Facebook was blindsided when companies including EBay, PayPal and Visa stepped back from its Libra digital currency project, leaving its future hanging in the balance.
As one scandal after another has chipped away at trust in his company over the past three years, Facebook CEO Mark Zuckerberg has adopted a public pose of penitence, promising to take more responsibility for its power and put users’ privacy at the center of its products.
The future of the project will now depend largely on whether it can garner the required regulatory approvals, which may involve making some changes to the shape of the project, and on how the remaining backers engage with it. But even the remaining members are shaky, with some expressing reservations and monitoring for future disruptions. “The dominoes are falling,” one current member said. One criticism leveled by some is that the company should have pegged Libra to the dollar to create a more straightforward payments system, rather than an entirely new currency. Others are urging Facebook to take a more back-seat role going forward.Still, Libra’s executives have signaled that they will press ahead, despite admitting that they may well miss the target of launching by the end of 2020 and will only launch if they have approvals from U.S. and E.U. watchdogs. One person closely involved with Libra said they believed early conversations with the U.S. Treasury about the project had been “pretty good” and that some sizable banks were among the more than 1,500 organizations that have expressed interest in signing up as Libra partners in future. According to Libra, 180 of those meet the criteria for potentially becoming a member. Following its first official meeting on Monday, the association said it had appointed a five-strong board and signed off on an initial charter. “It’s nuts, it’s crazy town,” the person said of the regulatory spotlight on the project. “[But Libra has] more than doubled down on this. They are not going to bring in Mark Zuckerberg to Capitol Hill if they are going to just drop it.” © The Financial Times Ltd. 2019. All Rights Reserved. FT and Financial Times are trademarks of the Financial Times Ltd. Not to be redistributed, copied or modified in any way.Facebook founder Mark Zuckerberg says in a New Year’s resolution note that he intends to “study the positive and negative aspects” of cryptocurrencies.Facebook establishes a division to “explore how to best leverage blockchain” technology across the platform. David Marcus, the former president of PayPal and head of Facebook Messenger, is announced as leader of the team.Facebook announces plans for a new global digital currency called Libra, backed by 27 other “partners,” including payments companies, ecommerce groups and venture capital companies.The plan draws immediate scrutiny from global regulators, central bankers and politicians, such as the G-7 and President Trump. They cite money laundering and terrorism financing concerns, as well as the risks it could pose to wider financial stability.Marcus faces two days of bruising hearings in Capitol Hill from hostile politicians, who warn that Facebook should not be trusted to run a digital currency following its recent data privacy scandals.The European Commission launches an antitrust investigation into Libra, amid concerns that the currency could unfairly disadvantage rivals.Zuckerberg is called to testify on the project before Congress later this month. Meanwhile, two Democratic members of the Senate banking committee write to Visa, Mastercard and Stripe warning that their existing businesses will come under increased regulatory scrutiny if they continue their involvement.
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