“I don’t control Libra” was the central theme of Facebook CEO Mark Zuckerberg’s testimony today in Congress. The House of Representatives unleashed critiques of his approach to cryptocurrency, privacy, encryption and running a giant corporation during six hours of hearings. Zuckerberg tried to assuage their fears while stoking concerns that if Facebook doesn’t build Libra, the world will end up using China’s version. Yet Facebook won’t stop shaking up society, with Zuckerberg saying its News tab feature will be announced this week.
During the hearing before the House Financial Services Committee that you can watch here, Zuckerberg recommitted to only releasing Libra with full U.S. regulatory approval. But given the tone of the questioning and Zuckerberg’s lack of fresh answers since Facebook’s David Marcus testified about Libra in July, Libra now looks even less likely to launch in 2020.
The hearing started tensely, with Rep. Maxine Waters (D-CA) declaring that “Perhaps you believe that you’re above the law, and it appears that you are aggressively increasing the size of your company, and are willing to step over anyone, including your competitors, women, people of color, you own users, and even our democracy to get what you want . . . Infact,youhaveopenedupaseriousdiscussionaboutwhetherFacebookshouldbebrokenup.“
However, some members of Congress used their time to advocate for American dominance instead of heavy regulation. Rep. Patrick McHenry (R-NC) said “the question is, are we going to spend our time trying to devise ways for government planners to centralize and control as to who, when and how innovators can innovate.” Many Republicans complimented Zuckerberg on his business acumen, though none showed outright support for Libra.
With few highlights or positive moments coming from the hearing, here are the major takeaways followed by a chronicle of the top exchanges between Zuckerberg and Congress:
Zuckerberg claims China will soon have its own version, so regulators shouldn’t block Libra
He’s open to regulators requiring Libra to be majority-backed by the U.S. dollar
Zuckerberg would leave inheritance to his children in Libra since it’s backed one-to-one with real currency
He wouldn’t commit to blocking anonymous wallets but he’s open to baking more anti-money laundering into Libra’s network
Zuckerberg plans to expand verifying users via government ID to battle abuse of Facebook
He said Libra partners left because “it’sariskyprojectandthere’sbeenalotofscrutiny”
Zuckerberg confirmed the Libra Association has abandoned or modified its plan to deal themselves dividends on interest from the Libra reserve
Facebook will pull out of Libra if it does something Facebook can’t allow or that it’s prohibited from by regulators
Zuckerberg didn’t discuss Facebook’s policy allowing misinformation in political ads with President Trump during their meeting
He says Facebook is developing anti-deepfakes technology and a policy about takedowns
He repeated his call for more government regulation instead of Facebook making its own rules
Facebook will comply with subpoenas for info on discrimination in housing ads
Zuckerberg wouldn’t commit to trying out the role of Facebook content moderator
Facebook plans to announce its upcoming News tab this week
Congress’ questions were smarter than a year ago, but still pried little new information on Libra out of Zuckerberg
Zuckerberg repeatedly relied on the Libra Association’s independence from Facebook to avoid substantial answers
On Libra versus China
Zuckerberg tried to leverage nationalist sentiment to deflect scrutiny. “AssoonasweputforwardthewhitepaperaroundtheLibraproject,Chinaimmediatelyannouncedapublicprivatepartnership,workingwithcompanies . . .toextendtheworkthatthey’vealreadydonewithAliPayintoadigital Renminbiaspartofthe Belt and Road Initiativethattheyhave,andthey’replanningonlaunchingthatinthenextfewmonths.” He later said that for Libra, “Chinese companies would be the primary competitors.”
What if the Libra Association chooses to add the Chinese currency to the basket used to back Libra and reduces the U.S. dollar’s fraction of the basket? “Ithinkitwouldbecompletelyreasonableforourregulatorstotryto [implement] arestrictionthatsaysthatithastobeprimarilyU.S.dollars,” Zuckerberg responded in one of his most substantial answers of the day. Zuckerberg was receptive to feedback that the Libra Association should keep its white paper updated.
As for why Libra isn’t just backed 100% with the U.S. dollar, Zuckerberg explained that “IthinkfromaU.S.regulatoryperspective,itwouldprobablybesignificantlysimpler.Butbecausewe’retryingtobuildsomethingthatcanalsobeaglobalpaymentsystemthatworksinotherplaces, itmaybelesswelcomeinotherplacesifit’sonly100%basedonthedollar.” Still, Zuckerberg said he would leave his children their inheritance in Libra because it’s backed one-to-one by the Libra reserve.
On Libra and regulation
Zuckerberg wouldn’t commit to blocking anonymous Libra wallets that could facilitate money laundering, only saying Facebook’s own Calibra wallet would have strong identity checks. He did say Libra was exploring whether it could encode “know your customer” protections at the network level instead of relying on developers to build this into their wallets.
On whether Facebook will increasingly seek to verify users’ identities through government ID, Zuckerberg was enthusiastic. “ThisisanareawhereIthinkwearegoingtodoalotmoreintheyearstocome.Westartedwithpoliticalads . . . overthecomingyearsforanythingthatpeoplearedoingthatissensitive,we’relikelygoingtoincreasinglyrequireverificationeitherbygovernmentIDorotherthingssowecanhaveaclearsenseofpeople’sauthenticidentity.”
Rep. Dean Phillips (D-MN) mentioned this could be a competitive advantage, implying Facebook’s size and resources might allow it to embark on a verification initiative other companies couldn’t.
Facebook has assured regulators that Calibra’s data would be kept separate from the social network. But Facebook said the same when it acquired WhatsApp, then reneged and integrated its data. This time around, Congresswoman Nydia Velázquez declared that “we’regoingtoneedtomakesurethat . . . youlearnedthatyoushouldnotlie.”
When pushed on why Libra Association members like Visa, Stripe and eBay left the organization, Zuckerberg admitted, “Ithinkbecauseit’sariskyprojectandthere’sbeenalotofscrutiny.” Zuckerberg struck back at finance incumbents, saying “I think that the U.S. financial industry . . . is just frankly behind where it needs to be to innovate and continue American financial leadership going forward.”
In an awkward moment, Zuckerberg could not answer which Libra members were run by women, minorities or LGBTQ+ people. “Is it true that the overwhelming majority of persons associated with this endeavor are white men?,” Rep. Al Green (D-TX) asked. “Congressman, I don’t know off the top of my head,” Zuckerberg responded.
Zuckerberg was criticized for trying to profit and potentially helping money laundering while claiming Libra is designed to help the unbanked. Zuckerberg said the Libra Association “hadn’t nailed down policies” about whether anonymous payments are allowed.
Rep. Brad Sherman (D-CA) said “fortherichestmanintheworldtocomehereandhidebehindthepoorestpeopleintheworld,andsaythat’swhoyou’rereallytryingtohelp.You’retryingtohelpthoseforwhomthedollarisnotagoodcurrency — drugdealers,terrorists.” Some members of Congress like Sherman chose to use their entire time monologuing instead of actually asking questions.
Zuckerberg got a chance to clear up a major snafu from Marcus’ testimony, where he said the Libra Association was in contact with the Swiss data regulator, which CNBC reported hadn’t heard from Libra. Zuckerberg explained today that the Libra Association had been in contact with the primary Swiss Financial Market Supervisory Authority instead. He says Facebook plans to earn money from Libra on ads from small businesses if cheap transactions lead to more e-commerce.
In one revealing exchange, Rep. Lance Gooden (R-TX) asked if the Libra Association still planned to offer profit incentives by offering dividends based on interest earned on currency in the Libra reserve after expenses are paid. Zuckerberg said the idea had either been “modified or abandoned.”
The highlighted section detailing how Libra Association members earn dividends on Libra reserve interest has been removed from the Libra whitepaper
Claiming Facebook isn’t Libra
Throughout the testimony, Zuckerberg tried to distance himself and Facebook from the Libra Association’s decision making process. “Wemightberequiredtopullout if the Associationindependentlydecidestomoveforwardonsomethingthatwe’renotcomfortablewith,” Zuckerberg said. That means if Facebook can’t launch Libra, it could still theoretically launch without the social network, though it does most of the engineering heavy-lifting.
The strategy was crystallized by Zuckerberg’s response to whether he could commit to moving Libra’s headquarters from Switzerland to the U.S. “Atthispoint,wedonotcontroltheindependent Libra AssociationsoIdon’tthinkwecanmakethatdecision.” Rep. Ayanna Pressley (D-MA) refuted this position, stating, “Mr. Zuckerberg, Libra is Facebook, and Facebook is you.”
The Facebook CEO, Mark Zuckerberg, testified before the House Financial Services Committee on Wednesday October 23, 2019 Washington, D.C. (Photo by Aurora Samperio/NurPhoto via Getty Images)
The “we don’t control Libra” argument provides Facebook and Libra an escape hatch from criticism, because any member and even the newly appointed chairperson and board can’t unilaterally control or make promises about its actions.
On misinformation and encryption
Many Congress members remain fixated on Facebook’s recently solidified policy of refusing to submit political ads for fact-checking. Rep Sean Casten (D-IL) asked if in Zuckerberg’s recent meeting with President Trump, “Did anyone discuss the policy change along the exemption of political figures and parties from misinformation prohibition on Facebook?” Zuckerberg responded, “Congressman, that did not come up,” quieting theories that Trump pushed for the policy that would exempt false claims in his ads.
Zuckerberg defended the policy to Rep. Alexandria Ocasio-Cortez (D-NY), saying “Ithinklyingisbad,andIthinkifyouweretorunanadthathadalie, thatwouldbebad,” but that outside of calls for violence or voter suppression, Facebook thinks it’s best to leave lies in ads from politicians so they can be scrutinized by the press and public. Yet that too heavily leans on the media to scrutinize thousands of ad variants being run as part of multi-hundred-million-dollar political ad campaigns.
Rep. Ann Wagner (R-MO) chided Zuckerberg, saying “you’renotworkinghardenough” to stop the spread of child exploitation imagery online despite Facebook submitting millions of reports. She brought up worries that Facebook moving entirely to encrypted messaging could hide child abusers, and Zuckerberg merely said “I think we work harder than any other company.” He failed to explain how Facebook would continue improving detection through encryption.
Oddly, Zuckerberg was directly confronted about his views on vaccines since Facebook works to hide vaccine hoaxes and avoid recommending groups spreading unverified information about them. “Idon’tthinkitwouldbepossibleforanyonetobe100%confident,butmyunderstandingofthescientificconsensusisthatitisimportantthatpeoplegettheirvaccines,” Zuckerberg said, defending Facebook’s decision to hide some of this content.
In another strange moment, Rep. Madeleine Dean (D-PA) demanded if Facebook had bought blocks of hotel rooms at Trump properties but never used them just to curry favor with the president. Zuckerberg said he’d never heard of that and would be surprised if it was true.
On deepfakes, Zuckerberg confirmed that “Ithinkdeepfakesareclearlyoneoftheemergingthreatsthatweneedtogetinfrontofanddeveloppolicyaroundtoaddress. We’recurrentlyworkingonwhatthepolicyshouldbetodifferentiatebetweenmediathathasmanipulatedandbeenmanipulatedbyAItoolslikedeepfakes,withtheintenttomisleadpeople.” Zuckerberg later said the doctored Nancy Pelosi video should have been flagged sooner, and highlighted Facebook needs a separate deepfakes policy. Yet Facebook’s policy allows politicians’ ads to mislead people, weakening faith that it will properly address this new problem.
Questions about Facebook’s fair practices led Zuckerberg to reiterate his call for regulation, saying “Ithinkweneedfederalprivacylegislation.Ithinkweneeddataportabilitylegislation.Ithinkclearrulesonelections-relatedcontentwouldbehelpfultoobecause it’snotcleartomethatwewantprivatecompaniesmakingsomanydecisionsontheseimportantareasbythemselves.”
On diversity, discrimination and moderation
Regarding housing discrimination via Facebook ads, Zuckerberg committed to working with regulators to provide information under subpoena, noted Facebook has banned discriminatory housing ads, and said “NobodywantstoredlineandI’msurethatwasaccidental.”
Zuckerberg received his heaviest criticism of the day from Rep. Joyce Beatty (D-OH), who grilled him about not knowing if diverse bankers manage Facebook’s cash or if diverse law firms handle its court cases.She chastised Facebook for a lack of diverse leadership, saying “thisisappallinganddisgustingtome.” Of COO Sheryl Sandberg, who leads Facebook’s civil rights task force, Beatty said “weknowshe’s notreallycivilrights.”
WASHINGTON, DC – OCTOBER 23: Facebook co-founder and CEO Mark Zuckerberg arrives to testify before the House Financial Services Committee in the Rayburn House Office Building on Capitol Hill October 23, 2019 in Washington, DC. Zuckerberg testified about Facebook’s proposed cryptocurrency Libra, how his company will handle false and misleading inform