- Libra was dealt another blow after Mastercard, Visa, and Stripe pulled support
- This is the second consecutive blow for Libra after Paypal left last week
- Companies have wavered amid pressure from skeptical lawmakers
- Among the obstacles for Libra have been Facebook’s abysmal record on privacy
The launch of Facebook’s Libra cryptocurrency has been dealt a blow by partners Visa and Mastercard who have backed out of a group of supporters (Stock image)
The move marks the second major blow for Libra which saw mobile payment company, Paypal, pull it’s support just last week (Stock image)
Facebook’s global digital currency called Libra suffered a major setbacks on Friday with three major backers exiting a group of companies meant to help establish the project.
EBay, Stripe, and Mastercard all announced their intention to leave which marks the second major rebuke of Libra after Paypal exited the group just last week.
‘We highly respect the vision of the Libra Association; however, eBay has made the decision to not move forward as a founding member,’ EBay said in a statement.
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The Libra Association confirmed the exits of EBay and Stripe. Mastercard’s exit was reported by the Wall Street Journal.
Facebook announced plans to launch the digital currency in June 2020 in partnership with other members of Libra Association, but the project has quickly run into trouble with skeptical regulators around the world.
The idea of Libra is to open online purchasing to millions of people who do not have access to bank accounts and reduce the cost of sending money across borders.
However, France and Germany pledged to block Libra from operating in Europe last month and backed the development of a public cryptocurrency instead.
Speaking at an OECD conference on cryptocurrencies, economy and finance minister Bruno Le Maire said Libra poses systemic financial risks and the potential for abuse of market dominance.
‘All these concerns about Libra are serious,’ he said. ‘I want to be absolutely clear: In these conditions, we cannot authorize the development of Libra on European soil.’
In a statement, Libra brushed off the mass exodus of its backers.
‘We look forward to the inaugural Libra Association Council meeting in just three days and announcing the initial members of the Libra Association,’ said Dante Disparte, head of policy and communication for the Libra Association.
Among the obstacles for Libra has been Facebook’s increasingly poor track record when it comes to privacy.
Scandals have shaken the faith of both users and regulators, the latter of which have publicly probed Facebook in multiple congressional hearings throughout the last two years.
Infamously, Facebook was behind a massive privacy breach that exposed 80 million users’ private data to political consulting firm Cambridge Analytica.
The firm attempted to use that information to influence US elections in favor of current President Donald Trump.
What is Libra?
Libra is the name of the new cryptocurrency Facebook is backing which will launch in 2020, and once in circulation will be used to buy service digitally from a user’s smartphone.
The digital currency will be stored in a digital wallet called Calibra, a standalone app on a user’s smartphone or housed within Facebook-owned services such as WhatsApp and Messenger.
It has been backed by Visa and Mastercard, as well as businesses such as Uber, Spotify and eBay meaning eventually users will be able to use the currency to pay for almost anything from their weekly shopping to an Uber journey or their Spotify subscription.
How does cryptocurrency work?
Cryptocurrencies are entirely digital forms of money which use encryption to carry out transactions securely and in many cases anonymously between two parties, which many argue make it more secure against fraud.
A key benefit of cryptocurrency is also that they are decentralised, meaning that no one entity controls the currency in contrast to how a central bank controls traditional currency.
The currencies are often built on blockchain networks, a type of digital ledger technology where all transactions are publicly verified and recorded and can not be altered – creating a chain of information and improving transparency.
How is Facebook’s different?
The two biggest issues for cryptocurrency so far, Facebook argues, have been scalability and volatility. Bitcoin, for example, has seen its price fluctuate violently in recent years as its price is linked to supply and demand.
However, Libra is to be backed by a reserve of assets – including linking it to several international currencies – from a number of central banks in order to keep its pricing stable.
The developers have said that launching it through Facebook apps will also make it immediately accessible to more than two billion people globally – the number who use a Facebook app each month.
How can users buy Libra?
When the Calibra wallet for Libra launches, those wishing to use it will need to sign up for an account using a government-issued ID.
Users will then be able to convert their money into Libra and add it to their digital wallet. Once in place, the currency can be used to pay for “everyday transactions, like buying a coffee, buying groceries, or taking public transportation”.
Facebook said initially the new payment system will support peer-to-peer payments between individuals, as well as some other ways to pay for goods and services – for example by scanning a QR code.
The system will eventually be expanded to include integration into point-of-sale systems in stores, which would allow in-store payments that would work in a similar fashion to paying with a debit or credit card or using contactless.
Because it will also be built into WhatsApp and Facebook Messenger, users will also be able to send and receive money between their friends and families just by sending them a message.
This will also work with any businesses they interact with on those platforms, Facebook said.
When will it be available?
Still being finalised in its development, the full system of Libra and its Calibra digital wallet is expected to launch next year.