Facebook’s cryptocurrency Libra has been in hot water ever since the social media giant released the whitepaper earlier this year. Central banks and governments across the globe have put together a concerted effort against Libra, putting Facebook executives in the dock time and again as they fear that the social media giant is out to create a parallel financial system.
But the greatest threat that could derail Facebook’s cryptocurrency project probably lies within. The Libra Association, a collection of organizations that is supposed to oversee the Libra cryptocurrency, is already cracking.
The Wall Street Journal reports that payments heavyweights Mastercard and Visa, along with other financial partners, are having second thoughts about their involvement in Facebook’s cryptocurrency project.
Citing people familiar with the matter, the Journal says that Mastercard and Visa are wary about the regulatory backlash Facebook Libra has been facing on both sides of the Atlantic.
They probably fear that providing public support to Libra could eventually suck them into regulatory scrutiny as well, and both Mastercard and Visa won’t want to attract such attention.
As it turns out, Visa and Mastercard aren’t the only ones who have started doubting Facebook’s cryptocurrency initiative. PayPal recently said that it is cautious about the future of Libra following rumors that the first backers of the Libra project were not happy with the regulatory attention that the initiative was attracting.
But the report that Mastercard, Visa, and other financial partners such as PayPal are having second thoughts about Libra is concerning. That is because the project would be a dud if there are no financial partners to convert fiat into Libra and vice versa and transfer the same across the globe.
Regulators have bombarded Facebook executives with questions about how the social media giant plans to keep dark elements from using Libra before it launches in June next year. Global anti-money laundering watchdog Financial Action Task Force (FATF) is already keeping a close eye on Facebook’s cryptocurrency, Reuters reported last month. According to FATF president Xiangmin Liu:
“We want to make sure that if there are significant risks, they need to be addressed…The anonymity afforded by virtual assets is being exploited by serious criminals,” Liu said. “These activities are likely to be growing quickly, as law enforcement agencies are only seeing the tip of the iceberg.”
This is a common sentiment across the globe as politicians and regulators want to know how Facebook plans to keep a tab on money laundering and activities such as terrorist financing. So it wasn’t surprising to see Facebook’s blockchain chief subjected to a lengthy grilling at a Senate hearing in July.
WSJ reports that members of Congress are not happy about the lack of details over the workings of Libra and how Facebook plans to execute this project given its bad history of handling private data. As a result, regulators have reportedly been pursuing members of the Libra Association for information.
The Treasury Department has sent letters to Mastercard, Visa, PayPal, Stripe, and others to provide an overview of their money-laundering compliance, and how they see Libra exist within their frameworks. This is something that the backers of Facebook Libra are probably not comfortable with, which is why they are reconsidering their involvement.
As the Libra Association members have only signed a nonbinding agreement with Facebook, it might not take long for it to crumble if crucial partners such as Visa and Mastercard start pulling out.
Last modified: October 3, 2019 11:18 AM UTC