Visa, Mastercard, Others Reconsider Involvement in Facebook's Libra Network
Visa,
Mastercard, Others Reconsider Involvement in Facebook's Libra Network
Some
of Libra’s backers decline Facebook’s requests to publicly support the project
Facebook
is summoning policy executives from Libra’s more than two dozen backers to a
meeting in Washington on Thursday.
By AnnaMaria Andriotis and Peter Rudegeair Updated
Oct. 2, 2019 6:28 am ET
Cracks are forming in the coalition Facebook Inc. assembled to build a global
cryptocurrency-based payments network.
Visa Inc., Mastercard Inc. and
other financial partners that signed on to help build and maintain the Libra
payments network are reconsidering their involvement following a backlash from U.S. and European government officials,
according to people familiar with the matter. Wary of attracting regulatory
scrutiny, executives of some of Libra’s backers have declined Facebook’s
requests to publicly support the project, the people said.
Their reluctance has Facebook scrambling to keep Libra on track.
Policy executives from Libra’s more than two dozen backers—a group called the
Libra Association—have been summoned to a meeting in Washington, D.C., on
Thursday, according to people familiar with the matter.
On Oct. 14, representatives from the
companies are slated to meet in Geneva to review a charter for the Libra
Association and appoint a board of directors, according to a memo reviewed by
The Wall Street Journal.
Major defections could imperil Libra, Facebook’s attempt to
persuade consumers to swap their national currencies for a digital coin that
could be used to pay for goods and services on the internet. Without a network
of financial partners that could help transfer currencies into Libra and global
retailers to accept it as a form of payment, Libra’s reach would be limited.
When it unveiled the project in June, Facebook said Libra could
change the entire financial system, giving consumers a new way to move money
across borders. The project’s backers saw the payments-network effort as a
long-shot way to profit on Facebook’s 2.4 billion monthly active users.
After watching popular social-media company Tencent
Holdings Ltd. come to dominate the
market for Chinese digital payments with WeChat Pay, some payments companies
agreed to take part in Libra to avoid missing out on the next big thing.
Facebook, which worked in secret for
more than a year to develop Libra, has broad ambitions for the project as part
of a shift away from its nearly complete reliance on targeted advertising.
Facebook Chief Executive Mark Zuckerberg is steering the social-media company
to more private and encrypted communications, and Libra could offer a means of
providing financial services through those channels.
In announcing the project in June, the company said it hoped to
provide basic financial services to people around the world who lack bank accounts and to
save some of the $25 billion “lost by migrants every year through remittance
fees.”.
Some analysts have been bullish that Libra could help Facebook
diversify its revenue base and potentially transform the digital consumer
economy over the long term.
Yet government officials and central bankers were quick to
criticize the project, citing concerns about how the network would protect
users’ privacy and prevent criminals from using it to launder money.
David Marcus, the Facebook executive in charge of the project,
endured two days of tongue-lashings from members of Congress over
the summer for the lack of details about how the new cryptocurrency would work
as well as the company’s past missteps on data privacy. Federal Reserve
Chairman Jerome Powell told legislators he had “serious concerns” about Libra
and the company’s timetable of launching it next year.
Privately, U.S. regulators have leaned on Libra’s backers. The
Treasury Department sent letters to companies including Visa, Mastercard, PayPal Holdings Inc. and Stripe Inc. asking for a complete
overview of their money-laundering compliance programs and how Libra will fit
into them, people familiar with the matter said. by Facebook’s Libra
Cryptocurrency. Here's Why
Dante Disparte, head of policy and
communications at the Libra Association, said in an email that the group has
held regular meetings with regulators and policy makers to discuss conforming
to anti-money-laundering laws and preventing terrorism financing.
Libra Association members, meanwhile, have been pressing
Facebook for more information. They have asked Mr. Marcus and other Facebook
executives how illegal activities such as money laundering and terrorist
financing would be kept off Libra and haven’t received detailed answers, one of
the people said.
Mr. Marcus said on Twitter on
Tuesday evening that it was “categorically untrue” that detailed information
about how to protect the Libra network from illegal activity wasn’t shared.
“I can tell you that we’re very calmly, and confidently working
through the legitimate concerns that Libra has raised by bringing conversations
about the value of digital currencies to the forefront,” Mr. Marcus said.
It is unclear how many of the initial Libra Association members
ultimately will commit to the network. So far, association members have signed
nonbinding letters of intent, and they haven’t yet handed over the $10 million
that Facebook requested from each member to fund the creation of the digital
coin and build out the payments network, people familiar with the matter said.
“It’s important to understand the facts here and not any of us
get out ahead of ourselves,” Visa Chief Executive Al Kelly said on the
company’s earnings conference call in July. “No one has yet officially joined.”
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