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Facebook Libra payment partners are wavering, sources say

Facebook’s David Marcus
David Marcus, the top executive on Facebook’s cryptocurrency project, testifies before the Senate Banking Committee in July.
(Alex Wong / Getty Images)

Four payment companies that have joined Facebook Inc. as founding members of the Libra Assn. are wavering over whether to officially sign on to the cryptocurrency project, according to people familiar with the matter.

Visa Inc., Mastercard Inc., PayPal Holdings Inc. and Stripe Inc. are undecided about formally signing on to Libra’s organizing charter because they’re concerned about maintaining positive relationships with regulators who have reservations about the project, the people said.

Executives at the payment companies believe Facebook oversold the extent to which regulators were comfortable with the project and are worried about the perception the social network hasn’t behaved responsibly in other areas — such as how it has handled user data and privacy, the people said.

The Libra Assn. is asking the 28 founding members to reaffirm their commitment to the cryptocurrency project this month, according to three people familiar with the matter. Before Libra was unveiled, the companies signed nonbinding letters of intent to explore joining the association.

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David Marcus, the Facebook executive leading the Libra effort, tweeted Wednesday that the “[first] wave of Libra Assn. members will be formalized in the weeks to come.” Marcus said that he was unaware of any current Libra partners who might abstain from officially joining the organization, but that building a new global currency is “hard and requires courage.”

“I can tell you that we’re very calmly, and confidently working through the legitimate concerns that Libra has raised by bringing conversations about the value of digital currencies to the forefront,” he added.

Companies that officially join the charter won’t be obligated to immediately contribute an initial $10 million required to invest in the project, according to two of the people. The option to delay the payment reflects the association’s strategy to move the Libra project forward in baby steps, the people said. That would give members more time to work out how their participation might affect the rest of their companies’ operations and regulatory obligations, they said.

The signing of the charter could take place as soon as Oct. 14, three people said, and is likely to happen in Switzerland, where the nonprofit organization charged with managing the Libra digital currency reserve and global payment network would be based.

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“Nothing has changed with our involvement with Libra since we came on to participate,” a Stripe spokesman said. “We agreed to work on the charter with these other participants. We continue to work on the charter. We’re still actively involved.” He declined to comment specifically on whether Stripe has reservations about signing the charter.

Spokesmen for Facebook, Visa, Mastercard and PayPal declined to comment.

The move to get Libra members to formally sign on is the latest indication Facebook and its partners are pushing forward with the controversial plan, even after the Menlo Park, Calif.-based social media giant came under fire from policymakers around the world.

Facebook has said repeatedly that the Libra Assn. will be responsible for making decisions about the currency, so its formal creation could mean regulators start to get better answers than Facebook has offered so far.

Some European finance ministers have threatened to ban Libra in their respective countries, and the European Union’s antitrust chief says she has taken the unusual step of scrutinizing Libra because of the risk that the proposed currency could lead to the creation of a new, entirely separate economy.

Meanwhile, development of the technology to underpin Libra is moving faster than internal deadlines, Diogo Monica, co-founder of Anchorage, a technology company that safeguards cryptocurrencies, said in a phone interview. Five association members including Anchorage and Facebook’s digital wallet subsidiary Calibra are already running a test network of nodes and are sending transactions — not done with real money for now — to one another, he said.

Libra has started addressing regulators’ concerns by making tweaks to its technology and policies, such as its policies against money laundering, Monica added. Hundreds of organizations are on a waiting list hoping to join the association, Monica said, adding that no additional members have been admitted yet.

Opponents of the plan say Libra, which would be backed by a pool of traditional currencies, could undercut countries’ monetary policies or be used for nefarious purposes. This summer U.S. lawmakers grilled Marcus, questioning whether Facebook could be trusted to expand into financial services. Last month, Facebook Chief Executive Mark Zuckerberg told senators that the currency wouldn’t launch anywhere in the world without U.S. regulators’ blessing.

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Facebook announced the project in June to make international payments as simple as texting. It draws on big names in the payment, technology, telecom and blockchain industries, including EBay Inc., Uber Technologies Inc., blockchain start-ups Coinbase Inc. and Xapo Inc., and Vodafone Group, as well as venture capital companies and nonprofit organizations.

Even as Facebook endures public criticism, the Libra organization’s members have worked in the background to hash out details of a chartering document to formally establish the nonprofit so that the group’s work to set up the payment system can move forward.

The work has proved contentious because of continued uncertainty about the regulatory implications of the project, according to two of the people.

“Since June the association has met with numerous regulators and policymakers,” Libra Assn. spokesman Dante Disparte said in an email. “Additionally the group of founding members have held regular meetings to discuss appropriate regulatory requirements for operating a payment system, as well as conforming to anti-money laundering, combating the financing of terrorism, privacy and other standards.”


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