WASHINGTON – Facebook CEO Mark Zuckerberg told lawmakers that the company would pull out of the Libra Association in the event the consortium launched its proposed cryptocurrency without all needed regulatory approvals.
In a hearing of the House Financial Services Committee Wednesday, Zuckerberg fielded pointed questions on a variety of controversial issues around the social network, from election meddling to housing discrimination to deepfakes. But Libra, the proposed price-stable cryptocurrency Facebook conceived and set up the association to run, was the foremost item on the agenda
And many of the CEO’s answers to lawmakers’ questions underscored Facebook’s official position is that it no longer controls the project.
Specifically, Zuckerberg reiterated his commitment to satisfying regulators’ concerns before launching Libra. Rep. Bill Huizenga (R-Mich.) homed in on the apparent tension between this pledge and the idea that the Libra Association is independent of Facebook, asking:
“You said that you won’t launch without U.S. regulator approval. What happens if the association decides to launch despite that?”
Zuckerberg replied to this hypothetical:
“I believe we would be forced to leave the association.”
In such a scenario, he went on, “I would hope that [the] association will weigh our recommendation and what we say publicly that we think should happen.
“If we don’t receive the clearances that we feel like we need to move forward and the association chooses to move forward without us then we will be in a position where we will not be a part of the association,” said Zuckerberg.
As remote as the possibility may seem, Facebook wouldn’t be the first member company to abandon Libra – Visa, Mastercard, PayPal and eBay all pulled out a few weeks ago.
When Rep. Ann Wagner (R-Missouri) asked why he thought they did so, Zuckerberg said: “It’s a risky project.”
Similarly, Zuckerberg committed to preventing anonymous use of the Calibra wallet – but stopped short of promising lawmakers that the Libra cryptocurrency would never be used without identification.
Noting that the House had just passed a bill to crack down on shell companies, Rep Carolyn Maloney (D-N.Y.) asked Zuckerberg: “Will you commit to not supporting anonymous wallets for Libra?”
At first, he answered obliquely, telling Maloney:
“We see a range of cryptocurrencies. We are trying to build a safe and secure and regulated alternative. As a big company, we’re not going to do something that’s unregulated or decentralized. We want to get to the same standard on money laundering or CFT [counter-terrorism financing].”
Unsatisfied with the answer, the lawmaker pressed him.
“I don’t think you can have strong AML [anti-money-laundering practices] and anonymous wallets,” Maloney said. “I see this as a new loophole for criminals looking to hide money. Will, you commit to not having anonymous wallets? You’re creating a whole new currency that could potentially be anonymous.”
Zuckerberg answered that Calibra, the Facebook subsidiary developing a wallet for Libra, “is going to have strong identity [verification] and work with all the regulators to make sure we’re at the standard of AML or CFT that people expect.” But he added a caveat:
“I can’t speak for the whole association, you have my commitment from Facebook.”
Joined at the hip?
Despite Zuckerberg’s comments, separating Facebook from Libra may be a challenge for the nascent association.
During the hearing, Rep. Ayanna Pressley (D-Mass.) said “Facebook is Libra,” with Zuckerberg acting as the face of the company, and therefore, the new cryptocurrency.
Her comments were echoed after the hearing by Representatives Madeleine Dean (D-Penn.) and Sylvia Garcia (D-Texas), who told a group of reporters that separating the two might be difficult.
“[Zuckerberg] carefully called it an independent association probably five or 10 times but it doesn’t mean it makes it so and I don’t think it’s going to be the end of it,” Garcia said.
Watch the hearing here:
UPDATE (Oct. 23, 21:15 UTC): This article has been updated with additional comments by lawmakers.
Nathan DiCamillo contributed reporting
Image via House Financial Services Committee