PayPal Begins Mass Stampede from Libra over Regulations
After PayPal’s decision to remove the company from the board overseeing Libra more than a week ago, a domino effect began in fleeing the project: Visa, Mastercard, eBay, Stripe, Mercado Pago and all of the rest of the 28 original corporate backers followed PayPal’s lead. The Libra Association will forge on, but the exodus leaves Facebook with a major problem in convincing governments that its distributed global cryptocurrency is a good bet.
Bloomberg and the Financial Times reported on the defections. The Verge followed up by talking with Libra Association representatives. Largely composed of finance and technology companies, each decided to put at least $10 million into the Libra Association until defections began.
A combination of regulatory issues, fears that Facebook could undermine local economies through by-passing their currencies and an anti-trust investigation by the U.S. Justice Department have all led to cold feet among well established financial institutions in backing the revolutionary currency system. Mark Zuckerberg is scheduled to testify to the Justice Department next week.
According to the Verge, governments threatened a “high level of scrutiny” not only of transactions within the digital currency, but of all activity by the financial institutions involved.
Randal Quarles, the chairman of the Financial Security Board, comprised of G20 bankers, said the currency of “stablecoins” was risky for financial stability, as well as “data privacy, global competition, money laundering, tax evasion and cyber security,” according to a story on London’s Telegraph website.
Futurism.com quoted University of British Columbia professor and fintech expert Marc-David Seidel’s assessment that Libra could act the “demise” of Facebook if it moves forward because it would create publicly available platforms that could extend beyond the social media company’s control, delegitimizing its current model.
Whether plans for the currency will survive the onslaught of criticism remains to be seen.