Facebook’s ambitious plan to create a cryptocurrency that would replace traditional money all over the world appears to be on life support. Regulators and lawmakers have mocked it. Key partners like Visa and Mastercard have stepped away from it.
But the company isn’t backing down. Facebook executives fanned out in the capital last week to court lawmakers and regulators to the cryptocurrency project, called Libra. And on Wednesday, Mark Zuckerberg, Facebook’s chief executive, is expected to testify about Libra at a hearing held by the House Financial Services Committee.
Company executives are expending a surprising amount of energy and time defending their cryptocurrency plan, even though it is not central to Facebook’s business, advertising. The company also faces a variety of seemingly more pressing issues in Washington, including questions about antitrust and privacy violations and election security and disinformation.
The Libra project was secretly incubated inside Facebook for over a year. Though many questioned why Facebook needed to create a cryptocurrency, Mr. Zuckerberg has long been fascinated by digital coins like Bitcoin. The company initially brought on 27 partners that it hoped would help give the cryptocurrency legitimacy and spread it. Twenty-one remain.
Last week, Mark Zuckerberg, Facebook’s chief executive, met with the House Financial Services Committee’s Democratic chairwoman, Representative Maxine Waters of California, and its ranking Republican, Representative Patrick T. McHenry of North Carolina. While in Washington, Mr. Zuckerberg also gave a speech defending the company in a separate controversy — its hands-off stance toward dishonesty in political advertising.
David Marcus, the head of Facebook’s cryptocurrency effort, ran a parallel track of meetings. He gave speeches defending Libra to global leaders meeting at the World Bank and a meeting of the Group of 30, an international organization of financiers and academics. Mr. Marcus also met with staff for Democratic and Republican members of the House committee.
All told, Facebook has dedicated at least eight lobbyists to Libra since the project was publicly introduced in June, according to regulatory filings.
But it’s not clear that the charm offensive is having much of an impact. While executives were knocking on doors in Washington, the Group of 7, representing some of the most powerful governments in the world, issued a highly critical report that warned about the potential dangers of cryptocurrencies.
Even Republicans, who have been generally more open to the cryptocurrency plan since it was announced in June, have expressed concern about how it has been organized.
Representative Lance Gooden, a Republican from Texas, criticized the decision by the Libra Association, the Facebook-led coalition behind the cryptocurrency, to base itself in Geneva.
“There is an impression that perhaps Facebook wants a clean start somewhere else because they haven’t enjoyed criticism to their social media platform, but Democrats and Republicans agree that criticism of the social network is entirely justified,” Mr. Gooden, a member of the Financial Services Committee, said in a phone interview last week.
One evening last week, Mr. Marcus, swirled a glass of bourbon in a downtown, nouveau-Southern restaurant in Washington. Despite a flurry of bad news about his project, Mr. Marcus said he was unfazed.
“Look, change of this magnitude was going to be hard all along,” he said.
When Facebook announced the project, it had only a rough draft of what Libra would look like. The plan was for the final designs to be done by all the partners as part of the Libra Association, in which Facebook would have only one vote. But that lack of detail has made it hard to explain how Libra would deal with problems like money laundering and cybersecurity.
The basic description that Facebook did put forward was enough to bring out the knives from politicians and regulators all over the world. In the United States, President Trump and his Treasury secretary, Steven Mnuchin, harshly criticized Libra, as did politicians from both parties.
Mr. Marcus, over a dinner of fried green tomato arugula salad and spicy fried chicken, said he had no regrets about how Facebook had introduced the project. He brushed aside criticism that Facebook should have done more to get regulators on board ahead of time.
“Even if we spent 10 years outreaching, you’d still hear the same thing,” Mr. Marcus told a small group of reporters who had been invited to speak with him.
He offered the defense he repeatedly gave the Senate Banking, Housing and Urban Affairs Committee during testimony in July: Facebook was far from officially offering Libra, and it was working with regulators around the world.
“We didn’t launch anything,” Mr. Marcus said. “We opened up the idea that maybe it was a good thing to try to do something new to advance the state of access to digital money in general.”
The head of policy at the Libra Association, Dante Disparte, defiantly said in a separate interview last week that the problem was not Facebook. The problem, he said, is a political system in the United States that seems so willing to turn its back on technological innovation.
“It is an indictment of the state of play, for a country like the U.S., which is the greatest beneficiary of free markets and the rule of law, to have inspired such political animus for a project like this,” Mr. Disparte said.
Mr. Marcus said that while politicians had been negative about the project, he had gotten a much more open reception from regulators in private meetings.
But regulators have also sounded off on Libra. After the Libra Association formalized its list of partners last week — a list that notably did not include any major banking or finance companies — a steady stream of regulators went public with their concerns.
On Wednesday, Lael Brainard, the Federal Reserve official responsible for overseeing cryptocurrency policy, said in a speech that private currencies like Libra could weaken the power of central banks and create dangers for large economies “by increasing market volatility and by transmitting shocks across borders.”
A day later, the finance minister of France, Bruno Le Maire, wrote in the Financial Times that Libra was “unacceptable for both economic and political reasons.”
Later that day, a 37-page report from the G7 said “stablecoins” like Libra could have “significant adverse effects.”
The G7, like many other organizations, suggested that the ideas proposed by Facebook could make sense if they were pursued by a government instead of a company. And in recent months, several central banks, including the People’s Bank of China, have said Libra has revived their efforts to create national digital currencies.
Mr. Marcus framed this as something of a victory.
“We’ve advanced the dialogue on the fact that the status quo was not and should not be an option and that we need to move forward with a better system to enable more people to participate in the financial system,” he said.
Mr. Marcus said the pushback wasn’t at all surprising. Facebook’s brand, after all, comes with “baggage.” His biggest job, he said, is correcting misperceptions held by politicians, regulators and the public.
But other than the online music service Spotify, Mr. Marcus hasn’t had much help from the 21 remaining partners, which have said little publicly about Libra. Even PayPal, the company he ran before joining Facebook, dropped its support for the project.
When asked if Mr. Zuckerberg had doubts about the project because of the recent setbacks, Mr. Marcus added: “If you think about this over the long run, if it works, then it’s going to be a very good thing for Facebook. And a very good thing for the world.”