In June, Facebook stunned the world by announcing its intention to enter the financial sector with a new cryptocurrency and digital wallet. The firm founded a nonprofit organization called the Libra Association to develop an eponymous digital coin and an accompanying banking product called Calibra. Notably, Facebook revealed that it convinced payment companies like Mastercard, PayPal, Stripe, and Visa to join Libra’s oversight committee.
However, a new report from Bloomberg indicates that the payment processors are now experiencing cold feet. The global regulatory backlash to Libra has made the quartet wonder if aligning with Facebook will harm their operations.
When Facebook presented Libra to the world, the four large financial service companies backing it helped legitimize the product. However, evidence suggests that their support was less substantial than it initially seemed. In a July earnings call, Visa CEO Alfred F. Kelly said that his corporation’s involvement with the Libra Association depends on Facebook’s digital coin receiving regulatory approval.
According to Bloomberg, the social network told its payment processing partners that government officials would approve of its banking services. However, upon the project’s announcement, regulators in the United States, the United Kingdom, and the European Union objected to its existence. International leaders expressed concerns that the encrypted financial service would be used to facilitate terrorism and various financial crimes.
Besides, an official from China’s central bank argued that Facebook’s proposed currency would undermine global financial markets.
In response, Facebook CEO Mark Zuckerberg pledged that the Libra project wouldn’t go forward without U.S. regulatory approval. However, the executive’s statement didn’t stop European financial authorities from launching an investigation to determine if the social network’s commercial product represents an antitrust violation.
Feeling anxious about a regulatory crackdown, Mastercard, PayPal, Stripe, and Visa are reportedly reconsidering their participation in the Libra project. The firms don’t want their existing relationships with international regulators to suffer because of their attachment to the digital financial product. Conversely, Facebook is pressing its financial service backers to formalize their support for the cryptocurrency by signing its official charter.
David Marcus, head of the Libra project, told Bloomberg that he doesn’t know of any organizations that want out.
Full Speed Ahead
If Facebook’s digital coin loses the support of its payment processing partners, its legitimacy will take a significant hit. Nevertheless, Facebook might not treat their exit as an existential problem. Bloomberg discovered that, despite the widespread backlash, the social network hasn’t slowed down work on its crypto product.
Diogo Monica, co-founder of the digital asset custodian firm Anchorage, told the publication that Libra and Calibra development is currently ahead of schedule. Indeed, Monica noted that his firm has been performing test blockchain transactions in tandem with other Libra Association members.
Last month, The Burn-In reported that Facebook purchased chatbot startup Servicefriend. The firm is notable for developing an artificial intelligence program that provides natural language-based consumer support on a large scale. Accordingly, Facebook acquired it to give Calibra the resources it will need to help millions of users without greatly expanding its customer service headcount.
As such, Facebook might be treating financial regulatory concerns like it handles anxieties about its user data practices—by ignoring them. The company will undoubtedly continue to publicly pledge collaboration with officials while pursuing a different agenda in private.