Lawmakers are about to grill Mark Zuckerberg about the big plan Facebook created to upend the way we send money around the globe (FB)

Business Insider Politics 3 weeks ago

Facebook CEO Mark Zuckerberg will testify before the House Financial Services Committee on Wednesday, where lawmakers are expected to grill 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 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.

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. Chairwoman of the committee and Congresswoman Maxine Waters (D-CA) 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."

This story is developing, please refresh for the latest.

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