Mastercard, Visa, and other financial institutions that embroiled themselves in a coalition designed to forward Facebook's Libra cryptocurrency are reconsidering their positions.
According to the Wall Street Journal, people familiar with the matter say the response of regulators in the United States and Europe, and ensuing criticism and legislative concerns, has given banks cold feet.
Mastercard and Visa, alongside companies including Uber, eBay, Stripe, and Vodafone, are public backers of the project -- at least, for now -- and are members of the Geneva-based Libra Association, the organization created for the management of the proposed virtual asset.
Libra was first announced in June. Due to launch in 2020, Facebook has touted the proposed cryptocurrency as a payment method suitable for integration with Messenger, WhatsApp, and third-party e-commerce services that will be backed by fiat currency to prevent the turbulence often experienced in traditional crypto markets, such as through the trade of Bitcoin or Ethereum.
The social media giant has attempted to reassure regulators that the payment alternative will enjoy the "same verification and anti-fraud processes that banks and credit cards use," but despite these claims -- and perhaps considering Facebook's own lackluster reputation when it comes to privacy and security -- authorities have been less than overjoyed at the prospect of Facebook moving into the financial sector.
The WSJ says that government backlash and regulatory scrutiny has caused some of Libra's backers to decline requests made by the social media giant to publicly issue their support for the project.
The Libra Association has been summoned to a meeting in Washington on Thursday and backers will be expected to answer policymakers' questions.
The US Federal Reserve has already branded Libra a "serious concern" and a project that "cannot go forward" unless Facebook submits its plans for a full regulatory review. Last month, French authorities said they would move to block Libra unless consumer and financial concerns are addressed.
It is unsurprising that some financial institutions would consider Facebook's reach -- including over 2.4 billion platform users -- combined with a payment infrastructure as a prospect for profit and future revenue.
However, unless the social network is able to quell the concerns of regulators, there may be the risk that major financial players will withdraw their support, which has only reached a non-binding letter of intent stage.
Without the backing of these companies, Libra could finish before it has begun, or at least, its potential as a payment method will become very limited.
David Marcus, the Libra project leader at Facebook, addressed the WSJ report in a series of tweets. The executive said that "change of this magnitude is hard" and for "Libra to succeed it needs committed members, and while I have no knowledge of specific organizations plans to not step up, commitment to the mission is more important than anything else."
Marcus added that Facebook is "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."
ZDNet has reached out to Mastercard and Visa and will update if we hear back.
Previous and related coverage
- France will attempt to block Facebook's Libra cryptocurrency on European soil
- US lawmakers troubled by Facebook's Libra due to 'pattern of failing to keep consumer data private'
- Facebook's Libra cryptocurrency project branded of 'serious concern' by Federal Reserve
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