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Exodus from Facebook's Libra digital currency as Visa, Mastercard and other backers quit
Five payments companies led by eBay, Mastercard and Visa have abruptly dropped out of Facebook's project to create a new digital currency, Libra, dealing a major blow to the social network's plan.
The companies, which also included the US payments firm Stripe and the Latin American Mercado Pago, announced that they were cutting ties just days before a crunch meeting on Monday which was expected to definitively establish the project's founding members.
It follows Paypal's announcement earlier this week that it would not be joining, despite initially being listed as a "founding member" on the hook for a $10m membership fee.
That removes six of the 28 intended "founding members" of the Libra Association, the independent governing body set up by Facebook to govern the currency and reassure critics that it would not be controlled by Facebook itself.
The drop-outs constitute a serious danger to Facebook's hopes of spreading the currency across the world, diminishing the heft of the Association as an independent body and therefore its utility as a shield against politicians and regulators.
A spokeswoman for 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. At this time, we are focused on rolling out eBay’s managed payments experience for our customers.”
A spokesman for Stripe, the payments service, said: "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.”
A spokesperson for Visa said it would not be joining the Association, but that it might do so in future, saying it had a "continued interest" in the currency due to its potential to expand secure digital payments into the developing world.
"Visa has decided not to join the Libra Association at this time," they said. "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."
Mercado Pago likewise said it would reassess Libra in the future "when there is greater clarity regarding the project".
The departures all followed within a few hours of each other, with eBay disclosing its exit first and Stripe, Mastercard, Visa and Mercado Pago going rapidly behind in that order.
David Marcus, Facebook's head of cryptocurrency, professed to welcome the move, thanking Visa and Mastercard for "sticking it out until the 11th hour" and suggesting that they had been pushed out by "threats" and "pressure" from regulators.
"I respect their decision to wait until there’s regulatory clarity for Libra to proceed," he said. "Of course, it’s not great news in the short term, but in a way it’s liberating... change of this magnitude is hard. You know you’re on to something when so much pressure builds up."
A spokesman for the Libra Association said that it would not be dissuaded from its mission of "a safe, transparent and consumer-friendly implementation of a global payment system that breaks down financial barriers for billions of people".
Libra, launched by Facebook in June with a promise to bring digital payments to the 1.7bn people without a bank account, is intended to be a global digital currency whose value remains stable.
Unlike traditional cryptocurrencies such as Bitcoin, Libra will, if it launches, be backed by a huge reserve of various real-world currencies and assets, maintained by the members of the Association and bought using their $10m membership fees.
Facebook itself is only developing the technology for Libra, whose management it will then hand over to the Association. The social network will then launch its own digital wallet, called Calibra, which will compete with other wallets developed by third parties.
Yet the project has attracted widespread hostility from politicians, regulators and central banks, who have accused it of undermining national sovereignty. France and Germany last month said they would block it, while members of the US Senate wrote to Mastercard and Visa urging them to consider their position carefully.