Libra partners stampede for the exit

Visa and Mastercard are among a group of partners in Facebook’s Libra cryptocurrency venture to decide the whole thing is too risky.

It has been widely reported that internet payment platform Stripe and consumer trading site eBay have also bailed on the project, following PayPal’s decision to step away last week. The general theme of the reasons they give for pulling out is that they still like the concept, but the regulatory heat they’ve all been getting the project was unveiled is just too rich for their blood.

A couple of other factors, on top of the precedent set by PayPal, seem to have influenced the timing of the decision. The Verge reports that Visa, Mastercard and Stripe all got letters from a couple of US Senators last week, warning them of severe regulatory con sequences if they continue with Libra. In addition there’s a Libra meeting today, in which partners are supposed to formalise their commitment to the project, they were compelled to make a choice one way or the other in advance of it.

“Facebook appears to want the benefits of engaging in financial activities without the responsibility of being regulated as a financial services company,” said the most ominous part of the letters. “If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related activities, but on all payment activities.”

Having the two dominant global financial services providers pull out is obviously pretty bad news for Libra. It now faces the task of convincing them the threatened regulatory Armageddon won’t come to pass, which won’t be easy. David Marcus, one of the founders of the project, attempted damage limitation on Twitter, but all eyes will be on the outcome of today’s meeting.