On Friday Bloomberg reported that five more firms have withdrawn from Facebook’s Libra stablecoin project. The digital currency abandonments include Mastercard, Visa, eBay, Stripe and Argentinian online payments company Mercado Pago. The floodgates were started by Paypal’s withdrawal announcement a week earlier.
Before the Paypal revelation, it was rumored that the firm was concerned about increased regulatory scrutiny into its core payments business. Likewise, four out of five of the latest withdrawals are payments firms.
That concern was reinforced by last Tuesday’s letter from U.S. Senators Brian Schatz and Sherrod Brown. They wrote to Mastercard, Visa and Stripe and urged them to withdraw. The letters warn that “weaknesses in Facebook’s risk management systems will become weaknesses in your systems that you may not be able to effectively mitigate.” It alleges that Facebook “is shifting the risks and the need to design new compliance regimes on to regulated members of the Libra Association like your companies.”
Numerous regulators around the world have voiced concerns about Facebook’s involvement in a payment instrument that could reach billions of users. Without the participation and moderating influence of high profile regulated payment providers, the risk of Facebook’s participation in the project could be perceived as even greater.
The withdrawals are being triggered ahead of today’s planned Libra meeting in Geneva at which members will be asked to sign a charter agreement. The Libra Association is registered in Switzerland. It involves a new blockchain technology project which to date has been mainly developed by the Facebook team.
Many of the financial firms did not rule out participating in the Libra at a later date, presumably once the regulatory position has been clarified and crystallized.
In other related news, the BBC says the G7 group of nations is about to publish a report about stablecoins. The paper outlines the risks that digital currencies such as Libra could pose to the global financial system. A previous report by the IMF noted that “risks abound” with with stablecoins.
