Global payments companies follow PayPal’s exit from the cryptocurrency project.
Five companies, led by eBay, Mastercard and Visa, pulled out of Facebook’s planned digital currency Libra on Friday, following sustained political pressure and just days before the project’s backers are due to meet for their first board meeting, according to Financial Times.
The exit of Visa, Mastercard, eBay, Stripe and Mercado Pago came as a major blow to Facebook’s ambitions to shake up the global payments market and follows one week after PayPal announced it was also pulling out of the project. The withdrawals follow intense scrutiny from international regulators and politicians, some of which have called for the project to be halted altogether, citing money laundering concerns and worries about wider financial stability.
“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,” a Visa company spokesperson said on Friday. “Visa’s continued interest in Libra stems from our belief that well-regulated blockchain-based networks could extend the value of secure digital payments to a greater number of people and places, particularly in emerging and developing markets,” the spokesperson added.
An eBay spokesperson said in a statement to the Financial Times that it had made the decision in order to “[focus] on rolling out eBay’s managed payments experience for our customers”.
“We highly respect the vision of the Libra Association; however, eBay has made the decision to not move forward as a founding member,” EBay said in a statement.
Payments group Stripe said that in spite of its exit it still believed Libra had “potential” to “make online commerce more accessible for people around the world” and remained open to working with the project “at a later stage”.
Two people familiar with the decisions said that Mastercard and Mercado Pago had also quit Libra.
The Libra alliance, a group largely made up of finance and technology companies, had each decided to put at least $10m behind the scheme. The remaining members are due to meet in Geneva on Monday to nominate the board for the project.
Some of the initial members were spooked after it emerged that Mark Zuckerberg, Facebook’s founder, will testify in front of Congress about the plans later this month, according to several people familiar with the project.
In addition, earlier this week, two Democratic senators wrote to Mastercard, Visa and Stripe to express concern about the project and urge them to reconsider the risks the project poses to the government and the financial system as a whole.
Sherrod Brown and Brian Schatz, two members of the Senate banking committee, wrote in their letters: “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 payment activities.”
Mr Brown said on Friday: “Large payment companies are wise to avoid legitimising Facebook’s private, global currency. Facebook is too big and too powerful, and it is unconscionable for financial companies to aid it in monopolising our economic infrastructure. I trust others will see the wisdom of avoiding this ill-conceived undertaking.”
People close to the companies said all three of the companies addressed by the senators were concerned about the threat of closer regulatory scrutiny on their business. PayPal had said when it dropped out that it wanted to “focus on our existing mission”.
A Libra spokesperson said: “We look forward to the inaugural Libra Association council meeting in just three days and announcing the initial members of the Libra Association.”
„Though Libra has met with fierce resistance from central banks and supervisory authorities and might never see the light of day, in many other cases tech firms (both start-ups and established big players) have successfully captured bits and pieces of universal banks’ traditional value chain. This trend may only intensify in the coming years. In this environment, European banks remain squeezed.”