Facebook has experienced substantial criticism over its plans to create a cryptocurrency system.
Visa and Mastercard have announced their departure from Facebook’s Libra project in a potentially fatal blow to the social network company’s plan for a worldwide digital currency.
Along with the two payment giants, several other large companies have said they are exiting Libra.
Payment processing company Stripe said it is stepping back, as well as online auction company eBay. PayPal was the first of Libra’s big partners to leave, announcing last week it would no longer be involved.
Facebook has faced substantial criticism over its plans to create a separate, private currency system to allow cross-border payments.
The Libra Association, based in Switzerland, was supposed to give the currency project a comfortable arm’s-length distance from Facebook, which would not own Libra.
Despite those efforts, financial regulators, as well as members of US Congress on both sides of the political divide, noted the privacy issues raised with the social networking company controlling a currency, while also expressing concern about money laundering.
US president Donald Trump tweeted earlier this year that Facebook should be subject to US banking laws if the Libra project were to move forward. Trump tweeted: “I am not a fan of Bitcoin and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.
“Unregulated crypto assets can facilitate unlawful behaviour, including drug trade and other illegal activity. Similarly, Facebook Libra’s ‘virtual currency’ will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new banking charter and become subject all banking regulations, just like other banks.”
‘Focused on moving forward’
The impact of Libra’s loss of Visa and Mastercard cannot be understated. The two hold an effective duopoly over credit and debit cards in the US and Europe, and are making substantial inroads into developing countries’ payment systems.
Their initial agreement to join the Libra Association instantly gave Facebook’s project legitimacy. Both companies made it clear from the onset that their interest in Libra was at least partly out of curiosity.
It now appears that the political pressure on Facebook to drop the project was enough to convince a chunk of the original members to cut ties. The Libra Association said in a statement that it is “focused on moving forward”.
– PA Media