Zuckerberg testifies before House committee regarding new Facebook cryptocurrency
On Wednesday, Facebook CEO Mark Zuckerberg testified before the House Financial Services Committee on Capitol Hill. The subject was Facebook’s finance sector, and specifically their plan for a new global cryptocurrency, known as Libra, that would be run entirely through Facebook.
Lawmakers from both parties came together over their skepticism of the system, which would see Facebook and partner corporations in charge of their own currency beyond the control of any government.
Unlike other cryptocurrencies, designed at their core to have no central regulating authority and thus to be independent of any but a fluctuating market value, Libra is intended to be directly backed by assets from the companies involved in the project, including US Treasury securities and a portfolio of international currencies.
‘Traditional’ cryptocurrency such at Bitcoin is decentralized, with the blockchain logging every transaction automatically and anyone able to generate new currency using computer processing power, thus giving no individual special control.
Libra would instead have the non-profit Libra Association as a ‘central bank’ behind the currency, similar to how governments control the minting and monitor the circulation of their currency.
Facebook thinks that an estimated 1.7 billion adults around the world who don’t have access to a bank account dealing in national currencies could benefit from Libra, but lawmakers around the world have been worried about a giant tech company gaining the kind of influence over currency that is almost universally the domain of national governments.
Zuckerberg admitted that companies like Visa, Mastercard and PayPal had dropped out of Libra earlier this month, allegedly because it was a “risky project.” Of the 28 companies that originally made up the Libra Association behind Facebook’s plan, seven have now abandoned it.
According to Zuckerberg in questioning, Facebook itself may withdraw from the Libra Association if he feels “like Facebook can’t be part of it keeping with the principles I laid out.”
He also said that Facebook won’t move forward with the project anywhere in the world unless US regulators approve it and all US regulatory concerns are addressed.
Representatives questioned whether Facebook’s principles can be trusted, however, in light of numerous prior concerns over the company’s illegal misuse of customer data.
Zuckerberg claimed that no data from the ‘wallet’ app for Libra, known as Calibra, would be shared with Facebook itself, but House representatives pointed out that the same claim had been made when Facebook shared customer data with Whatsapp and was later fined $122 million for the breach.
Likewise, despite claims that Libra would be fully under the sway of US regulators, representatives noted that the Libra Association’s headquarters would be in Switzerland, which Zuckerberg claimed was a natural choice as an international organization.
At present, Libra remains in the theoretical stages, but the questioning Wednesday represented a great deal of mistrust that Facebook will need to overcome if it and its partners mean to get the cryptocurrency off the ground.
