When Facebook announced earlier this year that it is creating a new cryptocurrency and had secured the backing of many major companies as investors, regulators around the world went crazy. Officials from the ECB, the Federal Reserve, and even Congressmen called on Facebook to halt development until the issue had been fully vetted, and approved, by governments and central banks where the coin would be available.
Since Facebook was in the midst of a global privacy backlash, the company agreed to further study on the cryptocurrency idea and it faded from view, even though it was slated to go live in June 2020. Now it’s back, but for the wrong reasons.
After receiving a threatening letter from a pair of U.S. Senators, several of the major backers, who were supposed to kick in $10 million apiece and share in the profits, are washing their hands of it. Mastercard and Visa abandoned the Geneva-based Libra Association on Friday, as did eBay, fintech startup Stripe and payments company Mercado Pago.
Last week Senators Brian Schatz (D-HI) and Sherrod Brown (D-OH) sent separate letters to several firms involved with Libra and demanded that they reconsider the project. The letters spelled out concerns with the digital money, but also included a very explicit threat.
In part, the letter read:
If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities.
The blatant threat is reminiscent of the mafia notion of giving someone a deal they can’t refuse. If companies support Libra, the Senators will make sure they regret it be tearing apart the rest of their businesses.
PayPal started the Libra Association exodus this month, leaving Facebook without the backing of any major payments firms for the project, due for launch by June 2020.
Libra said this month it would give details after a meeting scheduled for today in Geneva of the 1,500 “entities” that have indicated “enthusiastic interest” to take part in the project.
France last month pledged to block Libra from operating in Europe, with the Bank of England laying out high hurdles it must meet before its launch. U.S. Federal Reserve Chairman Jerome Powell has also suggested the project could not advance before concerns were met.