Libra faces crisis of confidence as early backers back out
(11 October 2019 – United States) Following PayPal’s withdrawal from Facebook’s Libra cryptocurrency project, Visa, MasterCard, eBay, Mercado Pago and Stripe have also now all walked away similarly citing anti-money laundering (AML), financial stability, consumer protection and regulatory concerns.
Doubts were also cast preceding Facebook CEO Mark Zuckerberg testifying in front of Congress about the plans for Libra on October 23.
First announced in June this year, the Libra Alliance of financial and technology groups each contributed US$10 million to the development of the Libra Blockchain. The remaining members are meeting in Switzerland this week to nominate the board for the project. Facebook announced plans to launch the digital currency in June 2020 in partnership with other Libra Alliance members. Libra confirmed that it will forge ahead with plans to formally charter the association.
Germany and France are seeking to block the cryptocurrency from operating in Europe and backed the development of an ECB backed public cryptocurrency instead with similar moves afoot in China. The Bank of England (BoE) has demanded that the social media company must meet its highest standards to proceed with a successful launch in the United Kingdom (UK). Digital currencies such as Libra would need to reach the same high standards as those of traditional payments.
In a warning to Facebook, the Bank’s quarterly assessment of emerging financial risks stated: “If payment tokens were used widely to facilitate routine payments, they should have the same level of operational resilience and safeguarding as the use of debit cards to make payments from current accounts. The resilience of the proposed Libra system would rely on the stability of not just the core elements of the Libra Association and Libra Reserve but also the associated critical activities conducted by other firms in the Libra ecosystem, such as validators, exchanges or wallet providers,” the Bank 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. 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” Visa claimed in an official release.
“In spite of Stripe’s exit, Libra still has the potential to make online commerce more accessible for people around the world. Stripe will remain open to working with the project at a later stage” Stripe released in a statement.
“We look forward to the inaugural Libra Association council meeting in just three days and announcing the initial members of the Libra Association” said Libra Head of Policy and Communication, Dante Disparte.