PayPal withdraws from Libra, in blow to Facebook

0
2
Paypal headquarters

PayPal, the online payments company, said Friday it is withdrawing from the Libra Association, becoming the first major backer of Facebook’s planned cryptocurrency to exit the project amid escalating regulatory pressure.

PayPal said it remained supportive of “Libra’s aspirations” but will forgo further participation in the association that’s being established to manage the digital currency, which is set to launch next year.

PayPal declined to elaborate on why it was stepping away, though it likely would have incurred heightened scrutiny by lawmakers and regulators skeptical of Libra.

“Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities,” PayPal said.

PayPal’s withdrawal came as Libra’s backers faced a make-or-break moment to show their support for the effort, which is being spearheaded by Facebook but is set to be governed by several companies and organizations making up the Libra Association.

The currency has faced major pushback from policymakers worldwide, including President Donald Trump, Federal Reserve Chairman Jerome Powell and House Financial Services Chairwoman Maxine Waters (D-Calif.).

Lawmakers and regulators have questioned whether Libra poses serious risks to consumers and could be used in money laundering schemes to hide criminal activity. Facebook has pledged that Libra won’t launch until all U.S. regulatory concerns are addressed — a high hurdle that has raised questions about whether Libra can meet its 2020 rollout target.

The House Financial Services Committee has been in talks with Facebook about receiving testimony from Chief Operating Officer Sheryl Sandberg, but lawmakers are also pushing to hear from CEO Mark Zuckerberg. David Marcus, who is heading up Facebook’s financial services division tied to Libra, testified before the House and Senate earlier this year.

Marcus is a former president of PayPal.

The lack of public backing from the Libra Association’s initial membership has further raised doubts about the future of the digital currency. The association’s members include Visa and Mastercard, which did not immediately respond to questions about whether they would continue to be part of the group.

“If PayPal has already indicated that they’re withdrawing [from Libra], and others are still looking at their options, it’s a clear indication that something’s amiss,” said Rep. Sylvia Garcia (D-Texas), a Financial Services Committee member who wants Zuckerberg to testify.

Libra Association backers met Thursday in Washington. One member said they discussed concerns with Libra Association staff that participants in the organization weren’t hearing about its endeavors in advance, forcing them to be reactive. Members got reassurances from association staff that they would do better, the source said.

Dante Disparte, head of policy and communications for the Libra Association, said building the new payment network “is a journey, not a destination.”

The “Libra Council” will hold its first meeting in 10 days, he said, adding that the association plans to share updates including details of 1,500 entities that have indicated “enthusiastic interest” to participate.

“This journey to build a generational payment network like the Libra project is not an easy path,” he said. “We recognize that change is hard, and that each organization that started this journey will have to make its own assessment of risks and rewards of being committed to seeing through the change that Libra promises.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here