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Friday, October 30, 2020

Payment Giants VISA and MasterCard Pulls Out of Facebook Cryptocurrency

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In June 2019, Facebook announced the creation of the Libra cryptocurrency and the Calibra digital wallet on its platform, intending to make financial transactions around the world more accessible.

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However, ever since the announcement, regulators were quick to put the Libra currency firmly under the microscope. While Germany and France have argued that a ban should be placed on Libra in the European Union, Central banks, the UK, US, and EU regulators have spent time seeking more information about the stability and privacy implications of the currency.

eBay and Stripe have now joined PayPal in pulling out of their partnership with facebook in the creation of the company’s cryptocurrency, Libra. The new development was confirmed in separate statements by both companies to the Financial Times. Payment giants Visa and MasterCard have also withdrawn from the Libra association, leaving facebook to carry on without them.

In the statement by eBay, the company stated that “We highly respect the vision of the Libra Association; however, eBay has decided 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.”

While in a statement to the Financial times by Stripe, the company mentioned that

“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.”

This statement may signal a possible collaboration in the future, but it is not the best news for the social network company at the moment.

Soon after eBay and Stripe announced they were pulling their support from the Libra Association (Libra association is the non-profit specifically created to oversee the Libra cryptocurrency), Visa and Mastercard joined in the abandonment. In light of the new reality of things, the Libra Association is scheduled to hold its first board meeting on the 14th of October 2019.

After the withdrawal of support by the companies as mentioned above, the “founding members” who remain a part of the Libra association in the meantime are Lyft, Spotify, and Uber.

Dante Disparte, who is the Libra Association’s policy and communication chief in a statement to CNBC said,

“We are focused on moving forward and continuing to build a strong association of some of the world’s leading enterprises, social impact organizations and other stakeholders to achieve a safe, transparent, and consumer-friendly implementation of a global payment system that breaks down financial barriers for billions of people. We looked forward to the inaugural Libra Association Council meeting in just three days and announced the initial members of the Libra Association.”

Meanwhile, later this month, Facebook CEO Mark Zuckerberg is expected to testify before the Financial Services Committee about the Libra cryptocurrency. In July 2019, Democratic members of the committee had drafted legislation to ban Facebook and other tech giants from launching their own cryptocurrencies.

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Meanwhile, at exactly (6:18 PM ET), the Libra exec David Marcus had tweeted about the departure of Visa and Mastercard, thanking both companies for “sticking it out until the 11th hour.” Marcus suggested these departures are only temporary until facebook can achieve “regulatory clarity” and went further to encourage the public to “stay tuned for more very soon.

The moves made by Visa and MasterCard was first reported in the Financial Times, after the withdrawal of PayPal, which was announced last week.

These withdrawals represent a considerable loss to the social network’s dreams and efforts to launch what it pictures as a global currency to make financial transactions seamless around the world.

Facebook chief executive Mark Zuckerberg is expected to discuss Libra and its planned roll-out during his appearance before the House Committee on Financial Services on the 23rd of October.

Mercado Pago, which is a payments firm currently serving mostly Latin America, has also pulled out of the Libra Association. This means that out of the six payments-related firms that were first involved in the Libra cryptocurrency, just one, PayU, is yet to pull out.

A spokesperson representing Visa mentioned that: “We will continue to evaluate, and our ultimate decision will be determined by several factors, including the Association’s ability to fully satisfy all requisite regulatory expectations.”

The Libra Association, said of the departing these firms: “We appreciate their support for the goals and mission of the Libra project. Although the makeup of the Association members may grow and change over time, the design principle of Libra’s governance and technology, along with the open nature of this project ensures the Libra payment network will remain resilient.”

Adding that, “We look forward to the inaugural Libra Association Council meeting in just three days and announcing the initial members of the Libra Association.”

In a tweet by facebook’s executive in charge of its Libra effort, David Marcus, he mentioned that losing the companies was “liberating.”

Marcus added that “I would caution against reading the fate of Libra into this update. Of course, it’s not great news in the short term, but in a way, it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.”

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PayPal said last week, that it has no plans of being a part of the Libra association effective immediately, but did not dismiss the possibility of working on the project in the nearest future – sparking a strong reaction from the Libra Association.

The Libra association said in response to PayPal’s statement that “Commitment to that mission is more important to us than anything else. We’re better off knowing about this lack of commitment now.”

We keep our fingers crossed and await the outcome of Monday’s meeting, as well as Mark’s appearance before the Financial Services Committee. Till then, we wish facebook all the best.

Please do not hesitate to leave a comment below, telling us what you think about the Libra currency. Will it change the world of financial transactions for the better, or will it lead to a rise in cases of money laundering and internet fraud? We look forward to interacting with you.

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