Facebook’s dream to launch its cryptocurrency, Libra, took a major hit last Friday after payment systems giants Visa and Mastercard decided to leave the project out of regulatory and political pressure. They were the last two companies in a total of four payment processing giants (the others being PayPal and Stripe) and one eCommerce player (eBay) in the line that refused to be a part of the project very recently.
Libra is a blockchain-based digital currency that Facebook started developing in 2017. At that time, there was only one person working for the project. Now, there are 50 engineers working on the blockchain initiative. The main purpose of creating Libra is to set up a private currency system for making cross-border payments much easier.
It is only in June this year when Facebook revealed that the first version of Libra will be released in 2020. Although developed by the social media giant, it has given the control and management of the cryptocurrency to an independent entity, Libra Association, which is based in Geneva, Switzerland and founded by 28 international companies.
The founding companies of the Libra Association include the recently left five payment processing giants as well as players from technology (such as Spotify and Uber), telecommunication (such as Vodafone), eCommerce (such as eBay), venture capital, and non-profits spaces.
At the time of initiating the Libra Association, each of the founding members injected a minimum of US$10 million in order to create an asset base for the cryptocurrency. The main purpose behind establishing the Libra Association is to create a ‘de facto central bank’ for Libra unlike decentralised digital currencies such as Bitcoin that uses permission-less blockchains.
Despite all the efforts for obtaining a green signal for the project, Libra faced several criticisms from financial regulators and Congressmen due to privacy and security issues, and concerns over unauthorised monetary transactions and money laundering as witnessed with other cryptocurrencies such as Bitcoin and Ether.
Recently, U.S. President Donald Trump tweeted that Facebook should come under U.S. banking laws if it needs to push the Libra project forward. Last week, the Bank of England mentioned that in order to pass the digital currency in Britain Facebook needs to conform to the central bank’s highest standards.
The departure of Visa and Mastercard is too disappointing when there is only a day left for the first official meeting of the Libra Council on October 14 in Geneva. Their participation in the association had made the Libra project legitimate.
However, Facebook has not given up on the project yet. The company CEO, Mark Zuckerberg, will appear in front of Congress on October 23 to testify on the project. The Libra project in-charge, David Marcus, is also very optimistic about getting the regulatory approval for the project and winning back the participants of the association.