Regulatory Pushback Spooks Libra Backers

Some early supporters of Facebook’s proposed cryptocurrency Libra, spooked by the intense regulatory scrutiny both national and worldwide, want to distance themselves from the project, according to a report by The Financial Times.

The Libra Association, a coalition of 28 members put together by Facebook to help bring the cryptocurrency to fruition, includes Visa, Mastercard, Uber, the subsidiary Calibra and Spotify, among others.

The members all made a non-binding promise to invest at least $10 million. Three anonymous members spoke with the FT and said they wanted to back out of the venture. 

Libra was announced in June, and it immediately saw a strong backlash from all facets of the financial community, including regulators, politicians and antitrust officials.

Two early backers said that they wanted to figure out how to end their relationship with Facebook over the scrutiny. Another early backer told the FT that they didn’t want to support Libra publicly because they were worried about the regulatory attention it could bring to their own business. 

“I think it’s going to be difficult for partners who want to be seen as in compliance [with their own regulators] to be out there supporting [Libra]” one of the founding partners told the news organization.

Facebook has reportedly become concerned about the lack of support from anyone but its own organization.

“Facebook is tired of being the only people putting their neck out,” a backer said.

That doesn’t mean that the backers think Libra is a bad idea, they just want to make sure that it’s moving in a direction that will allow it to be viable.

“Some of those conversations [about regulation] should have taken place before the launch, to understand how regulators would think about this, so there wasn’t so much pushback,” a Libra backer said.

Just this week, the EU antitrust regulator said that Libra was going to be subject to a probe. Many other organizations have voiced concerns over privacy and money laundering concerns. 

David Marcus, who heads Calibra, was in Washington recently where Libra was heavily scrutinized by politicians, and partners were called out over potential conflicts of interest.

Democrat Rashida Tlaib said that many of the executives in the coalition have close ties with each other, and worried that they could be trying to boost each others’ business. 

Marcus said all members “joined because they can add value on the network and provide services that are relevant to the people we serve.”