Facebook and Congress have a lot to talk about. In the past week, the company has careened through controversies over misinformation, squabbles over election ads, and an oddly statesmanlike speech in DC that sought to put a fresh spin on the Facebook origin story.
But, unless grandstanding on other Facebook issues gets in the way, Wednesday’s hearing featuring Mark Zuckerberg at the House Financial Services Committee is mostly about Libra. Zuckerberg is out to defend Facebook’s struggling cryptocurrency initiative, which lost a quarter of its partners in recent weeks, including Visa, Mastercard, and Paypal. It should be fun. In the US Congress, nothing is so bipartisan as hating on Facebook.
Expect some artful dodging. Facebook has sought to distance itself from the regulatory hubbub around Libra by putting most of the concerns—the banking regulations, the fears about money laundering—on the Libra Association, the nominally independent group that is to manage the cryptocurrency. Facebook, despite coming up with the idea for Libra and designing the system from scratch, is keen to note it is but one of the now-21 members launching the currency.
In Zuckerberg’s testimony, released Tuesday, he acknowledges it will be a lift to get the idea past regulators. “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,” he says.
The hearing is scheduled for 10 am Eastern time on Wednesday. It can be streamed on C-SPAN and the House Financial Services Committee website.
What to Watch For
Zuckerberg’s defense starts with the company line on Libra so far, pitching the digital token as a tool for financial inclusion. With a stablecoin backed by a basket of currencies, the idea is to reduce the cost of sending money across borders to friends and family, and to provide a potentially useful tool for small businesses. The company has said Facebook-enabled mobile money will be a particular boon for the unbanked, both in the US and developing nations.
Doesn’t do it for you? Your cynicism is forgiven. Zuckerberg himself acknowledges that more people transacting on Facebook will help the company’s bottom line.
Perhaps you’ll respond to a more patriotic argument instead: “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,” Zuckerberg says. Otherwise, he adds, China will take the lead on digital payments.
Libra has indeed sparked other countries to consider issuing a digital form of central bank money. China says it has accelerated its efforts and has a digital coin almost ready; others like the UK and European Union are considering similar plans. But some have questioned whether that arms race is one worth stoking, or if it matters all that much. Just because China is issuing digital yuan doesn’t mean it will catch on elsewhere.
Still, invoking China and innovation has become a popular way for tech firms to deflect regulatory concerns, especially antitrust. When David Marcus, head of Facebook’s cryptocurrency efforts, made a similar argument in front of the House Financial Services Committee in July, a number of lawmakers—especially Republicans—seized on it.
One thing many are watching for, but probably won’t get, is a compromise that would make Libra more palatable to regulators. Last week, Marcus told Reuters the association could consider ditching the currency basket and instead issue tokens for different countries, backed in the local currency. (He echoed Chris Dixon, general partner at Andreessen Horowitz, another Libra Association member, who floated the idea earlier this month at Techcrunch Disrupt.)
