Facebook cryptocurrency project continues to lose supporters

UNITED STATES (OBSERVATORY NEWS) — Visa, Mastercard, Stripe, eBay and Mercado Pago have announced their withdrawal from Facebook’s Libra cryptocurrency project, according to Bloomberg and The Wall Street Journal. In early October, PayPal left the project.

The eBay electronic marketplace, Stripe payment company, as well as Visa and Mastercard payment systems, have left the Libra blockchain project being developed by Facebook. The companies made the decision under pressure from regulators after PayPal also refused to participate last week.

An eBay spokeswoman said the firm appreciates Libra’s aspirations, but instead of developing a joint project, it will develop a “controlled payment service” for its customers.

Visa has decided not to join the project, but will follow the development of Libra. The payment system will make the final decision on joining the association based on several factors, including Libra’s ability to comply with regulatory requirements.

Mastercard said it will focus on developing its own solutions to ensure financial accessibility around the world. “We believe that such initiatives have potential, and we will continue to monitor the efforts of Libra,” the company added.

Stripe gave a similar explanation and stated that they would follow Libra. “We will remain open for cooperation with the Libra association at a later stage,” said a Stripe spokesman.

Also, the division of a large Latin American company from the field of electronic commerce Mercado Libre announced its withdrawal. The only company in the payment industry that has not yet announced its refusal to participate in the project is the Dutch PayU.

Companies left Libra a few days before the first meeting of the association, which is due to take place in Geneva on October 14. A Libra spokesman told Bloomberg that the meeting will take place and the company will announce the first project participants.

It is expected that it will be attended by 25 remaining members, who must sign the charter of the organization and thereby confirm their intention to continue to participate in it.

For the first time, information about the intention of partners to abandon work on Libra appeared in the media in late August. According to the Financial Times, some members of the Libra Association are looking for opportunities to remove from the project. The reason for this was criticism of the regulatory authorities against the stablecoin Facebook.

Another reason for refusing to work on the project, according to media reports, was the possible negative consequences of increased attention to them from the authorities (due to the support of the cryptocurrency of the social network).

The Libra cryptocurrency, as conceived by the creators of the project, should become a means of payment in the Facebook ecosystem, which unites almost 2 and a half billion users. The cost of tokens will be provided by a special basket of financial assets, including the US dollar, euro, British pound and Japanese yen.

The creation of a cryptocurrency and a special crypto wallet will be handled by the Facebook division – Calibra. It is expected that the launch of Libra at the global level will take place in the first quarter of 2020, and testing will begin at the end of 2019. The wallet will be supported both through a separate application, and instant messengers.

In addition to Facebook, the project involves dozens of companies included in the Libra Association, which will determine the development vector of the LIbra blockchain. A number of major American corporations, including Visa, Mastercard, PayPal and Uber, said earlier that they intend to invest $ 10 million in the creation of the consortium.

Facebook is positioning itself as one of the equal participants in this project. However, experts say that due to access to data from 2.4 billion users, it is Facebook that will play a key role in the project.

Facebook’s ambitious plan to launch a new cryptocurrency attracted the attention of American and European lawmakers a day after the announcement of the project, and some politicians have already called for the suspension of the Facebook payment service.

The head of the Facebook blockchain division, David Marcus, thanked the companies that accompanied Libra up to this point, and said that he respects their decision to wait for the formation of regulatory clarity.

“I urge you not to predict the fate of Libra on this news. Of course, they are deplorable in the short term, but it is not easy to carry changes of this level,” he wrote.

Commenting on the statement of Marcus, the famous cryptographer and early Bitcoin proponent Nick Szabo wrote: “Maybe you should ask yourself why the pressure turned out to be so strong. Read a story that some of the first Bitcoin proponents knew about, for example, about the failure of e-gold. You are not they’ve studied history, because of which they incurred great costs and repeated mistakes of the past. Bitcoin works infinitely better as an exchange medium than a virtually banned non-existent product.”

Now there are no large payment companies among the members of the Libra Association, so the currency will not be able to count on them in matters of converting other currencies into Libra by consumers and conducting transactions.

The remaining members of the association are mainly representatives of venture capital, telecommunications and technology companies, as well as non-profit organizations.

They are less associated with the processing of payments and therefore less risky. Blockchain companies probably saw the benefits for themselves in a joint project with giants such as Visa, including the possibility of increasing the legitimacy of the entire industry.

After the announcement of Libra in June, the project was criticized by the authorities of many countries, including the United States, Germany and France. Earlier, some experts admitted that prospective partners may begin to exit the project, not wanting to draw the regulators’ extra attention to their core business.

The Group of Seven prepared a preliminary version of a report on global stablecoins such as Libra, which outlined the nine main risks of such tools, according to the BBC.

According to the authors of the report, global stablecoins can interfere with competition and will threaten financial stability if users lose confidence in them.

“G7 believes that not a single stablecoin project should be put into operation until the legal, regulatory and supervisory challenges and risks have the necessary answer. Finding such an answer is no guarantee of regulatory approval,” the document says.

The official presentation of the report is expected to take place during the meeting of finance ministers at the International Monetary Fund this week.

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