Facebook Faces Another Congressional Grilling

Facebook chief executive Mark Zuckerberg was called back to Capitol Hill to speak about the company’s impact on the financial and housing sectors—particularly in light of its proposal to launch a cryptocurrency wallet, Calibra, and its involvement in the creation of the Libra cryptocurrency.

We’ve criticized Facebook on many fronts for years, and we share the wide ranging concerns of lawmakers who want to ensure their constituents’ privacy and rights are protected from Facebook’s abuses as it looks to expand its reach. Throughout the hearing, we appreciate that the committee members focused on Facebook’s actions as the basis of their skepticism about Libra, rather than around blockchain technology.

Zuckerberg faced several pointed questions about the company’s cryptocurrency proposal, but many rightly focused their ire on the company’s past actions and asked whether Facebook recognized how its tarnished reputation makes it difficult for consumers to trust it with financial information.

“Do you understand why this record makes us concerned with Facebook entering the cryptocurrency space? Do you realize that you and Facebook have a credibility issue here?” asked Rep. Nydia Velazquez (D-N.Y).

Even Zuckerberg himself recognized that his company’s reputation is far from sparkling. “I get that I’m not the ideal messenger for this right now,” he said.

While Facebook’s cryptocurrency proposals were under the microscope, we were encouraged that several lawmakers made the distinction between the Facebook-backed Libra Association and its Calibra wallet, and the broader worlds of cryptocurrency and blockchain technology.

“I believe distributed, permissionless blockchain technologies have the opportunity to fundamentally change the digital world in very positive ways, and I absolutely want this country to lead,” said Rep. Anthony Gonzalez (R-Ohio). “I believe that is an altogether different statement—and different thing entirely—from what Libra is and what we are talking about today, which I think has a number of contradictions inherent in the project itself.”

We agree. We remain concerned about the implications of Libra, including the serious possibility that reactive legislation to this idea could further harm consumers—and possibly entrench Facebook’s position rather than encourage needed competition and innovation in this space.

As lawmakers continue to consider proposals, we’ve identified a few rules of the road for any policymakers stepping into this space to ensure they minimize the harm to consumers.

• Principle 1: Regulation should not undermine privacy-enhancing innovation in this space. Legislative proposals should ensure that new innovations for defending consumer privacy are allowed to flourish.

• Principle 2: Regulation should not chill future technological innovation that will benefit consumers. The blockchain ecosystem is relatively young. Still, well-established companies—or large companies looking to enter the space—have the resources to employ legal counsel and compliance officers able to navigate regulations at the state, federal, and international levels. We want to ensure that these companies don’t establish themselves and then pull up the ladder behind them.

• Principle 3: regulation should focus on custodial services. It is custodial services—those entities that hold and trade tokens on behalf of users—that are most likely to abuse consumer trust. Any regulation should protect individual miners, merchants who accept cryptocurrencies, and individuals who trade in cryptocurrency as consumers.

• Principle 4: Any regulation should recognize the important role of decentralized exchanges and other decentralized technologies in empowering consumers. Blockchain technologies were built to be resilient and decentralized, and future innovation that advances decentralization – including decentralized exchanges – should be protected.

• Principle 5: Regulations should not punish those who merely write and publish code. EFF fought to establish, and several courts have recognized, that writing code is a form of expressing ideas, similar to other types of communication like writing music or books, and thus is protected by the First Amendment. Any regulation in this space must heavily weigh the First Amendment protections for free speech and must defend the rights of speakers to express themselves.

In this wide-ranging hearing, Zuckerberg also faced questions about Facebook’s effect on the housing sector—in light of the Department of Housing and Urban Development’s decision to charge the company with violating fair housing laws in connection with its housing ads. Facebook in March agreed to new policies for its housing ads as part of a settlement with a number of civil rights groups including the National Fair Housing Alliance and the American Civil Liberties Union.

We agree that Facebook’s alleged actions with respect to housing and ads are wrong. Facebook has the power, the technology and the resources to fix problems on its network, and should design ways to address these problems.