Some of Libra’s backers decline Facebook’s requests to publicly support the project
Facebook is summoning policy executives from Libra’s more than two dozen backers to a meeting in Washington on Thursday. Photo: fabrice coffrini/Agence France-Presse/Getty Images
The Wall Street Journal
AnnaMaria Andriotis and Peter Rudegeair
Updated Oct. 2, 2019 6:28 am ET
Visa Inc., Mastercard Inc. MA -2.47% and other financial partners that signed on to help build and maintain the Libra payments network are reconsidering their involvement following a backlash from U.S. and European government officials, according to people familiar with the matter. Wary of attracting regulatory scrutiny, executives of some of Libra’s backers have declined Facebook’s requests to publicly support the project, the people said.
Their reluctance has Facebook scrambling to keep Libra on track. Policy executives from Libra’s more than two dozen backers—a group called the Libra Association—have been summoned to a meeting in Washington, D.C., on Thursday, according to people familiar with the matter.
Facebook Scrambles to Keep Libra on Track as Partners Waver
A.M. Edition for October 2nd: Visa, Mastercard and other partners that signed on to help build and maintain the Libra payments network are reconsidering their involvement after a backlash from U.S. and European government officials. The Wall Street Journal’s Peter Rudegeair has more.
On Oct. 14, representatives from the companies are slated to meet in Geneva to review a charter for the Libra Association and appoint a board of directors, according to a memo reviewed by The Wall Street Journal.
Major defections could imperil Libra, Facebook’s attempt to persuade consumers to swap their national currencies for a digital coin that could be used to pay for goods and services on the internet. Without a network of financial partners that could help transfer currencies into Libra and global retailers to accept it as a form of payment, Libra’s reach would be limited.
When it unveiled the project in June, Facebook said Libra could change the entire financial system, giving consumers a new way to move money across borders. The project’s backers saw the payments-network effort as a long-shot way to profit on Facebook’s 2.4 billion monthly active users.
After watching popular social-media company Tencent Holdings Ltd. come to dominate the market for Chinese digital payments with WeChat Pay, some payments companies agreed to take part in Libra to avoid missing out on the next big thing.
Facebook’s David Marcus testifies about Libra at a Senate committee hearing in July.
Facebook, which worked in secret for more than a year to develop Libra, has broad ambitions for the project as part of a shift away from its nearly complete reliance on targeted advertising. Facebook Chief Executive Mark Zuckerberg is steering the social-media company to more private and encrypted communications, and Libra could offer a means of providing financial services through those channels.
In announcing the project in June, the company said it hoped to provide basic financial services to people around the world who lack bank accounts and to save some of the $25 billion “lost by migrants every year through remittance fees.”
Some analysts have been bullish that Libra could help Facebook diversify its revenue base and potentially transform the digital consumer economy over the long term.
Yet government officials and central bankers were quick to criticize the project, citing concerns about how the network would protect users’ privacy and prevent criminals from using it to launder money.
David Marcus, the Facebook executive in charge of the project, endured two days of tongue-lashings from members of Congress over the summer for the lack of details about how the new cryptocurrency would work as well as the company’s past missteps on data privacy. Federal Reserve Chairman Jerome Powell told legislators he had “serious concerns” about Libra and the company’s timetable of launching it next year.
Privately, U.S. regulators have leaned on Libra’s backers. The Treasury Department sent letters to companies including Visa, Mastercard, PayPal Holdings Inc. PYPL -2.43% and Stripe Inc. asking for a complete overview of their money-laundering compliance programs and how Libra will fit into them, people familiar with the matter said.
Dante Disparte, head of policy and communications at the Libra Association, said in an email that the group has held regular meetings with regulators and policy makers to discuss conforming to anti-money-laundering laws and preventing terrorism financing.
Libra Association members, meanwhile, have been pressing Facebook for more information. They have asked Mr. Marcus and other Facebook executives how illegal activities such as money laundering and terrorist financing would be kept off Libra and haven’t received detailed answers, one of the people said.
Mr. Marcus said on Twitter on Tuesday evening that it was “categorically untrue” that detailed information about how to protect the Libra network from illegal activity wasn’t shared.
“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,” Mr. Marcus said.
It is unclear how many of the initial Libra Association members ultimately will commit to the network. So far, association members have signed nonbinding letters of intent, and they haven’t yet handed over the $10 million that Facebook requested from each member to fund the creation of the digital coin and build out the payments network, people familiar with the matter said.
“It’s important to understand the facts here and not any of us get out ahead of ourselves,” Visa Chief Executive Al Kelly said on the company’s earnings conference call in July. “No one has yet officially joined.”