Facebook’s ambitious cryptocurrency venture named Libra is already floundering before its launch scheduled in January. A governing body founded by Facebook to run the currency called the Libra Association has seen eight of its original members withdrawing from commitment, citing regulatory norms and banking inefficiencies.
Facebook’s Libra Association, based out of Geneva, which was initially welcomed by the Swiss government, is no longer finding favor there. In December, Swiss finance minister Ueli Maurer said that the country can’t approve Libra in its current form as the basket of currencies that was formed to back its digital currencies were not approved by the issuing national banks. He added that “the project had failed in its current form.”
Mastercard, Visa, eBay, Stripe, and Mercado all pulled out of the Facebook-led Libra Association in October. PayPal and Booking Holdings withdrew support earlier. The latest to join the bandwagon of exits is Vodafone.
All the companies cited Facebook’s inability to meet the banking regulations required for the basket of currencies that Libra is using for digital transactions.
A Visa spokesperson told CoinDesk, “Visa has decided not to join the Libra Association at this time. 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.” Mercado Pago said the company will re-evaluate Libra after there is “greater clarity” on the project. Ebay and Stripe said they would like to focus on their inbuilt payment methods for the time being. The world governments did not welcome the Libra project. Germany and France expressed concerns over its launch, citing security and banking over-reach concerns.
The US government is equally disenchanted with the venture. The Securities & Exchange Commission of the US wants Facebook to pass all the regulatory hurdles. It is concerned about Libra competing with the dollar and about its new and unproven technology. Two senators wrote letters to Visa and Mastercard, cautioning them against joining the project and warning that it would open them to stringent scrutiny from the government.
Facebook needs to meet the banking norms and regulations of the various countries’ currencies that it intends to use to get support. This will prove to be a Herculean task. Moreover, Facebook’s recent record on misuse of data, and Libra’s potential as a fertile field for financial criminals, is disabusing the companies from going forward.
Facebook unveiled plans for its cryptocurrency Libra in June 2019, aimed at providing banking services to the millions of individuals who currently lack access. To make it a global payment standard, Facebook opened its blockchain like platform to other companies and formed the Libra Association, which it based out of Geneva.
Around 28 entities signed up as members, including Visa, MasterCard, Uber and Lyft, eBay, and Spotify. Founding backers also include venture capital firms like Andreessen Horowitz and Union Square Ventures and non-profit organizations like Kiva and Mercy Corps.
"Access to financial services is limited or restricted for those who need it most—those impacted by cost, reliability, and the ability to seamlessly send money," the Libra white paper states. "All over the world, people with less money pay more for financial services."
Facebook’s ambitions to be an inclusive payment gateway may have to be permanently postponed. Governments and regulatory authorities do not have much faith in its benevolent beliefs. They are concerned that the project will open up financial transactions to the evils of hacking and phishing and fudge the strict regulatory rules that control the world financial institutions.