Ma­jor cards re­con­sider Li­bra net­work

Some of Li­bra’s back­ers de­cline Face­book’s re­quests to pub­licly sup­port the pro­ject

The Peterborough Examiner - - BUSINESS - AN­NA­MARIA ANDRIOTIS AND PETER RUDEGEAIR

Cracks are form­ing in the coali­tion Face­book Inc. as­sem­bled to build a global cryp­tocur­rency-based pay­ments net­work.

Visa Inc., Mastercard Inc. and other fi­nan­cial part­ners that signed on to help build and main­tain the Li­bra pay­ments net­work are re­con­sid­er­ing their in­volve­ment fol­low­ing a back­lash from U.S. and Euro­pean gov­ern­ment of­fi­cials, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter. Wary of at­tract­ing reg­u­la­tory scru­tiny, ex­ec­u­tives of some of Li­bra’s back­ers have de­clined Face­book’s re­quests to pub­licly sup­port the pro­ject, the peo­ple said.

Their re­luc­tance has Face­book scram­bling to keep Li­bra on track. Pol­icy ex­ec­u­tives from Li­bra’s more than two dozen back­ers—a group called the Li­bra As­so­ci­a­tion—have been sum­moned to a meet­ing in Wash­ing­ton, D.C., on Thurs­day, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter.

On Oct. 14, rep­re­sen­ta­tives from the com­pa­nies are slated to meet in Geneva to re­view a char­ter for the Li­bra As­so­ci­a­tion and ap­point a board of direc­tors, ac­cord­ing to a memo re­viewed by The Wall Street Jour­nal.

Ma­jor de­fec­tions could im­peril Li­bra, Face­book’s at­tempt to per­suade con­sumers to swap their na­tional cur­ren­cies for a dig­i­tal coin that could be used to pay for goods and ser­vices on the in­ter­net. With­out a net­work of fi­nan­cial part­ners that could help trans­fer cur­ren­cies into Li­bra and global re­tail­ers to ac­cept it as a form of pay­ment, Li­bra’s reach would be limited.

When it un­veiled the pro­ject in June, Face­book said Li­bra could change the en­tire fi­nan­cial sys­tem, giving con­sumers a new way to move money across bor­ders. The pro­ject’s back­ers saw the pay­ments-net­work ef­fort as a long-shot way to profit on Face­book’s 2.4 bil­lion monthly ac­tive users.

Af­ter watch­ing pop­u­lar so­cial­me­dia com­pany Ten­cent Hold­ings Ltd. come to dom­i­nate the mar­ket for Chi­nese dig­i­tal pay­ments with WeChat Pay, some pay­ments com­pa­nies agreed to take part in Li­bra to avoid miss­ing out on the next big thing.

Face­book, which worked in se­cret for more than a year to de­velop Li­bra, has broad am­bi­tions for the pro­ject as part of a shift away from its nearly com­plete re­liance on tar­geted ad­ver­tis­ing. Face­book Chief Executive Mark Zucker­berg is steer­ing the so­cial-me­dia com­pany to more pri­vate and en­crypted com­mu­ni­ca­tions, and Li­bra could of­fer a means of pro­vid­ing fi­nan­cial ser­vices through those chan­nels.

In an­nounc­ing the pro­ject in June, the com­pany said it hoped to pro­vide ba­sic fi­nan­cial ser­vices to peo­ple around the world who lack bank ac­counts and to save some of the $25 bil­lion U.S. “lost by mi­grants every year through re­mit­tance fees.”

Some an­a­lysts have been bullish that Li­bra could help Face­book di­ver­sify its rev­enue base and po­ten­tially trans­form the dig­i­tal con­sumer econ­omy over the long term.

Yet gov­ern­ment of­fi­cials and cen­tral bankers were quick to crit­i­cize the pro­ject, cit­ing con­cerns about how the net­work would pro­tect users’ pri­vacy and pre­vent crim­i­nals from us­ing it to laun­der money.

David Mar­cus, the Face­book executive in charge of the pro­ject, en­dured two days of tongue-lash­ings from mem­bers of Congress over the sum­mer for the lack of de­tails about how the new cryp­tocur­rency would work as well as the com­pany’s past mis­steps on data pri­vacy. Fed­eral Re­serve Chair­man Jerome Pow­ell told leg­is­la­tors he had “serious con­cerns” about Li­bra and the com­pany’s timetable of launch­ing it next year.

Pri­vately, U.S. reg­u­la­tors have leaned on Li­bra’s back­ers. The Trea­sury De­part­ment sent let­ters to com­pa­nies in­clud­ing Visa, Mastercard, PayPal Hold­ings Inc. and Stripe Inc. ask­ing for a com­plete over­view of their money-laun­der­ing com­pli­ance pro­grams and how Li­bra will fit into them, peo­ple fa­mil­iar with the mat­ter said.

Dante Dis­parte, head of pol­icy and com­mu­ni­ca­tions at the Li­bra As­so­ci­a­tion, said in an email that the group has held reg­u­lar meet­ings with reg­u­la­tors and pol­icy mak­ers to dis­cuss con­form­ing to anti-money-laun­der­ing laws and pre­vent­ing ter­ror­ism fi­nanc­ing.

Li­bra As­so­ci­a­tion mem­bers, mean­while, have been press­ing Face­book for more in­for­ma­tion. They have asked Mr. Mar­cus and other Face­book ex­ec­u­tives how il­le­gal ac­tiv­i­ties such as money laun­der­ing and ter­ror­ist fi­nanc­ing would be kept off Li­bra and haven’t re­ceived de­tailed an­swers, one of the peo­ple said.

Mr. Mar­cus said on Twit­ter on Tues­day evening that it was “cat­e­gor­i­cally un­true” that de­tailed in­for­ma­tion about how to pro­tect the Li­bra net­work from il­le­gal ac­tiv­ity wasn’t shared.

“I can tell you that we’re very calmly, and con­fi­dently working through the le­git­i­mate con­cerns that Li­bra has raised by bring­ing con­ver­sa­tions about the value of dig­i­tal cur­ren­cies to the fore­front,” Mr. Mar­cus said.

It is un­clear how many of the ini­tial Li­bra As­so­ci­a­tion mem­bers ul­ti­mately will com­mit to the net­work. So far, as­so­ci­a­tion mem­bers have signed non­bind­ing let­ters of in­tent, and they haven’t yet handed over the $10 mil­lion that Face­book re­quested from each mem­ber to fund the cre­ation of the dig­i­tal coin and build out the pay­ments net­work, peo­ple fa­mil­iar with the mat­ter said.

“It’s im­por­tant to un­der­stand the facts here and not any of us get out ahead of our­selves,” Visa Chief Executive Al Kelly said on the com­pany’s earn­ings con­fer­ence call in July. “No one has yet of­fi­cially joined.”

AN­DREW HARNIK THE AS­SO­CI­ATED PRESS FILE PHOTO

David Mar­cus, the Face­book executive in charge of Li­bra, en­dured two days of tongue-lash­ings from mem­bers of Congress over the sum­mer. Face­book is scram­bling to keep Li­bra on track.

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