- Facebook is trying to make its ambitious plan to create a new digital currency, called Libra, palatable to US lawmakers by amping up fears around China’s financial dominance.
- Facebook announced a new currency, Libra, as a way to allow people to pay for goods and services online, but is facing considerable blowback from politicians and regulators ahead of its launch.
- Facebook CEO Mark Zuckerberg will appear before US lawmakers and argue that Libra will “extend America’s financial leadership… around the world” against competition from China, according to prepared remarks for the House Financial Services Committee.
- The 35-year-old’s optimism about the Libra project comes despite seven of the project’s founding members dropping out in recent weeks, including major global payment processing firms such as Mastercard, PayPal and Visa.
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Facebook CEO Mark Zuckerberg has come up with a new angle to make his radical plan for an online currency more palatable to US politicians — by playing on fears that China will beat out the US as a global financial leader.
Zuckerberg argued that Libra, the Facebook-backed digital currency, will “extend America’s financial leadership as well as our democratic values and oversight around the world.” He added that if the US doesn’t innovate financially, China might gain more influence over the global financial system.
Facebook is trying to get Libra off the ground as a new form of digital currency that will let people pay for goods and services more easily online. But the firm has faced considerable blowback on the plan from regulators and lawmakers around the world.
Zuckerberg’s comment forms part of the prepared remarks he will deliver on Wednesday in Washington before the House Committee on Financial Services.
Here’s what’s he said:
“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.”
Zuckerberg and other Facebook execs have made the China argument before as a way to fend off criticism of their own firm. Facebook is not only battling global efforts to block Libra from launching, it also faces a prospective break-up as lawmakers worry the company has garnered too much power.
COO Sheryl Sandberg has explicitly said that breaking up Facebook would help Chinese social media rivals. As the argument goes, these rivals are unlikely to face the same scrutiny in their home nation, but don’t necessarily have US-friendly values around freedom of speech and privacy.
In his prepared remarks, Zuckerberg addressed some concerns regarding the project’s timescale; its regulation; and how consumers will be protected.
Addressing worries that the project is moving too fast – the currency is slated for a 2020 rollout – he said: “We are committed to taking the time to get this right.”
He flat-out denied the idea that Facebook intends to circumvent regulators, saying that: “Facebook will not be a part of launching the Libra payments system anywhere in the world unless all US regulators approve it.”
On the consumer protection front, Zuckerberg claimed that “Facebook is committed to strong consumer protections for the financial information we receive” before making a number of claims about how such information would be handled.
“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,” he said.
Despite Zuckerberg’s bullishness, the Libra project is going through a rough patch at present.
Seven members of the Libra Association – the coalition of firms interested in developing the Libra currency – have backed out of the project in recent weeks. Of the 28 original Libra Association members, 21 now remain, including Facebook, after the departures of PayPal, Visa, Mastercard, eBay, Stripe, Booking Holdings and Mercado Pago.
In the wake of these departures, Facebook’s Libra chief David Marcus was forced to defend the project’s feasibility in a series of media interviews last week. Speaking to Yahoo Finance, Marcus insisted that Libra was “absolutely not” in jeopardy, while admitting that the project is “going to get harder before it gets easier.”