Friday’s news that PayPal Holdings Inc. is bailing out of Facebook Inc.’s Libra cryptocurrency project underscores the importance of an upcoming meeting of the project’s backers in Geneva, Switzerland, observers say. It has also heightened speculation about whether the project is likely to lose more of the remaining 26 companies that signed on to support Libra.
The Libra Association, which consists of these companies plus Facebook, is set to meet Oct. 14 to appoint a board of directors and discuss other business. The association, which has designated Geneva as its headquarters, now includes, with PayPal’s withdrawal, four payments companies, namely Mastercard Inc., PayU, Stripe Inc., and Visa Inc. Observers have speculated for weeks that the harsh spotlight Libra has drawn from regulators and central bankers in the United States and Europe might pressure more of the backers to walk away out of concern for their own reputations and internal operations.
Some observers now see the meeting next Monday as a crucial juncture for members who might be on the fence in their support for Libra. “This meeting is another decision point,” says Aaron McPherson, vice president for research operations at Marlborough, Mass.-based Mercator Advisory Group. “A lot depends on what happens. There’s a lot of pressure on this meeting.”
The Geneva meeting was first reported last week by The Wall Street Journal before news broke Friday that PayPal was walking away from the consortium, but an association spokesperson Monday morning confirmed to Digital Transactions News that the meeting is still set for Oct. 14. Each association member has committed a minimum of $10 million to the Libra effort, though it is unclear whether any of the companies has yet paid up.
PayPal’s decision to pull out rocked the payments world, which has been closely following the Libra effort since Facebook unveiled the project in June. The defection followed a week in which Facebook spokespeople responded to widespread speculation that support from at least some of the backers was wavering.
Critics, including lawmakers, regulators, and central bankers, have expressed concerns about Libra’s ability to fend off threats of money laundering and terrorist financing. They are also concerned about Facebook’s involvement, pointing to the social-media giant’s struggles with data privacy. “Facebook is probably not the best company to be leading this effort,” says McPherson, who says he “expects more defections” from the current roster of backers.
Other observers argue Libra would draw less regulatory scrutiny if it billed itself as a stored-value product rather than as a cryptocurrency. “The regulatory hurdle this new currency faces is significant,” says Krista Tedder, head of payments at Javelin Strategy & Research. “I believe that Libra can be sustained, but it needs to be called something other than cryptocurrency, which is regulated as an asset.”
Some technology executives also question the wisdom of a currency controlled by private companies. Apple Inc. chief executive Tim Cook told a French newspaper late last week that Apple has no plans to launch a cryptocurrency and instead in the payments realm will concentrate on its Apple Pay mobile-payment service, mobile wallet, and new Apple credit card, according to The Verge, an online news service. He also said issuing currencies is a public function.
“I really think that a currency should stay in the hands of countries,” Cook told Les Echos shortly before news about PayPal’s withdrawal from Libra came out Friday, according to The Verge. “I’m not comfortable with the idea of a private group setting up a competing currency. A private company shouldn’t be looking to gain power this way.”
—With additional reporting by Jim Daly