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By AnnaMaria Andriotis and Peter Rudegeair
Cracks are forming in the coalition Facebook Inc. assembled to build a global cryptocurrency-based payments network.
Visa Inc., Mastercard Inc. and other key financial partners that signed on to help build and maintain the Libra payments network are reconsidering their involvement following 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 audacious attempt to convince 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 whole new way to move money across borders. The project's backers saw the 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.
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 its timetable of launching 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.
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 of Libra and have not received detailed answers, one of the people said.
It is unclear how many of the initial Libra Association members ultimately will commit to the network. So far, 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 coin and build out the 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."
Write to AnnaMaria Andriotis at firstname.lastname@example.org and Peter Rudegeair at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
October 01, 2019 18:34 ET (22:34 GMT)
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