Fragile Libra Association: Regulators are eyeing, no one pays for nodes inside

One of the biggest selling points of Facebook's grand plan for Libra's cryptocurrency is that the social media company has 27 partners, including Visa, Mastercard and Uber, all of whom are involved in the project. .

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(Libra's first partners, image source: Libra's official website )

But some of them are cautious about Libra. They participate by signing a non-binding agreement because they know they are not obligated to use or promote this digital token. Due to the sensitivity of the topic, the executives of seven companies were revealed anonymously, and if they were not satisfied with Libra's development direction, they could easily withdraw.

Libra is facing more and more challenges, and the suspicions of its partners have brought new challenges to them. Facebook executives hope that the new digital token Libra will one day become the foundation of the new online financial industry.

Due to problems with Facebook and regulators around the world, its privacy record is poor, its attitude toward corporate partners is unclear, and the legitimacy of cryptocurrencies is uncertain. Many companies are reluctant to work closely with Libra projects. Contact.

Although Libra was released only a week ago, it has already attracted close attention from Washington. Maxine Waters, chairman of the House Financial Services Committee and a Democrat from California, quickly arranged a hearing to investigate Libra and told Facebook to stop developing the project until some major issues were answered.

The House hearing will be held on July 17. It is expected that the Senate will hold a hearing on the same issue the day before.

Federal Reserve Chairman Jerome H. Powell said on Tuesday that the Fed will pay attention to it "very cautiously" given Libra's potential reach. Powell said in an event at the New York Council on Foreign Relations, "I think that from the perspective of consumer protection and regulation, our expectations will be very high."

European regulators also asked for more details on the project.

Facebook said the 27 partners announced last week will provide at least $10 million and join the association responsible for managing Libra cryptocurrencies. Libra is expected to be launched next year.

But so far these companies have not paid the corresponding funds. Executives at the seven companies said that many partners said that after Libra's way of working became clearer, they would decide whether to join the association and pay the appropriate funds.

Facebook spokesperson Elka Looks said in a statement that the company plans to "completely engage in dialogue and discussions with founding members and welcome more members to join in the coming months."

"We know it takes time and it's not easy, but as long as we work together, Libra's goals can be achieved."

Libra Association spokesperson Dante Disparte said that since the Libra Association was announced last week, it has received a large number of letters from companies interested in becoming members. He said that the Libra Association is likely to develop a list of companies that will become the first members of the association's 100 next year.

Facebook had hoped that its partners could help Libra respond to some criticism and keep the project at a distance from the social networking giant and its recent legal issues. However, this project has not yet been officially launched, and its potential partners have their own concerns.

According to two people familiar with the matter, Facebook participated in the project and approached a number of large financial companies, including Goldman Sachs, JPMorgan Chase and Fidelity. The above-mentioned insiders said that these financial companies refused to join, in part because of regulatory issues related to cryptocurrencies.

Media spokesmen at these banks declined to comment. A Fidelity spokesman said the company is continuing to observe the project.

Facebook has indeed succeeded in reaching partnerships with two major credit card companies, Visa and Everything. But according to documents obtained by The New York Times, MasterCard is one of the last companies to participate.

After Libra’s announcement, MasterCard issued a statement expressing support for the program. But the statement did not mention the name Libra, and said that MasterCard is one of the many partners to join.

Jorn Lambert, executive vice president of Digital Solutions at MasterCard, stated in the statement:

“By opening up partnerships to explore, co-create and test new concepts, we can broaden our thinking and make inclusiveness a reality faster.”

After Libra's announcement, several partners, such as MasterCard, avoided publicly expressing their full support. Four people who understand the negotiations said that Facebook asked its partners to release press releases and comment with the media about their support for Libra, but some partners declined.

Libra

(Fragile logo, image source: unsplash )

If Libra succeeds in achieving its goal of reducing the cost of digital payments, it could challenge partners like Master, Visa, Stripe and PayPal. But executives at payment companies say they don't want to stay away from Libra, but want to play a role in Libra's creation process.

Uber and Spotify partners are more enthusiastic because they may benefit from a credit card downgrade.

Coinbase, the largest cryptocurrency company in the United States, is one of Libra's first 27 partners. But according to Coinbase's two employees, when the partnership was announced within the company, several employees of the company expressed concern about the joint venture between their company and Facebook, because the company was involved in privacy issues such as cryptocurrency fans. There are bad records on it.

A Coinbase spokesman declined to comment.

Joe Lallouz, CEO of Bison Trails, another cryptocurrency company, said he was also skeptical when Facebook found him.

"My first reaction was: 'From a data privacy perspective, you have a bad record. 'Facebook's reputation for data privacy and credibility runs counter to this cryptocurrency philosophy."

But Lallouz said Facebook has indicated that it is serious about protecting user privacy, in part because it ensures that they don't have much control over the project.

Facebook executives said Libra's design was inspired by the decoupling of Bitcoin, and Libra's governance was handed over to the Libra Association. The association is expected to have 100 members, and Facebook can only vote one vote.

Lallouz said:

"They have given up control and ownership of this large-scale project."

These partners are expected to meet in the coming months to draft a charter governing the association.

Facebook’s past history of working with partners has also made them more cautious. For example, game developer Zynga faces huge revenue losses after Facebook cancels its close relationship with the company. Facebook also had a lot of tension with many publishers last year, when the company changed the algorithm behind its news feed and lowered the weight of its news coverage.

Lallouz said:

“This is a huge opportunity, but there are still many details that need to be addressed.”