It’s not quite the answer you would expect Zuckerberg to give if he were trying to get people to trust him; Facebook is about soaking up user data to sell to advertisers of various degrees of scrupulousness more than it is about anything else. And with Libra, it—or, technically, the project it kicked off—would also be about offering cheap financial services to help it better compete with companies such as WeChat and to cement its place as the essential digital utility around the world.
Financial inclusion would be a real, if perhaps ancillary, benefit. The Libra project would create a low-volatility, stable-price cryptocurrency. Users of Facebook and other services would be able to buy Libras in their local currency and then ping payments back and forth, fast, cheap, and free.
Libra would help provide bare-bones financial services to the 8.4 million American households who are “unbanked,” or without a bank account, as well as the hundreds of millions more unbanked and underbanked people around the world. It would slash the price of payments processing, which in the United States and other countries acts as a hidden, regressive sales tax. And it would support global remittances—the half a trillion dollars that immigrants send to people in their home countries every year, even as processors take a 7 percent cut, on average.
But Libra is hardly the only way to serve the underbanked, eliminate middlemen, and make remittances fast and cheap. As Representative Gregory Meeks, a New York Democrat, argued in the hearing, Facebook has not previously shown interest in addressing the needs of financially marginalized communities through, say, nonprofit microloan services or postal-banking advocacy groups or minority depository institutions. “How much of Facebook’s money is helping the underbanked?” he asked Zuckerberg. “Have you invested in development institutions in America or elsewhere in the world? Is any of your money sitting in those banks?,” meaning minority depository institutions. Zuckerberg mumbled his excuses.
Moreover, Libra would address the issues of financial inclusion and the price of moving money in a potentially dangerous and destabilizing way. Libra would amount to an all-in-one pseudo-bank, cryptocurrency, payments processor, remittance system, central bank, and foreign exchange. But it wouldn’t quite be any of those things, and thus would fall into a queasy regulatory gray space, in the United States as well as abroad.
Libra would let customers put their cryptocurrency in a digital wallet and then transfer it around the world; thus, in some sense, it would be a depository institution. But would it be like “me having my money in Wells Fargo?” Democratic Representative Ed Perlmutter of Colorado asked Zuckerberg. “You could think about it that way,” he replied. “Although we’re not a bank.” And thus Libra would not offer any of the financial protections that the Federal Deposit Insurance Corporation guarantees the holders of bank accounts. (If a bank goes bankrupt, the FDIC guarantees that depositors can access up to $250,000 in cash.)