Initial Backers Of Facebook’s Libra ‘Consider Pulling Out’

At least three of the initial backers of Facebook’s Libra cryptocurrency are privately discussing ways to distance themselves from the venture due to scrutiny from regulators, according to a report.

Two of the backers, who were not named, said they were concerned about the aggressive regulatory response and were considering cutting ties, while a third said it was worried about publicly supporting Libra for fear of attracting the attention of the company’s own regulatory agencies, the Financial Times reported.

The project, announced in June, was initially backed by 28 companies including Visa, Mastercard, PayPal, Uber and Spotify, with each firm agreeing to invest at least $10 million (£8m) into the project.

But the plans have attracted a forceful response from regulators and politicians, including an official antitrust inquiry by the European Commission.

Scrutiny

The response has raised concerns with the project’s backers that they could in turn be seen as pushing the regulatory envelope, one of the partners told the FT.

In turn, Facebook has become annoyed with the backers as they have refrained from speaking out in favour of Libra, so that Facebook itself is the only one “putting their neck out”, a partner said.

One backer said more discussions over regulation “should have taken place before the launch, to understand how regulators would think about this, so there wasn’t so much pushback”.

In addition to the EU probe, data protection regulators from the US, EU, UK, Australia and Canada this month outlined their concerns over privacy, while other officials have spoken of the risks of money laundering, tax evasion and broad financial disruption.

Congressional hearings

Last month David Marcus, who heads Facebook’s digital currency efforts, faced hostile US politicians in two days of Congressional hearings.

At one of the hearings, Representative Rashida Tlaib accused Facebook of forming a “crypto mafia” with other companies to mutually boost their businesses, pointing out the “close relationships” between partners’ executives and members of Facebook’s own board of directors.

Facebook’s Marcus responded that the members joined Libra “because they can add value on the network and provide services that are relevant to the people we serve”.