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PayPal first to withdraw from Facebook currency group

Image credit: Alexey Novikov | Dreamstime.com

Payments firm PayPal said it was leaving Libra Association, the entity managing the Facebook-led effort to build a global digital currency, making it the first member to exit the group.

The online payments company announced on Friday (4 October) that it would “forgo further participation” in the group of 28 organisations supporting the currency, and would instead focus on its own core businesses.

“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future,” PayPal said in a statement.

In response, Geneva-based Libra Association said it was aware of the challenges lying ahead in its attempts to “reconfigure” the financial system.

“The type of change that will reconfigure the financial system to be tilted towards people, not the institutions serving them, will be hard,” the alliance said in a statement. “Commitment to that mission is more important to us than anything else. We're better off knowing about this lack of commitment now, rather than later.”

Facebook announced plans to launch the digital currency, and its digital wallet Calibra, in June 2020 in partnership with other members which include payments company Visa, ride-hailing app Uber and humanitarian charity Mercy Corps.

The company said people would be able to make payments with the currency via its own apps, as well as on Facebook’s messaging services. Partner firms would also be able to accept Libra for transactions. Furthermore, they added that Libra would be independently-managed and backed by real assets and that paying with it would be as easy as texting.

However, there have been concerns about how people’s money and data will be protected, as well as over the potential volatility of the currency.

The project has also come under criticism by regulators, campaigners, and lawmakers, with authorities in France and Germany pledging to block Libra from operating in Europe and backing the development of a public cryptocurrency instead. The Group of Seven advanced economies warned in July that it would not let Libra proceed until all regulatory concerns had been addressed.

Furthermore, central bank chiefs, including the Bank of England’s Mark Carney, have also voiced scepticism, and US President Donald Trump has tweeted he is “not a fan” of the currency.

With the exit of PayPal, Libra Association now has 27 members, including Uber Technologies Inc, Lyft Inc and Spotify Technologies.

“We look forward to the first Libra Council meeting in 10 days and will be sharing updates following that, including details of the 1,500 entities that have indicated enthusiastic interest to participate,” the Libra Association stated on Twitter.

Meanwhile, the Financial Conduct Authority (FCA) has revealed that its investigations into cryptocurrency businesses have surged over the past year as the regulator continues its crackdown on the controversial digital currencies. The number of live investigations by the financial regulator into the sector rocketed 74 per cent to 87 per cent as of September 2019, up from 50 a year earlier, according to new research by international law firm Pinsent Masons.

The FCA has previously warned that fraud is a significant issue in the finance sector, with estimates from the watchdog suggesting individuals in the UK lost £27m to cryptocurrency and forex investment scams in the past year.

While increasing investigations into potentially fraudulent businesses, the FCA has also increased with legitimate cryptocurrency firms to assess whether their products require authorisation.

When Facebook announced Libra, the watchdog warned that the launch will warrant intense scrutiny.

David Heffron, partner, at Pinsent Masons, said: “The rise in investigations reflects the FCA’s increasingly hands-on and no-nonsense approach to enforcing the law in the cryptocurrency market.”

“For cryptocurrency businesses acting lawfully, these statistics will be encouraging – they want bad actors pushed out. The FCA’s crackdown on businesses operating on its regulatory perimeter will instil a degree of confidence that products reaching consumers are less likely to be scams.”

Last week, researchers from Ecole Polytechnique fédérale de Lausanne (EPFL) in Switzerland revealed they have invented a nearly zero-energy alternative to the cryptocurrency Bitcoin.

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