In a United States House Committee on Financial Services hearing yesterday, Facebook CEO Mark Zuckerberg testified on the Libra stablecoin before lawmakers. The hearing lasted for 4 hours, and here are the main takeaways for the crypto industry.
“Facebook will not be a part of launching the Libra payment system anywhere in the world, even outside the U.S., until the U.S. regulators approve," Zuckerberg said in his opening statement. In case the Libra Association decides to launch despite the regulatory ban, Facebook would be forced to leave the Association, he added.
Mark Zuckerberg's opening statement to Congress.
As Zuckerberg read in his opening statement, “China is moving quickly the launch of a similar idea in the coming months,” and it could beat the US to the field if the U.S. regulators do not allow the launch of cryptocurrency.
Arguing for the Libra launch, Zuckerberg claimed that the Facebook stablecoin could strengthen American financial leadership: “Libra is going to be backed mostly by dollars, and I believe that it will extend America’s financial leadership around the world, as well as our democratic values and an oversight. But if America doesn’t innovate, our financial leadership is not guaranteed.”
Ann Wagner, the Republican representative from Missouri, found the fact that seven companies decided to quit the Libra Association "highly concerning". Answering the question about the alleged reasons behind their decision, Mark Zuckerberg said: “Because it’s a risky project and there’s been a lot of scrutiny.”
Republican congressman Ted Budd of North Carolina noted that Libra is not technically a cryptocurrency like Bitcoin or Ethereum, but a stablecoin. He asked Zuckerberg how he supposed it be regulated. “If we’re to remain a world leader in financial technology, it’s vital that we don’t embrace reactionary laws against cryptocurrencies,” Zuckerberg answered.
Representative Chuy Garcia said he would introduce a Keep Big Tech Out of Finance Act. The act proposes to prevent big technology companies from functioning as financial institutions or issuing digital currencies. Garcia asked Zuckerberg who should regulate Libra and if it should be regulated by the SEC as a bank. Zuckerberg dodged the question, saying “I think the SEC should decide.”
Rep. Chuy Garcia claims regulators should not greenlight Libra.
A number of Congress members criticized Zuckerberg for claiming that Libra was meant for poor and unbanked. Rep. Brad Sherman from California called Libra a “Zuck Buck” and compared the Libra project with “powerful burglary tools.” He questioned the necessity of Libra for poor and unbanked and stated that, unlike the U.S. dollar, it will provide greater solutions for tax evaders, drug dealers, and terrorists.
Rep. Brad Sherman from California called Libra a “Zuck Buck”.
Rep. Chuy Garcia told Zuckerberg “I don’t think we can trust you.”
“When we have blurred the lines between banking and commerce, we’ve run into problems,” Garcia said. “Facebook has operated as a shadow government with you as its head.”
Although, some Congress members supported Mark Zuckerberg’s innovative approach to financial services. As Kentucky Republican Andy Barr claimed:
“Criticism is cheap. Anybody can criticize. As you can see here today, politicians in Washington are pretty good at lodging criticism. But creating something of value is significantly more difficult, and I would commend you for being an innovator and trying to create something of value.”