PayPal Holdings, Inc., the U.S. payments processor, has left the Libra Association. As we have reported, Libra is the entity managing the Facebook-led effort to build a global digital currency, but as PayPal was one of the first to join the conglomerate of investors and supporters of the Libra project, it is now also the first member to exit the group.
PayPal said it would forgo any further participation in the group to instead focus on its own core businesses. In a statement, they mentioned that they would remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future.
“The type of change that will reconfigure the financial system to be tilted towards people, not the institutions serving them, will be hard. 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.” – Libra Association
In June, 2019, when Facebook announced plans to launch the digital currency, it was like opening a can of worms. Sooner than expected the organisation ran into trouble with regulators worldwide, which put their partners in a difficult position. Facebook has shown no indication that it is shelving the project, however, amid growing concerns regarding regulations and the government’s reaction, it is a undoubtedly a big hurdle to jump.
Visa and Mastercard, Inc. have also reconsidered their involvement in Libra and also defected as they do not want to attract any more regulatory scrutiny, the Wall Street Journal reported. Countries in the EU pledged to block Libra from operating in Europe and backed the development of a public cryptocurrency instead. In fact, Stripe, and Mercado Pago, have all withdrawn from the Libra Association, dealing a major blow to Facebook’s plans for a distributed, global cryptocurrency. The withdrawals were first reported by the Financial Times and Bloomberg.
A Visa spokesperson said that Visa has decided not to join the Libra Association at this time but will continue to evaluate the project; their ultimate decision to be determined by a number of factors which include the Association’s ability to fully satisfy all requisite regulatory expectations. The withdrawals leave Libra with no major U.S. payment processor, which poses a serious issue for Libra.
With the exit these former partners, the Libra Association now has 21 members in the conglomerate. In the meantime, 1500 other entities have indicated an interest in joining the Libra Association, something that will be discussed in a future Libra council meeting.
The first official Libra Council meeting was held on October 14th in Geneva and we are still left to wonder if these cornerstone departures are the death knell of Libra. Certainly, it is in a precarious position despite the interest of other enterprises.
Stripe had given their reason for the withdrawal as such: “Stripe is supportive of projects that aim to make online commerce more accessible for people around the world. Libra has this potential. We will follow its progress closely and remain open to working with the Libra Association at a later stage.”
Libra had started its journey alongside the stalwarts of all industries and the organisation will continue to build a strong relationship with the world’s leading enterprises, social impact organizations and other stakeholders. While the ones who left has escaped the negative impact of the regulations, the remaining Libra members are facing growing pressure from governments and regulators, many of whom see the project as a threat to the existing financial system.
While Visa and Mastercard were involved in the project, Democratic senators urged them to reconsider their involvement with Libra, saying that it could have significant regulatory consequences for any payment processor involved. Those who remain with Libra may expect a high level of scrutiny from U.S. and worldwide regulators.
David Marcus, co-creator and head of Libra, has conceded that this news is “not great in the short term,” but “liberating” to know that you’re onto something when so much pressure builds up. Marcus also casts the news of Mastercard and Visa’s withdrawal from the project as simply waiting until there’s proper “regulatory clarity” on Libra before they fully commit.
While it’s his job to promote and build Libra, we’d like to hear your opinion about Libra’s ultimate destiny. Will it be a success or is it doomed to fail? Let us know!
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