Libra’s ship appears to be sinking. Companies like Visa, Mastercard, Paypal, and Stripe are pulling out of the project, landing a serious blow to Facebook’s plans to launch its own cryptocurrency.
Mastercard, Visa, Stripe, and Mercado Pago announced their decision to abandon the project on Friday, October 11. A week earlier, PayPal announced its own exit from the group in the face of increasingly skeptical government scrutiny.
For Facebook, this means that it can no longer count on major payment companies to pad the way and make it easy to facilitate transactions with the Libra coin. The Libra Association no longer has any major financial firms backing the cryptocurrency.
The companies that remain in the association are mostly venture capital, tech, blockchain, and telecommunication companies, plus a few nonprofit groups. Lyft, Vodafone, Kiva, and Spotify are sticking with the project so far.
“Visa has decided not to join the Libra Association at this time,” the company 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.”
David Marcus, Facebook’s head of the project and a former PayPal executive, advised consumers against deciding the fate of Libra in the face of Visa’s exit, but he agreed that “it’s not great news in the short term.”
Despite the bad news for Libra, Facebook still plans to formally charter the association in three days, according to Dante Disparte, the company’s head of policy and communication.
“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,” he 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.”
As soon as Facebook announced its plans to launch a digital currency in June 2020, it faced immediate scrutiny from global regulators. They said the project raised questions that the company would have to answer before proceeding.
France and Germany vowed to block Libra from Europe, intending to develop a public cryptocurrency instead of allowing Facebook to take hold. Federal Reserve Chairman Jerome Powell stated that the project would need to address issues of privacy, consumer protection, and money laundering before advancing. The cryptocurrency would need to be financially stable.
The recent exits mean that major companies are taking regulatory concerns into consideration and questioning whether Facebook can control the currency and prevent it from being abused. Last week, Democratic senators sent a letter to Mastercard, Visa, and Stripe, warning them of “a project that will foreseeably 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,” Senators Sherrod Brown and Brian Schatz wrote.