Visa, Mastercard and other key financial partners that have agreed to help build and maintain Facebook’s Libra payments network are having second thoughts about being involved with the social media company's proposed digital currency.
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This follows backlash from U.S. and European government officials, people familiar with the matter told the Wall Street Journal. These sources also said that some of Libra’s backers are fearful of attracting regulatory scrutiny and have declined Facebook’s pleas to voice their support of the project in public.
"We basically put out this big idea for enabling through our networks, through WhatsApp and Messenger, the ability for people to send money hopefully as easily as you can send a photo or other content across the world to different folks," Facebook CEO Mark Zuckerberg said in leaked audio to The Verge that was released Tuesday. "But we want to work with traditional currencies. So we have a test going in India. We’re working in Mexico and a bunch of other countries to have this rolled out broadly. The hope is to get that rolled out in a lot of places with existing currencies before the end of this year."
On Monday, Sept. 9, global financial regulators questioned representatives of Libra in Basel, Switzerland. Fnality International and JPMorgan, which announced its own cryptocurrency in February, were also at the meeting, which focused on "policy and regulatory issues posed by the emergence of "stablecoin" initiatives backed by financial institutions and large technology companies," according to a statement by the Bank for International Settlements.
"The public things, I think, tend to be a little more dramatic," said Zuckerberg in the leaked audio. "But a bigger part of it is private engagement with regulators around the world, and those, I think, often are more substantive and less dramatic. And those meetings aren’t being played for the camera, but that’s where a lot of the discussions and details get hashed out on things. So this is going to be a long road. We kind of expected this — that this is what big engagement looks like."
A report released on August 23 said that some corporate backers were rethinking their involvement with the project at that time. Earlier that week, antitrust regulators in the European Union launched a probe into Libra to examine whether the payments service could hurt competition and grant an unfair advantage over rivals.
This was preceded by a bipartisan backlash to Libra in the United States, where President Trump, Fed Chairman Jerome Powell and House Financial Services Committee Chairman Maxine Waters (D-CA), were some leading officials who raised questions about Libra’s potential to harm the U.S. economy.
Back in July, Facebook faced two days of Congressional hearings, at which lawmakers from both sides of the aisle demanded that the social media giant delay introducing the offering until a long list of concerns is addressed.
David Marcus, who heads the company’s digital wallet, Calibra, routinely stressed at the hearings that the offering will be overseen by a Switzerland-headquartered consortium of companies and exist separate from Facebook’s signature platform.
"We want to work with traditional currencies. So we have a test going in India. We’re working in Mexico and a bunch of other countries to have this rolled out broadly. The hope is to get that rolled out in a lot of places with existing currencies before the end of this year."
Facebook also promised to hold off on launching Libra until regulators sign off on the product.
Those overtures were not been enough to satisfy congressional critics who have pressed the company on issues such as the steps Facebook has taken to protect consumer privacy, and whether the digital currency could impact the U.S. dollar and other currencies’ strength.