Faceboo's alliance for the establishment of a global payment network based on cryptocurrency has been cracked.
According to people familiar with the matter, Visa, Mastercard and other financial partners who signed a protocol to help establish and maintain the Libra payment network are rethinking their participation with strong opposition from US and European government officials. The people said that some Libra support executives rejected Facebook’s request for public support for the project, fearing that it would lead to regulatory scrutiny.
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Their reluctance to let Facebook busy getting Libra on the right track. More than 20 policy directors in Libra were called to Washington to meet, they are members of the Libra Association.
A memo seen by The Wall Street Journal shows that on October 14th, representatives of these Libra partners will meet in Geneva to review the charter of the Libra Association and appoint a board of directors.
Serious “renegade” may jeopardize the survival of Libra, and Facebook tries to convince consumers to exchange their currency for a digital currency that can be used to pay for goods and services on the Internet. If no network of financial partners can help convert these currencies into Libra and global retailers accept it as a form of payment, the scope of application of Libra will be very limited.
When Facebook announced the plan in June, Libra said that Libra could change the entire financial system and provide consumers with a new way of cross-border transfers. Proponents of the project believe that the payment network's efforts are to use Facebook's 2.4 billion active users per month as a long-term profit.
After seeing popular social media company Tencent adopting WeChat payment to dominate China's digital payment market, some payment companies agreed to join Libra to avoid missing the next big event.
In order to develop Libra, Facebook has been secretly working for more than a year. The company has a broad ambition for this project as part of its shift away from relying almost exclusively on targeted advertising.
Facebook Chief Executive Mark Zuckerberg is leading the social media company to more private and encrypted communications, and Libra may offer a way to provide financial services through these channels.
When the project was announced in June, the company said it hopes to provide basic financial services to people without bank accounts around the world and to save some of the cost of “$25 billion in annual losses due to remittance costs”.
Some analysts have been optimistic that Libra may help Facebook diversify its revenue base and may change the digital consumer economy in the long run.
However, government officials and central bank officials quickly criticized the project, saying they were worried about how the network would protect users' privacy and prevent criminals from using their money laundering.
This summer, Facebook executive David Marcus, who was in charge of the project, was reprimanded by lawmakers for two days because of the lack of details about how the new cryptocurrency will work and the company’s past Mistakes in data privacy. US Federal Reserve Chairman Jerome Powell told legislators that he was "seriously concerned" about Libra and the company's timetable for launching Libra next year.
Privately, US regulators put pressure on Libra supporters. The U.S. Treasury sends letters to companies such as Visa, Mastercard, PayPal, and Stripe Inc. People familiar with the matter said they asked for a complete overview of their money laundering compliance program and how Libra would enter the products and services of these companies.
Dante Disparte, director of policy and communications at the Libra Association, said in an e-mail that the organization regularly meets with regulators and policy makers to discuss compliance with anti-money laundering laws and the prevention of terrorist financing.
At the same time, members of the Libra Association have been pressing Facebook to ask for more information. One person familiar with the matter said that they had asked other senior executives of Marcus and Facebook how to prevent Libra from engaging in illegal activities such as money laundering and terrorist financing, but have not yet received detailed answers.
Marcus said on Twitter on Tuesday night that details about how to protect the Libra network from illegal activities were not shared, a statement that is "absolutely untrue."
“I can tell you that we have resolved the legitimate concerns about Libra very calmly and confidently, and we have mentioned the most important position about the value of digital currency.”
It is unclear how many of the original Libra members will eventually work on the network.
People familiar with the matter said that so far, members of the association have signed a non-binding letter of intent, and they have not yet provided $10 million in participation funds from each member of Facebook's requirements for the creation of digital coins and the establishment of a payment network.
Visa CEO Al Kelly said in a July earnings conference call:
“It’s important to understand the facts, and no one of us can be too hasty. No one has officially joined Libra.”