The Libra Association, a membership-based organization founded by Facebook’s subsidiary Calibra, started out with 28 founding members. In August this year, a report from the Financial Times claimed that up to three founding members were reconsidering their support for the project as their companies could face regulatory pressure as well.
While the rumors only remained rumors and the sources were unconfirmed, PayPal has finally announced on Friday that they have left the organization. First reported by the Financial Times last week, PayPal’s decision was seen as a real blow to the project, as the company makes one of the most influential members in the Libra Association besides Visa, Mastercard, Coinbase, and others.
Interestingly enough, PayPal has previously expressed that the company shares the same values and goals as Facebook’s Libra does. However, the company placed its support to a stop as PayPal sent an official statement concerning its current position to ABC News.
The letter reads that PayPal has made the decision to renounce its participation in the Libra Association at the moment and that it will continue to focus on the company’s existing mission and business priorities to democratize access to financial services for underserved populations.
“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.”
The move may come as a result of increasing regulatory scrutiny. Facebook’s Libra was heavily criticized by major governments recently, including France and Germany who have threatened to block the arrival of Libra on European soil. Taking a look at other continents, U.S. regulators are not too keen on releasing Libra either, as the company’s 2.3 billion users could potentially destabilize the global economy by disrupting traditional finance.
Apart from political and regulatory pressure, PayPal has previously inquired Facebook to focus on the potential of money laundering schemes, as the payment processor was considerably concerned over the aspect. Prior to PayPal’s decision, recent reports show that the social giant has failed to meet the founding member’s concerns.
Despite leaving the association, PayPal stated that it will ‘remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future.’ The global payments platform has also noted that the social giant provided PayPal with a valuable strategic partner and that they look forward to work again with Facebook.
After the announcement, Facebook has quickly made a statement concerning the turn of events. According to the head of policy and communications at Libra, Dante Disparte, it is better to ‘know now, rather than later’ about PayPal’s lack of commitment.
Two more to go?
While it is uncertain whether more members will decide to remove their support for the project, the rumors last summer claim that two more founding members thought of doing so.
PayPal is one of the most important backers out of the 28 members, and the company’s decision may likely result in less significant members to ‘crack’ under the pressure and follow PayPal’s move.
At the time of writing, there are no news or statements coming from the other founding members of the Libra Association. Nevertheless, all eyes are on Facebook now as several tech journalists have decided to scorn the social giant over PayPal’s move, claiming that the decision dealt a significant blow to the project. Sarah Frier, a tech reporter at Bloomberg, recently tweeted that the withdrawal dealt a heavy blow to the project, especially as David Marcus, who is the head of Libra, used to be the former president of PayPal.
The CEO of Digital Content Next, Jason Kint, stated that he was surprised that PayPal even showed the interest to leave the Association in the first place and that Visa and Mastercard might follow the lead. With PayPal leaving and the recently negative meeting in Switzerland, Libra is at a critical point as it is uncertain whether the stablecoin cryptocurrency will launch at all.