not lie?”
Vocally anti-crypto Rep. Brad Sherman (D-Calif.) also threw his hat into the ring, taking issue with Facebook’s pitch that Libra is something designed first and foremost to benefit the world’s 1.7 billion unbanked poor.
“[F]or the richest man in the world to come here and hide behind the poorest people in the world and say, that’s who you’re really trying to help…,” Sherman said.
Unfortunately, he tailed off before finishing the thought. But let’s be generous to Zuckerberg and complete it by saying “… is ironic.” As oppose to, say, “is laughable” or “is obscene,” which is where it sounded like Sherman was going.
It’s a good line, but doesn’t really take into account that a global stablecoin would make life much easier for people—about 14 million of them Americans—without access to a bank. The current payment processing system could be disrupted by a stablecoin or cryptocurrency-based platform. That would make transactions much faster and cheaper—seconds and fractions of a penny rather than days and fees of 10% or more to send remittances of $200 home.
On the other side of the aisle, Rep. Patrick McHenry (R-N.C.) called the hearing “a trial on American innovation.”
Calling Zuckerberg a “titan of the digital age,” McHenry added that Facebook’s founder had “enormous amount of responsibility.”
That is why, McHenry said, “[y]ou’re here today—to answer for the digital age.”
He then pointed out that when the committee grilled David Marcus, who heads up Facebook’s Calibra digital wallet project, “members of Congress on this dias actually compared the technology of Libra to the terrorist attacks of September 11th.”
Of course, there was also Rep. Roger Williams (R-Texas), who started out by asking the world’s fourth richest man, “are you a capitalist or a socialist?”
That drew a badly suppressed smile from Zuckerberg. Williams added, “[W]e should not discourage the private sector from investing their own time and money to research these new technologies. Private sector always seems to get it right most of the time.”
He then lobbed one over the plate, asking Facebook’s CEO, “can you explain why the private sector is better equipped to develop a digital currency like Libra than the federal reserve or another government entity?”
Zuckerberg responded, “this is an area where our financial system has been stagnant and isn’t serving a lot of the people that it needs to.”
He added, “there are always going to be risks… and we need to make sure we diligently address those risks. And that’s why the regulations are in place. But I do think that there are risks to not trying new things, too, and not having a lot of different approaches towards that. I wish that other people were trying to do different things too. I think that that would be important for helping to serve people both here and around the world.”
The China syndrome
The politicians weren’t the only ones playing politics with Libra at the hearing.
Zuckerberg repeatedly invoked the threat of America’s current financial and political bogeyman, China. This let him tie the issue into fears that if China gets too big a lead in creating a global digital currency it could cut into the dollar’s powerful role as the world’s reserve currency. It was a tactic that proved successful, coming up over and over in the questions.
He claimed that China rushed out a digital Renminbi cryptocurrency project after the Libra announcement in June, saying that it would likely launch within a few months. China claims to have been working on it for years.
It helps that as Facebook is one of the only major companies not in China or trying to enter the market, Zuckerberg was freer than most CEOs to criticize the country’s repression of free speech.
“While we debate these issues, the rest of the world isn’t waiting,” Zuckerberg said. “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.”
Zuckerberg also made China a talking point when highlighting the risks of America turning its back on innovation.
Rep. McHenry took up that line.
In a recent speech, “[y]ou said a decade ago, 10 of 10 of the top companies on the internet were American, now six of 10 are Chinese,” McHenry said. “So the question I have for you is why are we seeing emerging technologies driven by blockchain projects and digital currencies being developed elsewhere?”
He added that Libra, now governed by the Switzerland-based Libra Association, seemed to fit that bill. To which Zuckerberg responded out that Switzerland has been “forward-leaning” on creating regulatory certainty.
Returning to China, Zuckerberg said, “[o]ver the last decade, pretty much all of the major internet platforms have been American companies with strong free expression values,” Zuckerberg replied. “I just think that there’s no guarantee that that is the state of the world going forward today.”
Chinese tech and social media companies, “certainly do not share our values on things like expression,” he added.