Libra’s last stand? Zuckerberg testifies to Congress
In moments, Mark Zuckerberg will testify in front of Congress to defend the Libra cryptocurrency. Here's what we know from the pre-released testimony.
Following the departure of a quarter of Libra Association members in past weeks, including giants Mastercard, Visa and eBay, Mark Zuckerberg has been called on by Congress to defend the project.
This is the second time a Facebook executive has stepped up to the plate, following on from David Marcus, the head of the Libra project, who testified in July in front of the Senate Banking Committee.
Zuckerberg will be appearing in front of the same panel of senators today, however, this time it looks like the rhetoric needed to convince the government to allow the Libra project to succeed has changed.
There are a lot of similarities to Marcus's remarks in Zuckerberg's testimony, which was pre-released by the Committee yesterday. However, a few new angles of defence have been introduced.
The ongoing trade conflict with China has been introduced to the playing field, following the announcement in early September that the People's Bank of China would be developing a new digital currency with similarities to Libra. In his testimony, Zuckerberg doesn't mince words, implying that US financial dominance is reliant on a project like Libra:
While we debate these issues, the rest of the world isn't waiting. China is moving quickly to launch similar ideas in the coming months. Libra will be backed mostly by dollars and I believe it will extend America's financial leadership as well as our democratic values and oversight around the world. If America doesn't innovate, our financial leadership is not guaranteed.
Despite it being in development since 2018, China only announced its central bank digital currency (CBDC) after the introduction of the Libra project. As such, it was seen as a defensive move, setting the stage for a cold-war-like race between China and the US-led West to establish a major digital currency.
The key here is for China to keep control of its capital flows through blockchain-style tracking systems to help prevent capital flight, while Zuckerberg's testimony continues to double down on the cryptocurrency maxim "banking the unbanked".
The question for the US, though, is should a private company be left to manage the West's flagship digital currency?
To help persuade senators that yes, private companies like Facebook should lead the charge, Zuckerberg's next line of defence in his testimony is to invoke the risk of lost innovation.
"The financial industry is stagnant and there is no digital financial architecture to support the innovation we need," Zuckerberg's testimony reads. He echoes the idea again towards the end of his statement:
But I think it would be bad for our country and the world if companies were discouraged from taking on challenges like these, and settled for safer options that reinforce the status quo. That would harm our national reputation for innovation, make our economy less competitive, and end up concentrating more power in the hands of existing players rather than people.
Facebook is obviously not the only company that can do this, and is it even the right one to try?
Zuckerberg acknowledges this, as well as the apparent disdain that Congress has for him, announcing early in his statement:
I believe this is something that needs to get built, but I understand we're not the ideal messenger right now. We've faced a lot of issues over the past few years, and I'm sure people wish it was anyone but Facebook putting this idea forward.
The idea that a project like Libra is an essential part of the next phase of the global economy is echoed throughout the rest of the statement. Accompanying it is the idea that it was something Facebook felt obligated to do, and that if it didn't, someone else with less respect for the US government might have beaten them to it.
"Facebook will not be part of launching the Libra payments system anywhere in the world until US regulators approve."
It's been a rocky ride for Libra, and today's hearing may serve as a flashpoint. Given the global shift towards digital assets and currencies, the US Government will likely be asking itself whether a digital currency on the scale of Libra is something it is willing to let private organisations do, or whether it is something that falls squarely within the mandate of the US Government.
Disclosure: The author holds BTC, ETH, BNB, LINK, NEU, XRP, VET, USDT, POWR, ICX, ETC, LRC, WAN, XMR, BMX, GRIN, NXS, QASH, NEO, BEAM at the time of writing.