Mark Zuckerberg says that a global payments system like Libra „needs to get built” and that the US risks ceding financial leadership to China if it does not take the initiative. However, the Facebook CEO admits that his company is „not the ideal messenger right now”.
HEARING BEFORE THE UNITED STATES HOUSE OF REPRESENTATIVES COMMITTEE ON FINANCIAL SERVICES
October 23, 2019 Testimony of Mark Zuckerberg Founder, Chairman and Chief Executive Officer, Facebook
Chairwoman Waters, Ranking Member McHenry, and members of the Committee, thank you for the opportunity to testify today.
There are more than a billion people around the world who don’t have access to a bank account, but could through mobile phones if the right system existed. This includes 14 million people here in the US. Being shut out of the financial system has real consequences for people’s lives—and it’s often the most disadvantaged people who pay the highest price.
People pay far too high a cost—and have to wait far too long—to send money home to their families abroad. The current system is failing them. The financial industry is stagnant and there is no digital financial architecture to support the innovation we need. I believe this problem can be solved, and Libra can help.
The idea behind Libra is that sending money should be as easy and secure as sending a text message. Libra will be a global payments system, fully backed by a reserve of cash and other highly liquid assets.
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.
But there’s a reason we care about this. Facebook is about putting power in people’s hands. Our services give people voice to express what matters to them, and to build businesses that create opportunity. Giving people control of their money is important too. A simple, secure, and stable way to transfer money is empowering. Over the long term, if it means more people transact on our platforms, that would be good for our business. But even if it doesn’t, it could help people everywhere.
Before we move forward, there are important risks that need to be addressed. There are questions about financial stability, fighting terrorism, and more. I’m here today to discuss those risks and how we plan to address them.
But I also hope we can talk about the risks of not innovating. 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.
We co-wrote a white paper to put this idea out into the world and start a conversation with regulators, experts, and governments. Today’s hearing is an important part of that process. What we’re discussing today is too important for any single company to do on its own.
That’s why we helped found the Libra Association—a coalition of 21 companies and non-profits working to give everyone access to financial tools. But even though the Libra Association is independent and we don’t control it, I want to be clear: Facebook will not be part of launching the Libra payments system anywhere in the world until US regulators approve.
Last time I testified before Congress I talked about taking a broader view of our responsibility. That includes making sure our services are used for good and preventing harm.
People shouldn’t be discriminated against on any of our services. We have policies in place to prevent hate speech and remove harmful content. But discrimination can also show up in how ads are targeted and shown. As part of a settlement with civil rights groups, we’ve banned advertisers from using age, gender, or zip codes to target housing, employment, or credit opportunities, and we’ve limited interest-based targeting for these ads. This is part of our commitment to support civil rights and prevent discrimination.
I also know we need more diverse perspectives in our company. Diversity leads to better decisions and better services for our community. We’ve made diversity a priority in hiring, and we’ve made a commitment: within five years, we want at least 50% of our workforce to be women, people of color, and other underrepresented groups.
We’ve made some progress. There are more people of color, women in technical and business roles, and underrepresented people in leadership at Facebook. But I know we still have a long way to go.
This has been a challenging few years for Facebook. I recognize we play an important role in our society, and we have unique responsibilities. I feel blessed to be in a position where we can make a difference in people’s lives, and, for as long as we’re here, I’m committed to using our position to push for big ideas that we believe can empower people.
II. The Libra Project
The Libra project is about promoting financial inclusion through a safe, low-cost, and efficient way of sending and receiving payments around the world. Research shows that access to financial services can help people lift themselves out of poverty, and it is especially important for women in developing economies. We believe this is a problem that can be solved, and we want to be part of that solution.
Libra is one potential approach, and we’re proud to have helped found a 21-member coalition of companies and social impact organizations that have now committed to moving forward with this idea. Establishing this broad-based coalition is a positive step, and I welcome the conversation that Libra has sparked. But by design, we don’t expect to be leading those efforts going forward. The Libra Association has been created, has a governance structure in place, and will be driving the project from now on.
At Facebook, we’re also exploring other ways of giving more people access to financial services, for example by lowering remittance costs through our existing platforms. We recognize that other organizations are working on this challenge too, and we support that.
We will continue talking to regulators about our efforts. We understand that whatever approach we take to promote financial inclusion must address regulatory concerns, including money laundering and terrorism financing, sanctions, and potential currency disruption and systemic risk. I know that the Libra Association is mindful of those things as it proceeds, and at Facebook, we’re focused on those concerns as we explore what we can do as a company to address financial inclusion. We also understand the importance of being transparent about our efforts.
I recognize that some have expressed concerns about the Libra project and Facebook’s role in it. I want to talk briefly about how we are working to address the concerns we’ve heard.
First, we’ve heard that people are concerned that we are moving too fast. As we have said from the beginning, we’re committed to taking the time to get this right. We co-wrote a white paper to begin a dialogue with experts and the regulators and policymakers who oversee the stability and security of our financial systems. It was never intended to be the final word on the project. The goal was to signal the direction we want to go and to start a conversation about how to get there. That conversation is ongoing, and we will continue to advocate for responsible innovation in this space.
Second, some have suggested that we intend to circumvent regulators and regulations. We want to be clear: Facebook will not be a part of launching the Libra payments system anywhere in the world unless all US regulators approve it. And we support Libra delaying its launch until it has fully addressed US regulatory concerns.
We have met with regulators in 30 different jurisdictions. The Association has been focused on regulators and other stakeholders, but Association members—including Calibra, Facebook’s Libra-related subsidiary—are also talking with elected officials, including many here in Congress. This is how democratic oversight and scrutiny should work.
When it comes to Calibra, I know some people wonder whether we can be trusted to build payment services that protect consumers. We recognize our responsibility to provide people with all the protections they expect when they are sending and receiving payments online. We already do this across our services. For example, every day, people buy products through Instagram Shopping, which helps businesses of all sizes show customers things they might be interested in. People purchase goods from each other on Facebook Marketplace and send money to friends and family through Messenger.
Facebook is committed to strong consumer protections for the financial information we receive, and I want to be clear about how we handle that information:
. We do not sell people’s data.
. We do not use people’s data to make decisions about lending, or to create credit reports.
. We do not share information with third parties for lending or credit decisions.
. We use information about transactions that happen on our products to improve our services, including advertising. However, we do not use people’s payment account information itself for advertising purposes.
Payments processed through Facebook’s licensed payments subsidiaries are subject to comprehensive anti-money laundering, counterterrorist financing, and sanctions monitoring that leverage both our automated systems and human review, and we report suspicious payments activity to applicable authorities consistent with our regulatory obligations. We also have policies in place to prevent fraud.
We’re committed to building similarly robust compliance systems for the Calibra app, as well as strong consumer protections, customer support, and password recovery. Automated tools will proactively monitor activity to detect fraudulent behavior, and Calibra plans to refund any unauthorized transactions.
I also recognize that there are concerns about our access to people’s financial data if they use Calibra. We set up Calibra as a regulated subsidiary, so that there is clear separation between Facebook’s social data and Calibra’s financial data. Calibra will not share customers’ account information or financial data with Facebook, except to prevent fraud or criminal activity, when people affirmatively choose to share their data, or when we are legally obligated to do so.
Finally, there’s the question of whether Libra is intended to replace sovereign currency, and whether it’s appropriate for private companies to be involved in this kind of innovation. I want to be clear: this is not an attempt to create a sovereign currency. Like existing online payment systems, it’s a way for people to transfer money.
Monetary policy is the province of central banks, not Libra. The Libra Association has no intention of competing with any sovereign currencies or entering the monetary policy arena. It will work with the Federal Reserve and other central banks responsible for monetary policy to make sure that is the case. We expect the regulatory framework for the Libra Association will ensure that the Association cannot interfere with monetary policy. Libra is also being designed with economic security and stability in mind, and it will be fully backed through the Libra Reserve.
We also believe Libra presents an opportunity to strengthen the fight against financial crimes like money laundering and terrorism financing. A lot of illicit activities are funded through cash. A digital payments system with regulated on- and off-ramps and proper know your customer practices is easier to secure, and law enforcement and regulators can conduct their own analysis of on-chain activity.
I hope we can find a way to move forward in this area, because we believe responsible innovation like Libra can give more people access to the financial tools that many of us take for granted.
A digital payments system is going to be important in the future. If America doesn’t lead on this, others will. Foreign companies or countries may act without the same regulatory oversight or commitment to transparency that we have. We’re already seeing how companies with very different values are restricting people based on their beliefs. There’s no guarantee that services which support democracy and fundamental rights around expression will win out.
More broadly, we’re in a time when our industry and our company in particular are under increased scrutiny. Technology is playing a greater role in our lives and our society, and we’ve made mistakes. But if healthy skepticism becomes all-out hostility, we’ll put a lot of progress at risk— not just in the world, where American tech companies have an opportunity to champion American values, but also closer to home. Six million Americans work in the internet sector. Last year, our industry invested over $60 billion, helping to drive research and innovation in this country. The internet sector makes up 10.1% of US GDP. And we operate services that create a lot of value in people’s lives.
Those jobs, that investment, and that innovation didn’t happen by accident. They’re the result of our willingness to try new things—even if they’re difficult, and even if they don’t always work. I understand people have concerns about Libra. 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.
III & IV Combating Discrimination
This has been a challenging few years for Facebook. We understand we have a lot to do to live up to people’s expectations on issues like privacy and security. We know that companies like Facebook have become a part of people’s everyday lives, and that comes with immense responsibilities and a lot of very difficult judgments. We don’t think we should be tackling these issues alone, which is why I’ve called for a more active role for governments and regulators on harmful content, protecting elections, privacy, and data portability. I know we have a lot to do, but I also know that the problem of financial under-inclusion is solvable, and I believe that we can play a role in helping to find the solution. I hope that today I can answer some of your questions.
The full testimony here
„Though Libra has met with fierce resistance from central banks and supervisory authorities and might never see the light of day, in many other cases tech firms (both start-ups and established big players) have successfully captured bits and pieces of universal banks’ traditional value chain. This trend may only intensify in the coming years. In this environment, European banks remain squeezed.”