Facebook Chairman and CEO Mark Zuckerberg testifies in front of a "Zuck Buck" image that was put on display by the House Financial Services Committee during a hearing examining the company's plan to launch a digital currency on Capitol Hill in Washington, U.S., October 23, 2019.ERIN SCOTT/Reuters
Facebook Inc. chief executive Mark Zuckerberg confronted a hostile U.S. Congress on Wednesday as he defended plans for a global cryptocurrency project against an intensifying backlash by regulators who say they have lost trust in the social-media giant.
In his first appearance on Capitol Hill in more than a year, Mr. Zuckerberg said Libra, a proposed global cryptocurrency and payments system Facebook announced earlier this year, would provide low-cost financial services to marginalized populations, modernize outdated banking institutions, and reinforce the place of the United States at the centre of global finance and innovation.
Libra is being planned as a “stablecoin,” a cryptocurrency built on blockchain technology and backed by a reserve of global currencies, with access to coins controlled by an organization called the Libra Association that is independent from Facebook and based in Geneva, Switzerland.
Mr. Zuckerberg described the project as a “safe and secure and regulated alternative” to more speculative cryptocurrencies such as bitcoin that would include “world-class” systems to prevent it being used for money laundering, terrorist financing and other regulatory concerns.
Acknowledging his company has been under fire from lawmakers across the globe for a string of controversies, Mr. Zuckerberg portrayed Facebook as just one of dozens of partners in Libra. He pledged his company would pull out if the project did not get the support of U.S. regulators.
“I’m sure people wish it was anyone but Facebook putting this idea forward,” he told the House Financial Services Committee. “But if healthy skepticism becomes all-out hostility, we’ll put a lot of progress at risk.”
However, Republicans and Democratics made it clear on Wednesday they were not yet ready to permit a social media company that has been at the centre of scandals over data-privacy, election interference and the spread of misinformation to lead what several argued would amount to a privately run monetary system.
“We need to know what this is. We have to regulate it,” Ed Perlmutter, a Democratic Congressman from Colorado, told the Facebook founder. “And I’m not sure you guys understand what it is.”
Facebook announced plans for Libra in June, pitching it as a global alternative to the traditional financial system. Mr. Zuckerberg said on Wednesday that “sending money should be as easy and secure as sending a text message.”
Facebook expected to have 100 partners in the Libra Association before a launch early next year. It also said it would create a subsidiary, Calibra, to operate a digital wallet to store the electronic coins. Calibra would require users to verify their identity and would not share customer data with its parent company, Facebook has said.
While the company has positioned Libra as a group effort, the cryptocurrency is expected to make it easier for advertisers to sell their products to Facebook’s more than two billion users directly through the company’s platforms and private-messaging apps.
Mr. Zuckerberg has also said U.S. tech companies are threatened by the growing success of social-media platforms and digital payment systems being developed in China. On Wednesday, he pointed to plans by China’s central bank for a digital currency to help facilitate the country’s global development strategy known as the Belt and Road initiative.
Libra’s rollout has been plagued with problems, getting a cool reception from European financial regulators. The Group of Seven this month warned that stablecoins such as Libra could threaten global financial stability and cede too much control to a few private companies.
The response has been even harsher at home. Democratic lawmakers have called for a moratorium on Libra until Congress can pass regulations. Republicans pressed Mr. Zuckerberg on why he launched the Libra Association in Switzerland.
Rattled by the regulatory response, several high-profile business partners dropped out of the project in recent weeks, including Visa, MasterCard and PayPal, raising questions about whether Libra can launch next year.
Mr. Zuckerberg has said it was necessary to unveil Libra in its early stages to get regulators on board before the technology was too far along. But on Wednesday, he struggled to explain exactly how Libra would work. Many of the details are still up for debate, he said, including whether Libra would be backed by a basket of currencies as planned, or be a payments system built to interact with individual sovereign currencies separately.
He said he was also open to a requirement that Libra maintain a minimum amount of U.S. dollar assets to protect the dollar’s status as the world’s reserve currency. Libra’s partners are still working on other issues, such as how to refund fraudulent payments. “We clearly have not locked down exactly how this is going to work yet,” he said.