Facebook Inc.’s effort to create a cryptocurrency was dealt a blow Friday when several key partners, including Mastercard Inc., Visa Inc., EBay Inc. and Stripe Inc., abandoned the project. The defections underscored concerns that the Libra currency won’t pass legal muster with regulators and public officials who have lined up to criticize the effort.
The news came days before the Libra Assn., the group meant to oversee the digital currency, prepares to convene its members and ask them to sign a charter agreement. The meeting is slated to take place Monday in Geneva. A Libra Assn. spokeswoman said Friday that the gathering would proceed as planned, and that the association would announce the first list of official partners once a formal charter was signed.
In a statement, she said the group was “focused on moving forward and continuing to build a strong association” and would work to create “a safe, transparent, and consumer-friendly implementation of a global payment system that breaks down financial barriers for billions of people.”
Facebook has faced fierce backlash since it announced its plans for Libra in June. Politicians and regulators around the world have called on the company to halt its progress, and some have suggested Libra could be used for money laundering or trafficking schemes.
Despite the exodus of partners, Facebook remains committed to Libra, according to a person familiar with the matter who asked not to be identified because they were not authorized to speak publicly. Some people inside the company think the defections are partly driven by established payments providers worrying about a new entrant encroaching on their turf, the person said.
“Although the makeup of the association members may grow and change over time, the design principle of Libra’s governance and technology, along with the open nature of this project, ensures the Libra payment network will remain resilient,” Dante Disparte, head of policy and communications for the Libra Assn., said in a statement Friday.
Facebook has frequently found itself in the spotlight as regulators have lambasted the ambitious project. David Marcus, the Facebook executive spearheading the effort, went to Washington in July to testify before Congress about the currency and Facebook’s plans. Later this month, Chief Executive Mark Zuckerberg is scheduled to appear before the House Financial Services Committee to answer even more questions about Libra.
This week, two U.S. senators cautioned Visa, Mastercard and Stripe to reconsider their involvement in the project. Sens. Sherrod Brown (D-Ohio) and Brian Schatz (D-Hawaii) said Libra poses a risk not only to the financial system but also to the payment companies’ broader business. “We urge you to carefully consider how your companies will manage these risks before proceeding,” they said a letter to the companies.
Mastercard said in a statement that it will “remain focused on our strategy and our own significant efforts to enable financial inclusion around the world,” adding: “We believe there are potential benefits in such initiatives and will continue to monitor the Libra effort.”
Visa said that it too would continue to evaluate whether to join in Libra in the future, and that its “ultimate decision will be determined by a number of factors, including the association’s ability to fully satisfy all requisite regulatory expectations.”
EBay expressed support for the project but said it would focus on rolling out its own payment products. “We highly respect the vision of the Libra Assn.; however, EBay has made the decision to not move forward as a founding member,” an EBay spokesman wrote in the emailed statement. “At this time, we are focused on rolling out EBay’s managed payments experience for our customers.”
Payment giant Stripe, one of the most high-profile start-ups to sign on to the project, signaled it remained open to working on Libra in the future. “Stripe is supportive of projects that aim to make online commerce more accessible for people around the world. Libra has this potential,” a company spokesperson said. “We will follow its progress closely and remain open to working with the Libra Assn. at a later stage.”
The Libra Assn. is composed of about two dozen organizations, including Facebook. A Lyft Inc. spokeswoman confirmed Friday that the ride-hailing company remains a member. Other companies that have not signaled plans to leave include Uber Technologies Inc., Spotify Technology, Coinbase Inc. and telecom providers Iliad and Vodafone Group.