Credit: Jirapong Manustrong/ShutterstockFollowing increased regulatory scrutiny, as well as previous Facebook scandals, some of Facebook’s Libra cryptocurrency partners are starting to distance themselves from the social media company, according to a Financial Times (FT) report today.
Over the past two years, ever since the Cambridge Analytica scandal happened, Facebook has remained under intensive regulatory scrutiny in more than one country. This means that any company directly associated with Facebook could also cross paths with governments around the world if Facebook gets into trouble with regulators. Therefore, today's FT report about Facebook Libra partners potentially exiting the alliance doesn’t come as a huge surprise.
Currently, the Libra Association consists of 28 members, including Visa, Mastercard, PayPal, Uber, Spotify, as well as Facebook’s own subsidiary Calibra. Each member of the association has committed to investing at least $10 million for the development and promotion of the Libra currency.
Multiple governments have reacted strongly and negatively to Facebook’s Libra announcement, and some officials have even introduced bills that would preempt companies, such as Facebook, from creating a digital currency, with arguments including that such currencies could threaten those countries' sovereign currency (including the U.S. dollar).
According to FT, one backer doesn’t want to be put in the spotlight because of Libra, while another fears investigation by government agencies that oversee their business. One of the founding members of this unnamed company said:
“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].”
According to other FT sources, Facebook also seems to have grown tired of being the only one from the Libra Association publicly speaking out in favor of the developing cryptocurrency.
Another one of the Libra backers said that Facebook and the association members should have approached government officials before the Libra announcement to properly understand objections are and how to address them.
As noted by FT, Democratic representative Rashida Tlaib recently questioned whether Facebook and the Libra Association are forming some kind of “crypto-mafia,” given the tight relationships between the Libra Association executive and how they intend to support each others’ businesses.
Facebook previously said that it intends to launch the Libra digital currency in the first half of 2020. However, with the seemingly unexpected government pushback and now some partners considering withdrawing from the association, Facebook’s Libra plans may suffer a longer (if not indefinite) delay.