Visa, MasterCard, eBay too ditch Facebook’s digital currency consortium
14 Oct 2019
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Credit card companies such as Visa, MasterCard, eBay too have abandoned Facebook’s cryptocurrency consortium, Libra, following a similar decision by payment services provider PayPal, in what could be a major setback to Facebook Inc’s ambitious efforts to establish a global digital currency network.
Facebook’s Libra Consortium, which initially faced regulatory objections in the US and EU, is now faced with yet another roadblock with finance partners leaving Libra.
MasterCard and Visa Inc on Friday announced they would leave the association in the afternoon, followed by similar announcements by EBay Inc, Stripe Inc and Latin American payments company Mercado Pago.
PayPal Holdings Inc had exited the group a week ago, as global regulators continue to air concerns about the project.
The latest exodus leaves the Libra Association without any remaining major payments companies as members, meaning it can no longer count on a global player to help consumers turn their currency into Libra and facilitate transactions.
Facebook Libra consortium is now left with a few members such as Lyft and Vodafone and some venture capital, telecommunications, blockchain and technology companies, as well as nonprofit groups.
“Visa has decided not to join the Libra Association at this time,” the company said in a statement. “We will continue to evaluate and our ultimate decision will be determined by a number of factors, including the Association’s ability to fully satisfy all requisite regulatory expectations.” Facebook’s head of the project, former PayPal executive David Marcus, cautioned on Twitter against “reading the fate of Libra into this update,” although he acknowledged “it’s not great news in the short term.”
Libra, however, plans to press ahead by announcing a formal charter for the association, reportedly within three days.
“We are focused on moving forward and continuing to build a strong association of some of the world’s leading enterprises, social impact organizations and other stakeholders,” Dante Disparte, its head of policy and communication, said in a statement
“Although the makeup of the association members may grow and change over time, the design principle of Libra’s governance and technology, along with the open nature of this project ensures the Libra payment network will remain resilient,” he said.
Facebook announced plans to launch the digital currency in June 2020 in partnership with other Libra association members.
It is still not known how, with major EU economies, including France and Germany pledging to block Libra from operating in Europe and instead backing the development of a public cryptocurrency instead, Facebook will take the Libra project forward.
In the US, chairman of the Federal Reserve Jerome Powell suggested the project could not advance before addressing serious privacy, money laundering, consumer protection and financial stability concerns that must be addressed.
Lawmakers in the United States, meanwhile warned Visa, Mastercard and Stripe against joining “a project that will forseeably fuel the growth in global criminal activity.”
“If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all activities,” Senator Sherrod Brown and fellow Democratic Senator Brian Schatz wrote in the letters.
Following the announcements by Visa, MasterCard and other financial service providers on Friday, Brown said the companies had been “wise to avoid legitimising Facebook’s private, global currency.”
Facebook chief executive Mark Zuckerberg is scheduled to discuss the project when he testifies before the US House Financial Services Committee on 23 October. Maxine Waters, who chairs the panel of House representatives, has repeatedly called on Facebook to shelve the project.
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