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Facebook’s latest project is in the news, but for the wrong reasons. Last week, five major payment firms dropped out of the social networking giant's famed digital currency project, Libra, casting doubts on whether the company's plans to disrupt the financial services sector would materialize or not.
Visa, Mastercard, Stripe, eBay, PayPal, Mercado Pago and Booking Holdings, which had initially backed Libra, dropped out of the project, days before a Libra Association was set to meet in Geneva for the first time. The dropouts came after the project faced intense criticism from the regulators, who have raised concerns that it could be used for money laundering.
While Libra still counts heavyweights such as Uber, Spotify, and Lyft among its current supporters, most of the payment firms have bowed out, which have in turn put its future in question. As of now, Netherlands-based payments processor PayU is the only payment firm involved in the project. For a project of this magnitude, the backing of these payment firms was initially considered integral.
So, does this mean the end is near for Libra? Only time will tell. During the association’s first meeting in Geneva this week, its 21 founding members reiterated their commitment to the project by signing a charter and forming a board and an executive team.
Even though some stalwarts dropped out of the founding team, Libra seems to be enjoying support from a certain quarter. The association said that it had received interest from 1,500 entities that were interested in joining the project and out of that 180 have met the criteria required to become a part of Libra.
But before it could expand its base, Libra would have to work on sorting out the regulatory concerns that were raised. This could help it stand apart from other cryptocurrencies that are considered to be highly volatile.
“The Association is eager to pursue its mission of building a better payment network, broadening access to essential financial services, and lowering costs for billions of people who need it the most,” Libra said in a statement. “As an association, members will continue critical work with applicable regulators around the world, begin the important process of standing up a governance and policy structure and create a transparent membership criteria and admissions process that will be applied in a uniform and non-discriminatory manner to begin welcoming the first wave of new members.”
While regulators bemoan the project is not transparent, Facebook says Libra could make banking accessible to thousands who are unbanked through its network while lowering the costs. Recently, Facebook executive David Marcus warned against writing off Libra just yet.
"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," said Marcus, who used to be the president of PayPal.