Mark Zuckerberg’s Libra Testimony to Congress: 5 Things to Watch
On Wednesday at 10am ET, Facebook CEO Mark Zuckerberg will appear before the House Financial Services Committee. While the hearing is officially about “Facebook’s Impact on the Financial Services and Housing Sectors,” most of the proceedings will focus on “Project Libra”—the company’s embattled initiative to launch a global cryptocurrency.
Since it was announced in June (full details here), Project Libra—a top priority for Facebook—has taken a beating from regulators, politicians, competitors, and activists. The backlash recently led Facebook’s most important partners—including PayPal, Visa, Stripe, and Mastercard—to pull out of the project, leading to a perception Project Libra is on life support.
Zuckerberg’s appearance on Wednesday may be Facebook’s last chance to revive Project Libra’s fortunes. His performance and that of his Congressional interrogators could be a make-or-break moment. Here are five key issues to watch.
1) Will Congress even give Project Libra a fair hearing?
The technological promise of Libra is intriguing—it could create an efficient low-cost way to move money worldwide—but that promise will have to be weighed against Facebook’s hand in launching it. Technically, Facebook is just one of many members of a consortium that will run Libra. But, for now at least, the company is clearly in charge.
In theory, Congress should use the hearing to weigh the potential benefits of Libra versus the risks of handing Facebook more power. But given that Facebook is deeply unpopular right now with both liberal and conservative politicians, the members may choose to score political points by treating Zuckerberg as a piñata more than a witness. In order words, we may end up with a whole lot of anti-tech grandstanding and not much serious inquiry into whether the new cryptocurrency is a good idea.
2) Will Zuckerberg’s “crypto in the USA” strategy find any supporters?
Facebook has been pulling out all the stops to lobby for Project Libra without much success. But the company’s latest argument—that it’s better for an American company to lead the crypto charge than a Chinese one—may find some sympathetic listeners.
China is currently building a cryptocurrency of its own that critics say will be used to track how its citizens spend money. Expect Zuckerberg to make the case that the U.S. risks ceding the next wave of financial innovation to foreign countries, and Project Libra could be what it needs to check that. On the other hand, some politicians may hammer Zuckerberg for basing the project in Switzerland.
As a last resort, Zuckerberg may declare that Project Libra will begin as a digital alternative to the U.S. dollar, rather than a proxy for a basket of global currencies. Project Libra’s head, David Marcus, has suggested this in recent days—possibly as a last ditch attempt to keep the project alive. A dollar-based approach could also appease members of Congress who are concerned about preserving the greenback’s status as the world’s main reserve currency.
3) Can Zuckerberg make the case Project Libra is decentralized?
One of the biggest knocks on Project Libra is that it amounts to a private currency controlled by a handful of companies—and that was before PayPal and other big names pulled out. Right now, Facebook is left with about 20 other “partners” but, as Wired pointed out, many have ties to Facebook in one way or another.
According to the original grand plan, Project Libra would operate as a non-profit with a hundred or more members. But right now, it looks more than ever like Facebook’s show—and that’s a big problem if the company hopes to get regulators off its back. Watch to see if Zuckerberg has anything up his sleeve to persuade skeptical members that Libra can be the decentralized project it claims to be.
4) What will Zuckerberg say about money laundering?
The issue of money laundering is also another major obstacle standing in the way of Project Libra. Both U.S. politicians and the Financial Action Task Force—a global Paris-based group that combats money laundering—have warned Facebook’s project could be a currency for criminals.
Zuckerberg will have to come prepared with a convincing explanation for why Libra won’t be a go-to money for narco traffickers and other bad guys. On the other hand, if his answer is too persuasive—by saying governments will be able to oversee everything Libra users do—he risks alarming civil liberties groups that already distrust Facebook.
5) How will the hearing affect the price of Bitcoin?
Those familiar with cryptocurrency see Libra and Bitcoin as apples and oranges. The latter is a truly decentralized form of money, they say, while Libra is a centralized corporate currency.
Nonetheless, many see the fate of Libra as a proxy for the long-term success of other cryptocurrencies. If Zuckerberg takes a drubbing before Congress, the price of Bitcoin (currently around $8,200) could take a dive. Some encouraging words, on the other hand, may lead speculators to believe that the U.S. government may become less hostile to crypto.
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