Since it was unveiled in June of 2019, the Libra Association has been fielding criticism from the world’s governments and central banks.
Key monetary authorities and political pundits from the United States to China have made comments about the Facebook-backed project, often criticizing the risks the stablecoin crypto asset poses to the fiat financial system and the safety of citizens.
But, according to a recent report from Bloomberg, it’s not the regulators that the Libra Association should be worried about, it’s the corporations that are founding the blockchain.
Libra Faces New Threat in Association Partners
Sources familiar with the matter told Bloomberg on Tuesday that four key members of the Libra Association — a Switzerland-based entity that will be responsible for much of the blockchain’s initial development and reserves — are getting antsy amid regulatory pressure.
Visa, Mastercard, PayPal, and Stripe are currently hesitant to sign the Association’s inaugural charter in fear of angering regulators, most of which have expressed heavy reservations about Libra, the people said.
Bloomberg’s sources added that the four payment giants’ executives believe that Facebook “oversold the extent to which regulators were comfortable with the project” and are fearful about the social media giant’s historical handling of data privacy.
A spokesperson for Stripe claimed that “nothing has changed” in regards to its involvement with Libra, while representatives of the other three companies mentioned in the Bloomberg report declined to comment.
Notably, executives of both PayPal and Visa have asserted in recent months that what they have signed with Libra is a “non-binding commitment”, which while not a hint that they’re dashing for the door, might stir up doubt.
This latest Bloomberg report comes after the Financial Times revealed that at least two Libra Association partners were looking to formally pull out of the Libra Association. It isn’t clear if the two partners mentioned in the Financial Times report are part of the abovementioned fintech giants getting skeptical about the project.
Although Libra is still a while away from launch — with Facebook CEO Mark Zuckerberg asserting that the tentative late-2020 launch date is not set in stone — Visa, Mastercard, PayPal, and Stripe may need to figure out how they should play this soon. Sources told Bloomberg that the ratification of the charter could take place as soon as October 14th, just two weeks away.
Regulatory Pressure Mounting
While regulators have yet to make any concrete plans to stem Libra just yet, presumably hence why the aforementioned firms are looking to distance themselves from the crypto project.
On Tuesday, the antitrust chief of the European Union said that Libra’s potential to spawn an alternative economy or financial system, so to speak, may present serious risks to the stability of the economy.
She is currently probing Libra for the potential for anti-competitive behavior in fears that those that don’t use the cryptocurrency will be put at a disadvantage in this new economy.
President of the ECB, Mario Draghi, has echoed these concerns, explaining to a Union parliamentarian late September that it may be wise for regulators to keep an eye on Libra in case it begins to threaten financial stability.
Across the pond, banks in this month’s Federal Advisory Council meeting made a very similar argument. They said that the rise of Libra could create what they describe as a “shadow banking” system that will exist outside of sanctioned financial markets. The fear here, it seems, is that if lots of capital and financial activity migrates off the fiat rails, banks in their current form could be put at serious risk.