Zuckerberg set for grilling over Facebook cryptocurrency

Zuckerberg set for grilling over Facebook cryptocurrency

Facebook CEO Mark ZuckerbergMark Elliot ZuckerbergHillicon Valley: Progressives oppose funding bill over surveillance authority | Senators call for 5G security coordinator | Facebook gets questions over location tracking | Louisiana hit by ransomware attack Senators press Facebook over user location tracking policies Hillicon Valley: Amazon to challenge Pentagon cloud contract in court | State antitrust investigation into Google expands | Intel agencies no longer collecting location data without warrant MORE faces a tough test Wednesday as he testifies publicly before a House panel on Libra, his company's controversial effort to launch a global cryptocurrency.

Zuckerberg's testimony, which will be his first before Congress since the Cambridge Analytica scandal, comes at a crucial time for the project.

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Under his leadership, Facebook has led the charge to launch a digital currency that could upend entrenched financial systems around the world. But Facebook is also facing a barrage of high-profile controversies, and its reputation has taken a hit in Washington.

Zuckerberg will walk a tightrope on Wednesday, defending Libra and Facebook even as he tries to make the challenging case that his company should not be the face of the project.

According to his prepared testimony, Zuckerberg will offer a stark defense of the Libra project, touting its ability to offer financial services to people who do not have access to banks, but he will also work to emphasize that he no longer calls the shots and that Facebook is just one partner in a broader project.

“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,” Zuckerberg will tell the committee, according to his prepared testimony.

“But by design, we don’t expect to be leading those efforts going forward,” he will say. “The Libra Association has been created, has a governance structure in place, and will be driving the project from now on.”

Zuckerberg's testimony echoes the line from Facebook executives who have been trying to draw distinctions between their company and the Libra Association, the 21-member group responsible for launching the cryptocurrency.

“[Zuckerberg] can’t be the face of it,” David Marcus, the head of Facebook’s new cryptocurrency subsidiary Calibra, told reporters at a dinner in Washington, D.C., last week. “It’s going to be really hard for him to answer on behalf of the Libra Association.”

“He will, I’m sure, share his own views,” Marcus, who received a grilling before the same committee over the summer, added. “But he cannot engage or commit to anything on behalf of the association because he doesn’t have the power to do that anymore.”

The Libra Association formalized its governance structure just last week, with its 21 initial members — including Spotify, Uber and Lyft — signing on to a charter in Geneva.

But the other companies have yet to come before Congress or speak publicly before governments on behalf of the project, which has drawn significant fire from regulators around the world. And the project has faced challenges from the start; Mastercard, Visa and PayPal, three of the association’s most important members, pulled out of the virtual currency earlier this month, leaving the association without some of its top financial players.

The association says it has received interest in joining from more than 1,500 entities, 180 of which qualify for membership, and that it expects it will ultimately receive support from some banks and other established financial institutions.

But downplaying Facebook's role will be a hard sell for lawmakers and critics.

“Facebook is going to be hard-pressed to distance itself from a currency that they are launching,” Jennifer Grygiel, an assistant professor of communications at Syracuse University, told The Hill.

Democrats played hardball to get Zuckerberg to appear. Facebook had originally offered to send the company’s chief operating officer, Sheryl Sandberg, to testify about Facebook’s involvement in the Libra project.

But earlier this month, a congressional source told The Hill the committee would not confirm Sandberg's appearance until Zuckerberg agreed to appear before January.

Shortly after, the committee announced that Zuckerberg would be testifying. It is unclear if Sandberg will appear as well.

Zuckerberg is also testifying with his company under intense scrutiny from Washington, on Libra and a host of other issues. Lawmakers on the House Financial Services Committee are set to hammer Zuckerberg over his company’s litany of privacy infractions, failure to stave off election interference efforts on its platforms, and the ongoing allegations that Facebook’s advertising platform can be used to discriminate against minorities.

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Much of the focus on Wednesday, though, will be on Libra.

“It is concerning that a company with a well-documented history of promising one thing to achieve regulatory approval and then behaving differently now wants to enter the cryptocurrency sector,” Rep. Nydia Velázquez (D-N.Y.) said in a statement to The Hill.

“This raises significant customer privacy and even monetary stability concerns,” she said, “and we need to hear how Mr. Zuckerberg plans to address them.”

The committee’s memo on the hearing names five separate bills that have been floated to regulate or even kill the Libra project. Rep. Jesús García (D-Ill.) has introduced the Keep Big Tech Out of Finance Act to prevent companies like Facebook from becoming financial institutions, and a discussion draft from Rep. Sylvia GarciaSylvia GarciaZuckerberg set for grilling over Facebook cryptocurrency Audience laughs when Mueller jokes about member of Congress lying Here are the 95 Democrats who voted to support impeachment MORE (D-Texas) would identify the Libra coin as a security, meaning it would be subject to strict oversight from the Securities and Exchange Commission.

“I have some concerns about if Facebook should be in this arena at all,” Garcia told reporters on Tuesday. “If Mr. Zuckerberg wants to be king, he can be king of the social networks, but I don’t want him to have the additional arsenal of financial data on people.” 

The hearing itself is titled “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors,” opening the door for lawmakers to question Facebook over other issues as well, including an update on its settlement with civil rights groups in March over its targeted advertising practices, which previously allowed advertisers to target audiences by racial proxies.

Shortly after Facebook settled with the civil rights groups in the spring, the Department of Housing and Urban Development charged the company with encouraging and enabling housing discrimination through its targeted advertising practices, despite the changes it has made to its platform to prevent the issue.

“We have more to do here,” Zuckerberg will tell the committee. “But we are proud of these recent efforts and the message they send about Facebook’s commitment to civil rights and to protecting our users from potential discrimination.”

The hearing on Wednesday will mark the first time Zuckerberg has testified publicly on Capitol Hill since he came before the Senate and House in the wake of the Cambridge Analytica scandal. Those hearings in April 2018 were widely publicized, with congressional offices circulating sound bites and clips of lawmakers laying into Zuckerberg over his company’s privacy violations and manipulative business tactics.

But the hearings ultimately did not hurt Facebook’s bottom line. Facebook’s revenue for the quarter ending in June was $16.8 billion, a nearly 30 percent increase from the year before.

Lawmakers will be looking to put the CEO back on the hot seat Wednesday.

“Despite Mark Zuckerberg's attempt to distance himself from this project, Facebook remains the founding member of the Libra Association,” Rep. Brad ShermanBradley (Brad) James ShermanOn The Money: House passes monthlong stopgap | Broader spending talks stall | Judge orders Democrats to give notice if they request Trump's NY tax returns | Progressives ramp up attacks on private equity Progressive Democrats ramp up attacks on private equity Overnight Defense: Protests at Trump's NYC Veterans Day speech | House Dems release Pentagon official's deposition transcript | Lawmakers ask Trump to rescind Erdogan invite MORE (D-Calif.), one of Zuckerberg’s top antagonists on the committee, said in a statement to The Hill. “Therefore I still expect Zuckerberg to explain how Libra will not be used by drug dealers, human traffickers, tax evaders, and terrorists for illicit financial transactions.”