Facebook’s libra cryptocurrency faces exodus of partners
Facebook’s troubled cryptocurrency initiative, Libra, suffered new blows Friday as the departures of key partners became an exodus.
Stripe, Mastercard, Visa and ebay said they were pulling out of Libra, a week after Paypal became the first company to drop out. While they continue to support the idea of Libra, the companies said, they will no longer be part of the coalition that is backing the effort.
“Ebay has made the decision to not move forward as a founding member,” a company spokesman said. Mastercard said it was focused on its own strategy “and our own significant efforts to enable financial inclusion around the world,” and Visa said its future participation would depend, in part, on Libra’s “ability to fully satisfy all requisite regulatory expectations.”
A spokesman for Stripe said, “We will follow its progress closely and remain open to working with the Libra Association at a later stage.”
Also Friday, federal regulators obtained a temporary restraining order against the encrypted-messaging company Telegram, moving to shut down its Gram cryptocurrency.
Simon Taylor, a co-founder of 11:FS, a consulting firm that advises companies on blockchain adoption, said Facebook’s and Telegram’s difficulties “show just how important it is to have a clear position with regulators before launching at scale.”
Libra has been met with doubts and questions almost from the moment Facebook unveiled the effort in June, when the company positioned Libra as the potential foundation for a new financial system that would not be directed by Wall Street or central banks. The cryptocurrency could be freely traded inside Facebook’s properties, like Messenger and Whatsapp, and be used for international exchange, Facebook added.
Facebook declined to comment Friday and referred questions to the Libra Association, a Swiss organisation that the company created to oversee the project.
Unlike Libra, the Gram was supposed to operate without any central association or foundation, similar to Bitcoin.
That structure gave many investors confidence that it could operate without the same regulatory restrictions as ordinary investments. As a result, some of Silicon Valley’s biggest venture capital firms, including Benchmark, Lightspeed and Sequoia Capital, invested in the Gram. In total, Telegram took in $1.7 billion for it.
Telegram committed to delivering the Grams to investors by 31 October. But the Securities and Exchange Commission on Friday said it was suing Telegram before it sent out the Grams to investors and asked for a restraining order.
© 2019 The New York Times