Just days after digital payments giant PayPal announced that it would be exiting Facebook's Libra cryptocurrency project, a number of other major backers have now announced their resignation.
In a big blow to the social media giant's ambitious digital currency project, Visa, Mastercard, Stripe, Mercado Pago, and eBay have all announced that they would no longer be participating in the Libra Association.
The exit of the association's major backers is likely a decision that was not taken lightly. Facebook is facing a growing amount of scrutiny from global regulators for its Libra cryptocurrency and this has resulted in mounting concerns from its 28 founding members.
The timing of the exits is also not a coincidence as Facebook is scheduled to hold a meeting of all Libra participants next week. Facebook is reportedly looking for all participants to make substantial commitments moving forward, even more, substantial than the $10 million each company had to give to join the group when it was established. This meant that this week was the perfect opportunity for members who were hesitant about their roles to get out prior to any new binding commitments.
When Facebook established the Libra Association earlier this year, it announced that it had hoped to grow the group to more than 100 members by 2020. However, the exit of the major backers has dwindled the association's numbers from 28 members to 22 members. All of the association's members from the payment processing sectors have called it quits, except for the Netherlands-based firm PayU. Meanwhile, eBay is the first company from the technologies and marketplaces sector to leave the association.
The major payment processors could have proved useful for Facebook's Libra project at this time of increased scrutiny. The companies, particular Visa and Mastercard, are well versed in navigating regulatory issues pertaining to digital payments. However, the aforementioned companies also have a lot more to lose if Facebook loses its fight with regulators.
Facebook's Libra project has been continually criticized and questioned by regulators from both the United States and abroad. The most crucial issue that has been brought up is how exactly the digital currency would interact with traditional financial systems. There are also valid concerns over the possible use of the digital currency for illegal activities such as money laundering and tax evasion.
Facebook's documentation for its proposed cryptocurrency is vague at best and the company has yet to fully outline the intricate processes of how exactly the project would work. The company had only stated that it was still busy establishing a network for its digital currency to make it easier for customers to transition from traditional money to its cryptocurrency.
