PayPal has become the first company to drop out of Facebook’s Libra cryptocurrency, as the embattled project continues to face queries from regulators around the world, while also shining a light on the HUGE Value and Power in Decentralized Cryptocurrencies
Libra is technically an association backed by 28 – now 27 – multinational companies and nonprofits, although Facebook takes the lead, and a Facebook subsidiary, Calibra, is intended to be the main way consumers will interact with the project. Each of the companies involved had to pledge $10m (£8m) into a common pot to join.
PayPal did not give a reason for leaving the project. It said in a statement: “PayPal has made the decision to forgo further participation in the Libra association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations.
“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. 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 is not the only company thought to be having second thoughts about involvement. A Wall Street Journal report last week named Mastercard and Visa as companies reconsidering their position before a meeting on 14 October with representatives from the companies involved.
Since that report, Visa’s chief executive pointed out that any involvement was only provisional. Al Kelly told investors: “No one has yet officially joined. We’re in discussions and our ultimate decision to join will be determined by a number of factors, including obviously the ability of the association to satisfy all the requisite regulatory requirements.”
Libra has been under increasing scrutiny from regulators, particularly in Washington and Brussels, where the project is seen as an attempt to bypass rules on topics ranging from money laundering to tax evasion.
The French government has said it would block the development of Libra in the EU, while US regulators have suggested the financial underpinnings of the currency, which will involve pegging the value of one Libra against a basket of currencies held in reserve, could bring the project under the auspices of securities regulators.