In October alone, Facebook's Libra cryptocurrency lost the backing of some of the most influential companies such as Visa and Mastercard that initially joined the 27-member Libra Association with the aim to allow billions of people to transact easily across national borders without having to pay hefty transaction fees that they have to pay to banks.
Within a space of just two weeks, the Libra Association saw prominent members such as payments giants Visa and Mastercard and others like PayPal, eBay, Mercado Pago, and Stripe leave its fold. The timing is interesting for those following the Libra project as the Association is expected to hold its first council meeting in a few days from now.
"Visa has decided not to join the Libra Association at this time. We will continue to evaluate and our ultimate decision will be determined by a number of factors, including the Association's ability to fully satisfy all requisite regulatory expectations," said a Visa spokesperson.
The Libra cryptocurrency project had run into troubled waters as soon as it was launched in June this year. Immediately reacting to Facebook's ambition of rolling out a global cryptocurrency which is expected to be supported by the Calibra digital wallet, Mark Carney, governor of the Bank of England, said that he cryptocurrency will be subjected to the highest standards of global regulation and that Bank of England will closely monitor Libra even though he will keep an "open mind" about Libra's utility.
G7 members increasingly vary of Libra's future role in the prevention of money laundering
Carney said that Bank of England will work closely with the Bank of International Settlements, the International Monetary Fund, the Financial Stability Board, as well as with G7 countries to scrutinize Libra in the future to check if Facebook will be able to protect users' privacy and prevent money laundering at the same time.
Aside from Carney, the French Finance Minister Bruno Le Maire also said that allowing Libra to replace traditional currencies is out of the question, stating that "it can’t and it must not happen" as there are a large number of questions around the new project that concern privacy, money laundering and terrorism finance.
According to a recent draft report from the G7 group that includes the United States, the UK, Germany, Canada, Japan, France, and Italy, Libra cryptocurrency may not obtain approval from regulators as there could be major concerns around money laundering and terror funding. The report will be presented at the IMF annual meetings later this week.
According to BBC who accessed the draft report, the report noted that "Libra could stifle competition among other providers and even threaten financial stability if users suddenly suffer a "loss of confidence" in the digital currency" and that "no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed".
Stripe, eBay, Visa and Mastercard not too excited about Libra yet
Announcing its decision to withdraw from the Libra Association, Mastercard said that it will "remain focused on our strategy and our own significant efforts to enable financial inclusion around the world" while stating that it still believes "there are potential benefits in such initiatives".
Similarly, eBay said: "We highly respect the vision of the Libra Association; however, eBay has made the decision to not move forward as a founding member", adding that "at this time, we are focused on rolling out eBay’s managed payments experience for our customers".
"Stripe is supportive of projects that aim to make online commerce more accessible for people around the world. Libra has this potential. We will follow its progress closely and remain open to working with the Libra Association at a later stage," said Stripe, reiterating the position of other companies not to participate in the Libra project yet but not overtly deriding the project's regulatory challenges as well.