Amid security concerns raised by authorities, Facebook’s Libra Association has reportedly started crashing down as it has lost a quarter of its members.
The crypto-currency project, first announced officially back in June, originally consisted of 28 founding members, including well known players such as Paypal, Mastercard, Spotify, Uber, Vodafone, etc. This body collectively formed the Libra Association, set in place to supervise the workings of the project and the crypto-currency itself. The assembled team was made up of specialists from different areas like payments, online marketplaces, blockchain, telecommunications, etc.
Founding members abandoning the project
Out of the initial 28 members, only 21 now remain, as 7 core members have taken turns to pull out of the venture over the past 2 weeks.
It all started with Paypal Holdings Inc. that was the first to leave Libra Association on October 4, 2019.
Then, on Friday, 4 founding members left simultaneously. This included EBAY Inc., VISA Inc., Mastercard, and Stripe Inc. All corporations, excluding Stripe, acknowledged the potential benefits of the venture but favored focusing on improving their own companies. Stripe Inc, however, expressed willingness to join the project at a later stage.
Mercado Libre, an Argentinian e-commerce site also reportedly abandoned the project.
The last to leave was the travel agency Booking Holdings Inc. on Monday. However, they are yet to state their reasons.
What is Facebook Libra?
Libra is Facebook’s attempt at rivalling Bitcoin. In other words, it is Facebook’s advance into the crypto-currency market.
In the simplest of terms, cryptocurrency refers to a digital currency. To ensure security, this currency is crypto-graphed, i.e., converted to an undecipherable form. It was designed to carry out secure digital transactions of a digital model of cash.
While deriving its basic framework from this principle, Libra will differ majorly from other crypto-currencies in one key aspect. Most crypto-currencies are decentralized, meaning no central authority regulates its value and flow. However, this makes such currencies unstable. Facebook’s goal is to create a stable crypto-coin, and, thus, it will be opting for a centralized variant.
This simply means the cryptocoin’s value will be pegged against several monetary assets low in volatility or less liable to change.
Scrutiny from Regulatory Bodies
Facebook has been under strict surveillance this past year or so due to multiple antitrust allegations against it. These mainly include but aren’t restricted to privacy issues, attempts at dodging competitions through mergers with potential rivals, and politically biased content.
With such allegations against its back, the newly launched cryptocurrency Libra and related Libra Association are naturally being viewed with a critical eye by authorities.
The main concern across boards seems to be its effect on global financial stability, in case the crypto-currency catches on. It can potentially overpower a country’s official currency if used widely. The use of Libra is also expected to affect monetary policies in many regions.
Other concerns regarding Libra are consumer data privacy, money laundering and fraud, and the storage of user transaction data.
These charges provide a decent picture of the reasons why one-fourth of Libra Association’s founding members decided to pull out in such quick succession. It has also been reported that two democratic senators wrote to VISA, Mastercard, and Stripe Inc., urging the companies to leave the project, failing to do which would cause stricter regulatory scrutiny against them.
Additionally, officials in Europe expressed plans to ban Libra in parts of the continent so as to prevent it from affecting monetary policy.
Libra was initially expected to release sometime early in 2020 but has evidently faced a number of setbacks along the way. A statement earlier this year hinted to its uncertainty about the project. Despite everything, it seems the project might come to eventual fruition.