Congress pillories Zuckerberg over Libra cryptocurrency

The Facebook CEO dodges many of the attacks, but lawmakers express heavy skepticism about the new digital money.

Ben Fox Rubin Former senior reporter
Ben Fox Rubin was a senior reporter for CNET News in Manhattan, reporting on Amazon, e-commerce and mobile payments. He previously worked as a reporter for The Wall Street Journal and got his start at newspapers in New York, Connecticut and Massachusetts.
Ben Fox Rubin
6 min read

Facebook co-founder and CEO Mark Zuckerberg testifies before the House Financial Services Committee on Wednesday.

Chip Somodevilla/Getty Images

Mark Zuckerberg faced six hours of sometimes scathing questioning in Wednesday, as dozens of lawmakers picked apart Facebook's business practices, its many past scandals and a broad lack of consumer trust in the world's biggest social network.

The hearing, before the US House Committee on Financial Services, was slated to focus on  Libra , a cryptocurrency Facebook spearheaded and hopes will become a form of global digital money. It's expected to launch in the first half of next year. However, the event almost immediately spiraled into a broad indictment of Facebook.

"As I have examined Facebook's various problems," California Rep. Maxine Waters, the committee chairwoman, said to open the hearing, "I have come to the conclusion that it would be beneficial for all if Facebook concentrates on addressing its many existing deficiencies and failures before proceeding any further on the Libra project."

Waters then castigated Facebook for its failure to diversify its workforce, a lawsuit against the company for enabling housing discrimination and an ongoing antitrust investigation into the company. She added that several lawmakers have called for a moratorium on the Libra project until Congress can evaluate it.

The commentary set the tone for a largely adversarial hearing that saw many mostly Democratic lawmakers use their time to scold the billionaire executive about his company's failings, including serving as a place for hate groups organize, facilitating child exploitation, allowing Russian election interference, failing to prevent data breaches and OK'ing misleading political ads. Several Republicans offered more sympathetic comments, commending Zuckerberg for creating a successful business and working to innovate in the financial world.

Still, the force and tenor of questions offered a stark contrast to Zuckerberg's testimony before Congress last year, in which he emerged largely unscathed as elected officials appeared to be clueless about how Facebook works. This time, lawmakers were better prepared with more sophisticated questions and a more combative posture.

"Facebook's internal motto was for a long time 'move fast and break things.' Mr. Zuckerberg, we do not want to break the international monetary system," Rep. Nydia Velázquez, a New York Democrat, said Wednesday.

Ohio Rep. Steve Stivers, a Republican, argued that a payment system like Libra could be beneficial for people in countries with unstable currencies, but he noted that Zuckerberg may have bitten off more than he can chew by trying to make a new digital currency to operate this system.

Watch this: Zuckerberg gets grilled on Capitol Hill

Libra has faced a rocky start. Critics worry it may become a channel for funding terrorism and laundering money, an issue members of Congress hammered on repeatedly during the hearing. Several governments are concerned Facebook is using Libra to skirt regulations and create a rival currency to the dollar, yen or other established national currencies. Earlier this month, the Libra Association lost seven founding members, including payments powerhouses Visa, Mastercard and PayPal.

Announced in June, Libra is a stablecoin, a form of cryptocurrency backed by other assets to prevent wild swings in value. The association initially had 28 prospective members, each of which would pony up $10 million to fund the project and run nodes on the network powering the coin.

Looking to allay concerns about Libra, Zuckerberg's prepared remarks for the hearing focused on using the digital currency to help people without bank accounts, making it easier and cheaper for the so-called unbanked to transfer money. With Libra, he said, he wanted to make transferring money as cheap and effortless as text messaging. Members of Congress, though, said Facebook has a thin track record on helping the poor and minority groups, so they questioned his motives for creating Libra.

"I am trying to use the position that I have to do things that I think are going to make the world better," Zuckerberg said in response to one lawmaker, "to improve people's lives, and I would hope that is what you would want me to do."

Zuckerberg said that Facebook won't be involved in Libra's launch unless it gets US approval and would go so far as walking away from the Libra Association if it moved forward without that approval. He also pushed for the US to innovate with cryptocurrencies, invoking China's work as a warning. "If America doesn't lead on this, others will," he said, adding that it would be much harder to apply US regulations to a default global currency created by China.

Lawmakers on both sides of the aisle kept coming back to their concern that Libra was founded in Switzerland, not the US, which they found distasteful. Asked repeatedly whether he'd be willing to bring the Libra Association, a nonprofit that manages the digital currency, to the US, Zuckerberg demurred, saying he doesn't control the organization.

Zuckerberg showed some self-awareness about Facebook's many controversies.

"I believe this is something that needs to get built," Zuckerberg wrote in his testimony, "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."

Zuckerberg's appearance in Washington comes as his social network faces criticism seemingly on all fronts. Liberals and conservatives have complained that Facebook has too much power to shape social and political discourse. Some critics, notably Democratic presidential hopeful Elizabeth Warren, have called for the company to be broken up, while Congress and dozens of attorneys general are ramping up antitrust investigations into the company. The social network also continues to reel from concerns it isn't protecting user privacy, an issue that's already led to an unprecedented $5 billion fine

Libra has been a sore spot for the world's largest social network. Regulators around the world have bristled at Facebook's plans, saying Libra could facilitate money laundering. In July, David Marcus, Facebook's blockchain boss, was summoned to testify in front of Congress about Libra.

While Zuckerberg was able to avoid any major gaffes or appear overly defensive during the long hearing, he did appear unprepared or wouldn't answer several questions posed by Rep Joyce Beatty, an Ohio Democrat, about Facebook's lack of diversity hiring. She concluded by pointing to concerns that Facebook had abetted housing discrimination: "It's almost like you think this is a joke when you have ruined the lives of many people, discriminated against them."

At another point, California Rep. Brad Sherman, a Democrat, called Libra a "powerful burglary tool," before showing on a projector an image of a dollar with Zuckerberg's face on it. The illustration bore the title "Zuck Buck."

Ultimately, Colorado Rep. Ed Perlmutter, a Democrat, seemed to distill what many lawmakers were feeling about Libra. "We have to regulate this," he told Zuckerberg. In reference to Facebook's team, he added, "And I'm not sure you guys understand what it is."

Facebook has been lobbying heavily as its come under scrutiny. The New York Times reported the social network will spend $12.3 million in federal lobbying efforts in the first nine months of the year, almost as much as the $12.6 million it spent in all of 2018. The company has 60 internal and contract lobbyists, the paper reported, about double the size in 2016.

Outside of Libra, many representatives asked questioned about Facebook's policy to accept ads from politicians even if they contain false information. Zuckerberg has been on a public relations offense to defend the policy, which came under attack after Facebook rejected a request from Joe Biden's presidential campaign to pull down an ad from President Donald Trump's re-election campaign that contained misinformation about the former vice president.

"Do you see a potential problem here with a complete lack of fact checking on political advertisements?" asked Rep. Alexandria Ocasio-Cortez, a New York Democratic who had earlier solicited questions on Twitter for the tech executive. 

"I think lying is bad, and I think if you were to run an ad that had a lie, that would be bad," Zuckerberg responded.

Rep. Jesus Garcia, a Democrat from Illinois, offered what was perhaps the most serious warning to the CEO of Congress' concerns.

 "Facebook has acquired too much power," he said. "It has become too big and we should seriously consider breaking it up."

CNET's Andrew Morse and Queenie Wong contributed to this report.

First published at 12:47 p.m. PT on Oct. 22.
Updated at 8:24 a.m., 9:01 a.m., 11:37 a.m., 2:43 p.m. and 5:16 p.m. PT on Oct. 23: Adds comments and testimony from the hearing.