Facebook Scrambles to Keep Libra on Track as Partners Waver -- Update
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
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
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
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
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)
Copyright (c) 2019 Dow Jones & Company, Inc.
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