FinTech

Facebook’s Libra Project Suffers more Blow as Visa, MasterCard Drop Out

libra

 

Some of the biggest corporate backers of Facebook’s Libra digital currency said Friday they will withdraw from the project, delivering a massive blow to the social media giant’s plans to establish a new global payments network amid pressure from lawmakers and regulators.

Visa, MasterCard, eBay and Stripe said Friday they will not join the Libra Association, a Switzerland-based organization that Facebook spearheaded to manage the currency.

The announcements came as the companies faced a make-or-break moment before an inaugural association meeting next week.

If they had stuck with the project, the companies were sure to face intense scrutiny from policymakers who have warned that Libra — a privately run global payments system managed in part by a social media company with a poor privacy track record — is a potential threat to consumers and the financial system. The decisions followed news last week that online payment company PayPal was the first member withdrawing.

Federal Reserve Chair Jerome Powell and President Donald Trump were among the world leaders who raised doubts about Libra’s future shortly after Facebook announced the cryptocurrency earlier this year. The new currency has also drawn fierce resistance from the French and German governments.

None of the companies on Friday offered any specific reason for dropping out of the high-profile project, and Visa left the door open to reconsidering its move in the future.

“Visa has decided not to join the Libra Association at this time,” a company 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.”

It was not immediately clear what the departure of several major partners would mean for the future of Libra, which is set to be launched next year — a timeline that appears increasingly in doubt. Facebook’s top executive overseeing the project, David Marcus, is set to speak in Washington next week, followed by Oct. 23 testimony in the House from Facebook CEO Mark Zuckerberg.

 

The Libra Association signaled that it planned to move forward. Dante Disparte, head of policy and communications for the group, said the association looked forward to its inaugural council meeting next week and announcing initial members.

“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,” Disparte said. “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.”

Other companies that are signed on to participate in the Libra Association include Uber, Lyft and Spotify.

But in recent days, Facebook’s partners in Libra began to face direct political pressure to withdraw.

On Tuesday, Sens. Sherrod Brown (D-Ohio) and Brian Schatz (D-Hawaii) wrote to Visa, Mastercard and Stripe discouraging them from participating in Libra and warning of “a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities.”

“Large payment companies are wise to avoid legitimizing Facebook’s private, global currency,” Brown said Friday. “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.”