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Facebook’s Libra digital currency project hit by exodus of support

Image credit: Dreamstime

Facebook’s Libra digital currency venture is facing further challenges as Mastercard, Visa, eBay, Stripe and Mercado Pago have all ditched the project just days ahead of its inaugural meeting.

In June 2019, Facebook announced that it was preparing to launch its own digital currency in 2020, with a view to helping billions of people make more payments online, including anyone without an active bank account.

The payment method revolves around a digital wallet called Calibra and a digital currency called Libra, which will be based on real-world assets to minimise volatility. Facebook planned for Libra to be incorporated into Facebook’s own social media and messaging platforms – much like Chinese messaging platform WeChat supporting WePay – in addition to a dedicated app and support from other platforms.

The company also revealed an impressive 28-member ‘Libra Association’ formed from respected payment providers, a range of online platforms and NGOs led by new Facebook subsidiary Calibra. Each member was set to contribute at least $10m to the project and get one vote each on major decisions.

Despite Facebook’s ambitions to enter the financial sector, the Libra project has faced serious pushback from prominent lawmakers and other officials over concerns about Facebook’s record on privacy, its allegedly anti-competitive practices, and the possibility of crimes such as money laundering being facilitated by the new currency.

French and German officials have threatened to block the launch of the service in Europe, instead supporting the idea of a publicly controlled digital currency. Questions have also been raised by legislators and regulators in the US: Representative Maxine Waters (chair of the House Financial Services Committee) has demanded that the development of Libra is halted for review, with Facebook CEO Mark Zuckerberg due to testify before her committee this month.

Under significant political pressure, PayPal became the first Libra Association member to drop out last week, stating: “We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future.”

PayPal’s withdrawal was a severe blow to the Libra project, occurring just a week before the inaugural Libra Association Council. Members of the Libra Association – which have so far only signed non-binding letters of intent – are due to sign the Libra charter at the meeting.

On Friday (11 October), the Financial Times reported that eBay and online payments firm Stripe had pulled out of the group. An eBay spokesperson told the Financial Times that it would focus instead on its own “managed payments experience” for customers. A Stripe spokesperson stated that the company would follow Libra’s progress and “remain open” to working with the group in the future.

Later, Mastercard and Visa confirmed to reporters that they, too, would not proceed with the project. Mastercard stated that while it would not continue supporting the project, it believed that “there are potential benefits” in these projects, while Visa said that its final decision on Libra would depend on factors such as the ability of Libra to meet regulators’ requirements.

The exodus continued with online payments platform Mercado Pago pulling out of the Libra Association. Mercado Pago told CoinDesk that it would “suspend its participation” until there is greater clarity about how it would proceed. Mercado Pago’s withdrawal leaves just one payments company (PayU) involved with Libra.

At present, there are 23 remaining members in the Libra Association, including Facebook itself.

Today, the BBC revealed that the G7 has prepared a report outlining nine serious risks posed by digital currencies and stating that backers of digital currencies must demonstrate that they are safe and secure, such as ensuring that their currencies cannot be used by money launderers or terrorists.

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