Facebook’s Libra cryptocurrency coalition starts to crumble

Internet financial services giant PayPal is the first member of the Libra coalition to jump ship and probably won’t be the last.

When Facebook announced its audacious cryptocurrency ambitions earlier this year it derived a lot of its legitimacy from persuading a bunch of major financial services providers to formally back the project. Within days, however, regulatory authorities around the world expressed major concerns about the project and indicated they were unlikely to let it go ahead. Stories later emerged of some of the partners getting nervous about the amount of regulatory heat the project was getting.

Now this first of them has formally bailed on the whole thing, with PayPal notifying US media that it has decided to forgo further participation in the Libra Association before muttering about focusing on the day job. It also slightly hedged its position by saying it still thinks Libra is a great idea and it still wants to be friends with Facebook.

If the Libra Association’s response is anything to go by, PayPal’s hopes that Facebook won’t take this personally seem forlorn. The statement it provided to media started by opining that it takes guts to be involved in such an ambitious project and concluded by indicating that it’s pleased to be rid of any wimpy companies that can’t handle a little bit of adversity as early as possible.

That’s a good dig, but Libra should be careful what it wishes for. The coalition is a very loose one, with the members only having gone so far as to back the idea in principle, without committing to anything more substantial, so it’s very easy to bail out at this stage. Having said that, what did the participants expect when they announced their intention to create a new global currency? Of course there was going to be resistance and PayPal looks, at the very least, naïve for losing its nerve so quickly.