U.S. lawmakers are piling the pressure on Libra Association members to think again about their affiliation with Facebook in its project to launch a corporate cryptocurrency next year.
The latest effort has seen Senate Democrats Sherrod Brown of Ohio and Brian Schatz of Hawaii pen a letter to three payment processing companies – Visa, Mastercard and Stripe: all members of the Libra Association – to warn them of the risks of participating in the project.
On Friday, payments firm PayPal withdrew from the project – ostensibly to focus on its existing mission to “democratize access to financial services for underserved populations”. Yet a source from the company told the Financial Times that Facebook hadn’t done enough to address regulators’ concerns over money laundering.
Letter From the Senators
Senators Brown and Schatz, already outspoken critics of the Libra project, said they had sent the letter to the three payments companies to point out that Facebook had provided insufficient details to lawmakers, regulators and members of the Libra Association about the risks of criminal activity, threats to the global financial system and the transmission of monetary policy.
The letter said:
We urge you to carefully consider how your companies will manage these risks before proceeding, given that Facebook has not yet demonstrated to Congress, financial regulators — and perhaps not even to your companies — that it is taking these risks seriously.
The letter concluded that any weaknesses in Facebook’s risk management systems would be reflected in their own – a particular concern of PayPal, according to the FT's source.
Destabilizing From Within
Thus far, government and regulatory efforts to put the squeeze on Libra have focused on criticism of the project itself and its leaders within Facebook. PayPal’s withdrawal from the Libra Association appears to have provided Senators Brown and Schatz with the opportunity to apply pressure from within the Association.
Without Mastercard, Visa and Stripe as partners Facebook might find it difficult to form an international network of financial companies willing to help. Indeed, Senators Brown and Schatz could be touching on an already-fragile relationship with the Libra Association, after the Wall Street Journal reported last week that Mastercard and Visa were already starting to get cold feet.
David Marcus, Facebook’s head of the Libra project, took to Twitter soon after the WSJ report to ease nerves – addressing, pre-emptively, the concerns of Brown and Schatz. He said:
I can tell you that we're very calmly, and confidently working through the legitimate concerns that Libra has raised by bringing conversations about the value of digital currencies to the forefront.
Felt like addressing this. 1) official 1st wave of Libra Association members will be formalized in the weeks to come; (continued) https://t.co/baZkFlGN9O
— David Marcus (@davidmarcus) October 1, 2019
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