Facebook’s Libra cryptocurrency project suffered a major setback on Friday with the withdrawal of Visa, MasterCard, eBay, and other payment firms, according to BBC News and Ars Technica. PayPal had already announced plans to withdraw from the project last week.
The companies were slated to join the Libra Association, a Geneva-based organization that would develop and manage the cryptocurrency. Its first official meeting was scheduled for Monday, and its members were expected to make binding commitments to the project.
Instead, many of the biggest names have chosen to quit, in the face of heavy scrutiny and criticism from regulators. All but one of the payments firms originally on board with Libra have withdrawn, leaving only PayU, based in the Netherlands. Established finance companies like Visa and Mastercard would have offered much-needed expertise in navigating regulations, and their exit represents a real setback for Facebook.
But established financial giants also have the most at stake in taking a chance on such a project, and the proposal has put Facebook at odds with regulators on both sides of the Atlantic.
In the US, Facebook chief Mark Zuckerberg will appear before the House Committee on Financial Services later this month to discuss Libra. US lawmakers have asked the company to pause the project while they weigh its implications, and EU regulators have cautioned that Libra could impact financial sovereignty and stability, and voiced fears that it could be used as a money-laundering tool.
Furthermore, the project has also failed to gain momentum among blockchain proponents, who gravitate toward cryptocurrency like Bitcoin precisely because they are, unlike Libra, decentralized and beyond the scope of a single organization.
Facebook originally said it hoped to grow the Libra association from 27 original companies to over 100 by its 2020 launch. Instead, membership has now dropped to just 22 companies.
A Visa spokesperson said:
“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.”
But David Marcus, former PayPal president and Facebook’s executive in charge of the Libra project, remained hopeful and said of the departures:
“Of course, it’s not great news in the short term, but in a way, it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.”