Zuckerberg made the case that if the U.S. doesn’t lead in innovation, specifically in areas like cryptocurrency, then China will leap ahead.

“We can’t sit here and assume that because America is today the leader that it will always get to be the leader if we don’t innovate,” he said.

But members of Congress poked holes in Zuckerberg’s argument that Libra would improve America’s dominance in finance around the world. If that were the case, why would Libra need a home base in Switzerland, with a global roster of members and need to be backed by multiple currencies beyond the U.S. dollar? How would the currency actually work, and would it allow transactions that were anonymous or non-refundable?

Zuckerberg didn’t have many answers. The Libra product is still so hypothetical and is awaiting agreements among members about how it would function based on the response from governments about how they plan to regulate it. He said he didn’t know whether other Libra members were planning to contribute money to back the currency, and that the idea of anonymous transactions is still “an open question.”

Facebook originally had 27 partners that planned to join it in the Libra Association, which will be led from Switzerland and is supposed to share in the governance of the cryptocurrency. Recently about one-fourth of those original members have dropped out, including PayPal Holdings Inc., Mastercard Inc. and Visa Inc. Zuckerberg said some of Libra’s early partners abandoned the project probably because it was risky and because of the intense regulatory scrutiny.

Zuckerberg came prepared with lofty arguments about Libra’s purpose: It would help reduce income inequality by giving people -- including 14 million in the U.S. without access to bank accounts -- an easier, faster and cheaper way to send money around the world. At the same time, it would secure America’s international financial leadership, since Libra would be backed mostly by the U.S. dollar, especially if the cryptocurrency is allowed to launch prior to similar planned efforts in China.

But it was clear from the beginning that Waters and others were prepared to be tough on Zuckerberg. For years he said his social network’s purpose was to “connect the world,” but that mission ended up as a grow-at-all-costs strategy pursued with blind spots around the harmful ways people were using the product. Zuckerberg last testified to congress in April 2018, answering 10 hours of questions about how Facebook allowed app developers to collect data on users, and how the platform was used by Russia to influence the 2016 presidential election.

Goals for the democratization of money aside, Facebook envisions Libra being incorporated into the company’s various messaging apps including WhatsApp and Facebook Messenger. The company believes that the currency could help benefit its existing advertising business, or create opportunity for new revenue streams. Zuckerberg said Libra will eventually help boost Facebook’s advertising prices.

This article was provided by Bloomberg News.

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