When the Libra project was announced on 18 in June, it seemed like another worrying new front in Facebook's mega-expansion. The company already has billions of users earning tens of billions of dollars annually. So Mark probably thought, why not have the currency itself?
Blockchain chief David Marcus has announced his plans for Libra in a detailed paper. The document indicated that some very strong financial companies had already signed up to the Libra Association in support of the currency. Facebook's vision of an international currency seemed unstoppable.
But that was then. The first company to drop the Libra project was Paypal, which retired on 4 October. Then, within a few hours of 11 October, Visa, Mastercard, Stripe and Mercado Pago were also withdrawn from the project. Then followed eBay.
This means that every major US financial corporation has abandoned the Libra Association. (The latest financial company is PayU, which has not reported anything after the developments).
Is the fact worrying?
Losing five major companies in two hours may seem like a panic, but that's not the case. Let's look at the timetable.
On October 14, all founding members will attend Geneva for the first meeting of the Libra Association. There, they will segregate the roles that partner companies will play and try to answer all the governance issues that are not mentioned in the original paper. Ultimately, this will lead to the creation of an official map containing the signatures of each member in the new agreement.
This process will include many specific commitments from the companies that make up the Libra Association - so if anyone has doubts, the best time to avoid further commitments is to not sign the new agreement.
But that also means that corporate flight is not as disastrous for the Libra project as it seems. Anyone can sign when they are willing to do so.
This group of companies had a special reason to put it on their feet. With the exception of eBay, they are all financial companies, which means they have specific regulatory requirements regarding all types of fraud, money laundering and penalties. Governments have begun to realize that Project Libra could make it difficult to oversee these requirements - and so the companies involved were exposed.
Such as they said for Senators Schatz and Brown for the three of the companies that left, "Facebook seems to want the benefits of doing business without having the responsibility of controlling itself as a financial services company."
What does this mean in practice? If the Libra currency made transactions too easy for terrorists and money laundering in general, Visa, Mastercard and others might end up being accused.
This, of course, is a scary thought for financial companies, which could disrupt their core businesses. But for other Libra Association companies, that doesn't seem to be a problem. Lyft and Uber do not face the same pressure from regulators, so there is no particular problem.
Problems with financial companies point to a central problem in the Libra project. Blockchain-backed currencies work best as a stand-alone system, but problems with conventional banking often arise. In the early days of Bitcoin, financial companies were being persecuted for failing to support regulators' claims against money laundering. Recently, US regulators have been able to impose Know Your Customer requirements on all wallet providers.
In the original paper, the Libra project delivered compliance issues to financial companies, hoping that Visa and Mastercard would be able to handle the complex compliance requirements for dollar trading. After Friday's mass flight, companies feared taking responsibility, which is likely to discourage others who were thinking of backing the project.
Whoever takes on this role will have a huge task ahead of him. It should persuade governments around the world to trust Libra at a time when Facebook's public trust is in the tartar.
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