Disclaimer: This article will be updating live for the duration of the Oct. 23 hearing. Please check in for the latest from the hearing.
In a much-anticipated meeting of politics and tech, Facebook CEO Mark Zuckerberg has finally made his way to United States regulators. He will be testifying before the House Financial Services Committee on Facebook’s Libra. The planned stablecoin has been the subject of much controversy since it’s June whitepaper. Days after, Chairwoman of the committee Maxine Waters called for a moratorium on Libra’s development.
According to Zuckerberg’s prepared remarks released yesterday, he plans to assure the committee that Facebook will not launch Libra anywhere in the world without having satisfied U.S. regulators. Expect the representatives of the committee to be skeptical of this claim.
10:07 The Hearing begins
Chairwoman Maxine Waters began the hearing by calling the committee to order. Rep. Waters’ skepticism of Facebook’s intentions are well-documented.
In her opening remarks, Representative Waters suggested that the best course of action would be “if Facebook concentrates on addressing existing deficiencies and issues before proceeding with Libra.” The Chairwoman named staff discrimination, anti-trust concerns, consumer trust, and the 2016 elections as preeminent among these.
Ranking Member Patrick McHenry began his comments by declaring that “Today is a trial on American innovation.” In a comment on modern dependence on technology, he noted that most of the members of congress were checking their phones “right now.” To Zuckerberg: “Fair or not fair, you’re here to answer for the digital age.”
10:21 Zuckerberg’s opening remarks
Following an appeal the vast global unbanked, Zuckerberg said that “The financial industry is stagnant. There is no digital financial architecture to support the innovation that we need.” He went on to say “I don’t know if Libra is going to work, but I believe in trying new things.”
10:25 Questioning begins
In her questions to Zuckerberg, Chairwoman Waters referred to an earlier ban on cryptocurrencies on Facebook, accusing the company of changing its tune only when it realized how much it could dominate the market.
Rep. McHenry’s line of questioning began by asking about China, especially concerned with the rise in China’s technology companies. Zuckerberg: “Today, 6 out of 10 of the top tech companies are coming out of China and certainly don’t share our values.” This seems to play into a longer-term argument that Libra is the U.S.’s best chance against China’s crypto development. McHenry pushed the question, however: “Why not just do a Facebook version of Alipay?”
Switching back to domestic regulator concerns, Rep. Mahoney asked Zuckerberg what he meant by approval from all U.S. regulators, given the number of agencies and entities in play. “We’re committed to getting all of the appropriate approvals,” Zuckerberg answered.
Rep. Mahoney further asked Zuckerberg to commit to keeping Libra from all wallets that maintain lower standards of know-your-customer (KYC) and anti-money laundering (AML) controls than those that Facebook is promising for its Calibra wallets. Facebook’s CEO said “I can’t sit hear and speak for the whole of the Libra Association, but you have my commitment from Facebook.”
Referring to the recent departure of several major companies from the Libra Association, Rep. Wagner pushed Zuckerberg to admit that Libra is “a risky project.” She questioned the prospect of Facebook’s end-to-end encryption while citing recent figures saying that 16.8 of 18.4 million reported instances of child sexual abuse online came via Facebook. Zuckerberg agreed that this is a problem but attributed those numbers to the company’s reporting structure: “We actually do a better job than everyone else of acting on it and finding it.”
Rep. Velazquez saw Facebook’s acquisition of Whatsapp a problematic template, saying that it began with similar promises of maintaining separation that led, 18 months later, to the companies being linked. “Have you learned that you should not lie?” Velazquez asked.
Calling back upon Libra’s appeal to the unbanked, Rep. Lucas suggested that many of those without traditional bank accounts don’t trust banks, nor “congresspeople, nor captains of industry for that matter.” Zuckerberg responded that the real test would be how Libra behaved once allowed into the free market.
Rep. Meeks also went after Libra’s claims to work with the unbanked by asking whether Facebook had invested in minority depository institutions or similar efforts to provide financial services to the unbanked in the U.S. Zuckerberg responded that he did not know. “I would guess that there are almost zero dollars there,” said Meeks.
11:00 Further questioning
In introducing himself to Mark Zuckerberg, Rep. Brad Sherman said he was “anti-cryptocurrency back when you were anti-cryptocurrency.” He attributed Turkey’s stop to the power of the U.S. Dollar and maintained that crypto as a whole threatened that power.
Referring to Zuckerberg’s claim that Libra will meet all regulatory concerns, Sherman said “You will deploy a horde of lobbyists to stop us from writing a new statute.” Sherman’s five minutes of questions contained not a single question.
Rep. Huizenga asked what would happen were U.S. regulators to oppose the launch of Libra and Facebook fulfilled its commitment not to launch while the Libra Association remained intent on launching. Zuckerberg answered: “Then I believe that we would be forced to leave the association.”
Rep. Scott accused Facebook of participating in redlining by enabling discriminatory targetting practices. Rep. Stivers followed up on the same question, asking if he could target Facebook advertising using age, sex and race today. Zuckerberg checked with his staff before answering no.