PayPal Drops Out of Facebook's Libra Payments Network
October 04 2019 - 5:43PM
Dow Jones News
By Peter Rudegeair
PayPal Holdings Inc. is withdrawing from the group of companies
Facebook Inc. assembled to launch a global cryptocurrency-based
payments network, dealing a blow to the social-media giant's
ambitions to transform financial services.
The San Jose-based payments company "made the decision to forgo
further participation" in the Libra Association, the group backing
the libra cryptocurrency, a spokesman said in an email. PayPal
remains supportive of libra's mission and will continue to discuss
how to work together in the future, the spokesman said.
PayPal's announcement comes days after The Wall Street Journal
reported that Visa Inc., Mastercard Inc., and other financial
partners that had agreed to back libra are reconsidering their
involvement following a backlash from U.S. and European government
officials.
"Each organization that started this journey will have to make
its own assessment of risks and rewards of being committed to
seeing through the change that Libra promises," said Dante
Disparte, head of policy and communications for the Libra
Association, in an email. Mr. Disparte added that 1,500 entities
have said they are interested in participating in libra.
Libra is the brainchild of David Marcus, a former PayPal
president who joined Facebook in 2014 to lead its Messenger
division. In 2018, he formed a team within the social-media company
to explore applications of blockchain, the technology that
underpins bitcoin and other cryptocurrencies.
Like PayPal, libra was envisioned to be a way to send money
between two people as well as a way to pay for goods and services
online. Unlike PayPal, libra will run not on existing payments
infrastructure but on a yet-to-be-developed blockchain network
backed by a pool of real assets and currencies.
The number of people that use Facebook every month is around 10
times the number of people that use PayPal every year, and the
opportunity to deliver financial services to them motivated PayPal
to sign on to libra early. PayPal also powers payments on
Facebook's existing platforms, including a new in-app shopping
offering announced in March; libra was seen as a way to further
cement ties between the two companies.
"We believe that our more than 20 years of payments expertise
can not only contribute value to the Libra Association, but it also
gives us the opportunity to work with and learn from other leading
organizations," PayPal Chief Executive Dan Schulman wrote in a blog
post in June. The post has since been deleted.
Lawmakers and regulators in the U.S. and Europe were quick to
criticize libra after it was unveiled in June, citing concerns
about how Facebook and other companies involved would protect
users' privacy and stop criminals and terrorists from using it to
launder money.
This summer, PayPal was one of a number of companies that
received a letter from the U.S. Treasury Department that asked for
a complete overview of its money-laundering compliance programs and
how libra would fit into it.
Authorities have previously faulted PayPal for enabling illicit
activity. In 2015, it agreed to pay $7.7 million to settle
allegations that it violated U.S. sanctions by processing payments
for blacklisted individuals and organization. In 2017, PayPal
disclosed that it received subpoenas from the U.S. Justice
Department over its anti-money-laundering compliance program.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
October 04, 2019 17:28 ET (21:28 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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