The Philippine Star

Visa, Master­card join grow­ing ex­o­dus from Face­book’s Li­bra dig­i­tal cur­rency

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NEW YORK (AP) – Visa and Master­card an­nounced their de­par­ture from Face­book’s Li­bra pro­ject, a ma­jor set­back to the so­cial net­work’s plan for a world­wide dig­i­tal cur­rency.

Along with the two pay­ment gi­ants, sev­eral other large com­pa­nies have said they’re ex­it­ing Li­bra. Pay­ment pro­cess­ing com­pany Stripe is step­ping back, as well as ecom­merce com­pany eBay.

PayPal was the first of Li­bra’s big part­ners to leave, an­nounc­ing last week it would no longer be in­volved.

Face­book has faced sub­stan­tial crit­i­cism since the sum­mer when it un­veiled plans to cre­ate a sep­a­rate, pri­vate cur­rency sys­tem to al­low users to make cross-border pay­ments more eas­ily. The Li­bra As­so­ci­a­tion, based in Switzer­land, was sup­posed to give the cur­rency pro­ject a com­fort­able arm’s length dis­tance from Face­book, which wouldn’t own Li­bra.

De­spite those ef­forts, fi­nan­cial reg­u­la­tors, as well as mem­bers of Congress on both sides of the po­lit­i­cal di­vide, noted the pri­vacy is­sues raised with the so­cial net­work­ing com­pany con­trol­ling a cur­rency, while also ex­press­ing con­cern about how Li­bra could be used for money laun­der­ing like Bit­coin or Ether, other dig­i­tal cur­ren­cies. Even Pres­i­dent Don­ald Trump weighed in, tweet­ing that Face­book should be sub­ject to US bank­ing laws if the Li­bra pro­ject were to move for­ward.

All five de­par­tures come less than a week be­fore the Li­bra As­so­ci­a­tion’s of­fi­cial sign­ing cer­e­mony, which is to be held in Switzer­land.

The im­pact of Li­bra’s loss of Visa and Master­card can­not be un­der­stated. The two hold an ef­fec­tive du­op­oly over credit and debit cards in the US and Europe, and are mak­ing sub­stan­tial in­roads into de­vel­op­ing coun­tries’ pay­ment sys­tems. Their ini­tial agree­ment to join the Li­bra As­so­ci­a­tion in­stantly gave Face­book’s pro­ject le­git­i­macy. It also gave Face­book ac­cess to Visa and Master­card’s net­works, which could have given a path­way for users to con­vert tra­di­tional cur­rency into Li­bra.

“If there was any am­bi­tion to scale Li­bra very quickly and make it widely ac­cepted, they would have been able to do that through Visa, Master­card and PayPal,” said San­jay Sakhrani, a pay­ments in­dus­try an­a­lyst at the in­vest­ment bank Keefe, Bruyette & Woods. “Now it’s go­ing to be a big­ger chal­lenge.”

But both Visa and Master­card made it clear from the on­set that their in­ter­est in Li­bra was at least partly out of cu­rios­ity. It now ap­pears that the reg­u­la­tory and po­lit­i­cal pres­sure on Face­book was enough to con­vince a chunk of the orig­i­nal mem­bers to cut ties.

Visa said Fri­day that it would re-ex­am­ine a po­ten­tial mem­ber­ship in the Li­bra As­so­ci­a­tion if and when Face­book is able “to fully sat­isfy all req­ui­site reg­u­la­tory ex­pec­ta­tions” in its devel­op­ment of Li­bra – a sign that the reg­u­la­tory and po­lit­i­cal hur­dles Li­bra is fac­ing were be­com­ing too much to bear.

Face­book CEO Mark Zucker­berg is sched­uled to ap­pear in front of the House Fi­nan­cial Ser­vices Com­mit­tee later this month to dis­cuss Li­bra. That com­mit­tee is chaired by Rep. Max­ine Wa­ters, D-Cal­i­for­nia, who has been an ar­dent critic of Li­bra from its on­set.

“Visa’s con­tin­ued in­ter­est in Li­bra stems from our be­lief that well-reg­u­lated blockchain-based net­works could ex­tend the value of se­cure dig­i­tal pay­ments to a greater num­ber of peo­ple and places, par­tic­u­larly in emerg­ing and de­vel­op­ing mar­kets,” the com­pany said.

Gartner an­a­lyst Avi­vah Litan said that while the de­fec­tions are “a big set­back” for Face­book and Li­bra, they won’t kill the pro­ject.

“It’s not the end of the ef­fort, it just be­comes much more con­tentious,” she said.

With the re­cent de­par­tures, Li­bra’s mem­ber­ship now con­sists mostly of ven­ture cap­i­tal firms and non­prof­its. Uber, Spo­tify and Lyft were still listed as mem­bers on Fri­day, and none of them re­sponded to re­quests for com­ment. Voda­fone, the Europe-based telecom­mu­ni­ca­tions com­pany that has a sub­stan­tial pres­ence in Africa and has spe­cial­iza­tion in mo­bile pay­ments, was also still listed as a mem­ber.

Af­ter PayPal’s de­par­ture last week, Face­book did not wa­ver in its sup­port of Li­bra and is un­likely to do so, at least in the im­me­di­ate fu­ture. The com­pany has hired sev­eral Wash­ing­ton lob­by­ists to con­vince politi­cians and reg­u­la­tors to green light the pro­ject.

In a se­ries of tweets, Li­bra co-cre­ator David Mar­cus was not back­ing down ei­ther, de­spite Visa and Master­card’s de­par­ture.

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