Facebook’s (NASDAQ:FB) Libra cryptocurrency project is falling apart as many of the 28 original corporate backers, including Stripe, Mastercard, Visa and eBay announced Friday they will no longer back Menlo Park’s effort to build a global digital currency.
The departure of such key partners comes a week after PayPal became the first company to quit the Libra Association — a Geneva-based unregulated group of corporate members lead by Facebook.
“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,” PayPal said in a statement.
Facebook’s plans for its new security has drawn criticism from US and European officials who have warned that Libra, as a managed multi-currency collateralized debt obligation (CDO) – the same instrument that caused the 2008 financial crisis – can pose a serious risk to the global financial system.
U.S. Federal Reserve Chairman Jerome Powell has suggested that as a platform that can undercut the stabilising capacity of monetary and regulatory policies, Libra can not advance before first addressing concerns that include tax evasion, money laundering and privacy protection. European officials have also expressed their skepticism about the project’s advancement, with France and Germany pledging last month to block Facebook’s proposed security from operating in Europe.
Nonetheless, the Libra Association is moving ahead. On Monday the remaining members had their first official meeting.
“It’s not the end for Libra, but the project faces a hard path moving forward – and it’s only getting harder,” notes The Verge.
Whether Libra will blossom into a unicorn, or be Facebook’s downfall, as some analysts, including University of British Columbia professor and fintech expert Marc-David Seidel, have suggested, remains to be seen. In the meantime, Facebook CEO Mark Zuckerberg is set to testify on the security at an Oct. 23 hearing before the US Congress.
As of writing, Facebook stock is up 6 points, or 3.27%, in regular-market hours trading Tuesday. It closed to $183.28 during the previous regular session.