Why 21 companies are staying committed to Libra
Facebook’s controversial Libra cryptocurrency project is moving ahead, undaunted by the rapid departure of five high-profile companies — mostly in payments — that will not participate at the start.
Following a meeting in Geneva on Monday evening, the Libra Association confirmed 21 members have formally signed on and formed the association’s council. The group has also appointed members to Libra's executive team.
That's less than the 28 reported initial partners, though the original partner roster announced in June was never binding. The specific roles of the founding members have not been released in detail. The companies are in distinct industries such as payments, telecommunications and venture capital.
Libra suffered a major hit to its payments component, as PayPal, Visa, Mastercard, Stripe and eBay have all declined to participate at the start. Over the weekend, Libra lost more potential founding members as Mercado Pago, the transaction arm of Latin American e-commerce company MercadoLibre, declined to support the project. And Booking Holding, which owns Priceline, Booking.com and Kayak, also bailed.
But several remaining companies have a background in transaction technology, fintech and mobile-era merchant acquiring.
The Libra association has kept Uber and Lyft as founding members, providing two companies that have large international user bases and an increasing appetite to tie financial services and incentive marketing to their core ride-sharing apps. PayU is also a founding member, providing potential ties to the diverse range of companies that it has invested in or works with. PayU has made more than $500 million in investments to build a technology stack that includes mobile payment security, cross-border payments and analytics.
PayU did not make an executive available for comment Tuesday morning, but issued a statement through its PR representative saying the mission of the Libra Association, to "enable a simple global payment system and financial infrastructure that empowers billions of people," aligns with PayU's mission of "creating a world without financial borders."
Libra’s founding members also include Andreessen Horowitz, which has invested in Stripe and TransferWise, among other fintechs. Union Square Ventures, which has invested in Dwolla, is another Libra founding member; as is Vodafone, which has supported M-Pesa and other mobile money apps in emerging markets, playing a key role in financial inclusion. Libra has made financial inclusion part of its pitch and a way to win over regulators.
The Libra Association did not return a request for comment on Tuesday morning. The association contends there are more than 1,500 entities that have expressed an interest in joining the project, with 180 that have met the preliminary criteria. The association also says its initial members will be responsible for governance and engaging with regulators, which right now is the project’s major challenge.
To mitigate the political blowback, there have to be some assurances from the board about Libra’s plan to deal with partners that have either opted out or have expressed concerns, said Marwan Forzley, CEO of Veem, a global payments network for business.
“Libra should be further distanced from Facebook and run more independently,” Forzley said, adding it should be opened to a wider set of players and use cases.
"Applications of Libra can light up the protocol and its relevance. The board should identify the key use cases believed to be key catalysts to the success of the protocol,” Forzley said.
Libra has faced international pushback from regulators, mostly over contentions the cryptocurrency will circumvent central bank-driven monetary policy. Libra has said the project’s stablecoin model, which includes a group of traditional currencies, will prevent Facebook or associated parties from creating a shadow currency.
The founding members will continue to face political scrutiny. There are hearings scheduled, including pending testimony from Facebook CEO Mark Zuckerberg before the House Financial Services Committee this month. Libra has faced bipartisan condemnation in the U.S. with politicians as varied as U.S. Rep. Maxine Waters , D-Calif., and President Trump both expressing opposition.
Outside of the U.S., the environment's not much better, as politicians in France and Germany have vowed to "stop Libra." Japan, which generally has more advanced cryptocurrency regulations, has called for an international effort among regulators to determine how to govern Libra.
Beyond pressure over central bank monetary control, Facebook also faces scrutiny over money laundering controls. Facebook made its announcement of Libra on June 18, around the same time an intergovernmental coordinating body, the Financial Action Task Force (FATF), announced updated guidelines to prevent the misuse of virtual assets for money laundering and terrorist financing.
“For whatever reason, Facebook’s announcement provided little detail about such compliance, leaving it for future development and announcement, and the absence of such detail was not well received by the regulatory community,” said Patrick Burke, who chairs the data technology and cybersecurity group at Phillips Nizer. "Libra’s adherence to the FATF guidelines is still not well understood.”