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Facebook’s Libra Cryptocurrency Faces Exodus of Partners Facebook’s Libra Cryptocurrency Faces Exodus of Partners
(30 minutes later)
Facebook’s troubled cryptocurrency initiative, Libra, suffered new blows on Friday as the departures of key partners became an exodus.Facebook’s troubled cryptocurrency initiative, Libra, suffered new blows on Friday as the departures of key partners became an exodus.
Stripe, Mastercard, Visa and eBay said they were all pulling out of Libra, a week after PayPal became the first company to drop out. While they continue to support the idea of Libra, they said, they will no longer be part of a coalition of partners that was backing the effort. Stripe, Mastercard, Visa and eBay said they were all pulling out of Libra, a week after PayPal became the first company to drop out. While they continue to support the idea of Libra, the companies said, they will no longer be part of the coalition that is backing the effort.
“EBay has made the decision to not move forward as a founding member,” a company spokesman said. Mastercard said it was focused on its own strategy “and our own significant efforts to enable financial inclusion around the world,” and Visa said its future participation would depend, in part, on Libra’s “ability to fully satisfy all requisite regulatory expectations.”“EBay has made the decision to not move forward as a founding member,” a company spokesman said. Mastercard said it was focused on its own strategy “and our own significant efforts to enable financial inclusion around the world,” and Visa said its future participation would depend, in part, on Libra’s “ability to fully satisfy all requisite regulatory expectations.”
A spokesman for Stripe said, “We will follow its progress closely and remain open to working with the Libra Association at a later stage.”A spokesman for Stripe said, “We will follow its progress closely and remain open to working with the Libra Association at a later stage.”
Libra has been met with doubts and questions almost from the moment that Facebook unveiled the effort in June.Libra has been met with doubts and questions almost from the moment that Facebook unveiled the effort in June.
At the time, the social network positioned Libra as the potential foundation for a new financial system that would not be directed by today’s power brokers on Wall Street or central banks. As part of that, Facebook said, it had more than 27 corporate partners — including PayPal, Visa, Mastercard and companies like Uber — that had pledged to support the project. The partners are key because Facebook said Libra would not be controlled by the social network but by a broad network of corporate partners. At the time, the social network positioned Libra as the potential foundation for a new financial system that would not be directed by today’s power brokers on Wall Street or central banks. The cryptocurrency could be freely traded inside Facebook’s properties, like Messenger and WhatsApp, and be used for international exchange, Facebook added.
Yet many world leaders, regulators and central bankers immediately criticized Libra and the idea of an unregulated currency. And they have questioned whether Facebook, which is grappling with numerous regulatory issues around privacy and antitrust, should be heading up such an initiative. As part of that, the social network said, it had more than 27 corporate partners — including PayPal, Visa, Mastercard and companies like Uber — that had pledged to support the project. The partners are important because Libra will be controlled not by the social network but by a broad network of corporations, Facebook said.
Lawmakers asked David Marcus, the Facebook executive leading Libra, to testify in Congress early this year about the plans. And Facebook’s chief executive, Mark Zuckerberg, is scheduled to testify at a congressional hearing about Libra on Oct. 23. Yet many world leaders, regulators and central bankers — including President Trump and Treasury Secretary Steven Mnuchin — immediately criticized Libra and the idea of an unregulated currency. And they questioned whether Facebook, which is grappling with numerous regulatory issues around privacy and antitrust, should be heading up such an initiative.
Last week, PayPal, the electronic payments company that Mr. Marcus used to lead, said it would leave the Libra initiative so it could instead “continue to focus on advancing our existing mission and business priorities.” Lawmakers asked David Marcus, the Facebook executive leading Libra, to testify in Congress about the plans, and he faced two days of questioning in July. Facebook’s chief executive, Mark Zuckerberg, is scheduled to testify at a congressional hearing about Libra on Oct. 23.
Facebook did not immediately respond to a request for comment.Facebook did not immediately respond to a request for comment.
The Libra Association, a Swiss organization that Facebook created to oversee the project, is “focused on moving forward and continuing to build a strong association,” said Dante Disparte, its head of policy and communication. Even if the members change, he added, its underlying principles “will remain resilient.”
The Libra Association plans to announce its membership at a meeting on Monday, Mr. Disparte said.
Senator Sherrod Brown, a Democrat from Ohio on the Senate’s banking committee, applauded the withdrawals of Visa, Mastercard, eBay and Stripe.
“Large payment companies are wise to avoid legitimizing Facebook’s private, global currency,” Mr. Brown said. “Facebook is too big and too powerful, and it is unconscionable for financial companies to aid it in monopolizing our economic infrastructure. I trust others will see the wisdom of avoiding this ill-conceived undertaking.”
The Libra coalition has been fraying for months. In the weeks after Facebook announced the initiative, some of the partners began having second thoughts. Many were wary that Facebook’s issues with regulators and the uncertain legality of cryptocurrencies might hurt Libra. Some of the companies, particularly payments providers, rely on good relationships with financial regulators.
The partners signed nonbinding agreements, so backing out would be fairly easy, executives at seven of the partner companies told The New York Times in June. They also weren’t obliged to use or promote the digital token.
“We will not do anything that we think doesn’t meet our own personal standards, as well as the standards of regulators that we respect around the world,” Al Kelly, Visa’s chief executive, told CNBC this year.
In recent months, as skepticism around Libra was mounting, some of the partners realized the amount of resources they would have to commit to the effort was growing, said one person with knowledge of the situation, who declined to be named because the discussions were confidential.
PayPal, which Mr. Marcus used to lead, said last week that it would leave the Libra initiative so it could instead “continue to focus on advancing our existing mission and business priorities.”
Early this month, Mr. Marcus acknowledged some of the difficulties Libra faced. On Twitter, he wrote: “Change of this magnitude is hard and requires courage + it will be a long journey.”