Update: Facebook’s Libra plans continue to stumble as PayPal quits the digital currency project, with Visa and Mastercard also reconsidering their involvement.
In a statement late on Friday, PayPal says it has decided to „forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations”.
„We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
Cracks are forming in the coalition Facebook Inc. assembled to build a global cryptocurrency-based payments network.
Visa Inc., Mastercard Inc. and other financial partners that signed on to help build and maintain the Libra payments network are reconsidering their involvement following a backlash from U.S. and European government officials, according to the Wall Street Journal.
Wary of attracting regulatory scrutiny, executives of some of Libra’s backers have declined Facebook’s requests to publicly support the project. As per a memo reviewed by The Wall Street Journal, on 14 October, representatives from the companies are slated to meet in Geneva in order to review a charter for the Libra Association and appoint a board of directors.
As US regulators leaned on Libra’s backers, the Treasury Department sent letters to companies such as Visa, Mastercard, PayPal and Stripe, asking for a complete overview of their money laundering compliance programs and how Libra will fit into them.
On the other hand, Libra Association members have been pressing Facebook for more information, namely how illegal activities including money laundering and terrorist financing would be kept off Libra.
However, it is unclear how many of the initial Libra Association members ultimately will commit to the network.
PayPal is on the verge of quitting Facebook’s Libra project after having pulled out of a key meeting in Washington on Thursday, according to Financial Times.
One person close to PayPal said the company was concerned that Facebook has not done enough to address the backlash against the project, especially over money-laundering concerns.
“It doesn’t seem that there was a lot of pre-work done with regulators,” the person said. “[Payments] companies don’t want that [regulatory scrutiny] to bleed into their businesses.” The person said PayPal was unlikely to sign up initially but may rejoin the project at a later date.
Dante Disparte, head of policy and communications for the Libra Association, said: “This journey to build a generational payment network like the Libra project is not an easy path. We recognise that change is hard, and that each organisation that started this journey will have to make its own assessment of risks and rewards of being committed to seeing through the change that Libra promises.” The spokesperson added that “1,500 entities” had indicated they would participate in Libra.
So far, association members have signed nonbinding letters of intent, but they haven’t yet handed over the USD 10 million that Facebook requested from each member to fund the creation of the digital coin and build out the payments network.
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