When Facebook unveiled its cryptocurrency project Libra to the world in June 2019, many were quick to eye the list of partners that had agreed to participate in the development of the blockchain network.
At the time of the launch, the so-called Libra Association — a consortium set up to develop and distribute Libra (likely to ensure Facebook wasn’t violating antitrust laws) — had nearly 30 companies signed on.
The members at the time included some massive names in technology, finance, venture capital and, of course, blockchain technology: Vodafone, Visa, Lyft, Stripe, Spotify, eBay, PayPal, Coinbase, Mastercard, and a16z were among the star-studded names that had joined hands with Facebook.
But, after months of pushback from the world’s regulators, especially those in the U.S. (Trump simultaneously bashed Bitcoin and Libra in a crazy tweet), cracks started to appear in the Libra Association.
In the span of a few weeks late in 2019, PayPal, eBay, Visa, and Mastercard — arguably some of the most important names on that roster in terms of brand recognition — all said their goodbyes to Libra.
And just recently, Vodafone, the primarily British telecom provider, revealed that it would be jumping ship.
Mastercard’s chief executive recently revealed why he decided to pull out of the crypto venture.
Why Did Mastercard Drop Out of Facebook’s Crypto Venture?
Speaking to the Financial Times in a recent interview, Mastercard CEO Ajay Banga finally revealed more about his company’s decision to renounce its partnership with Facebook for the Libra Association.
Banga revealed that at first, when he was presented with Libra’s vision, he was excited, claiming that he likes the idea of a global currency. Yet, the fintech CEO said that as the project developed, concerns over the regulatory compliance of Libra and the overall business model forced him to withdraw.
He specifically cited the risks in Libra not enforcing mandatory KYC, AML, and data management protocol, adding that the partners in the project did not put adherence to global laws into writing.
Banga continued that Libra’s model for making money made no sense, likely referencing the high barrier to entry of a purported $10 million for becoming a Libra partner and the maintenance of network nodes and servers.
Banga also discussed what he sees as flaws in Facebook’s Calibra wallet, which would be the company’s attempt at serving the Libra ecosystem:
It went from this altruistic idea into their own wallet. I’m like: ‘this doesn’t sound right’ . . . For financial inclusion, the government has got to pay you in this [currency], you’ve got to receive it as an instrument you can understand, and you have to be able to use it to buy rice and cycles. If you get paid in Libra [coin] . . . which go into Calibras, which go back into pounds to buy rice, I don’t understand how that works.
Banga is the first executive of an ex-Libra partner company to have given such an in-depth interview about why their company decided to pull out of Libra.
Libra Still Sending Central Banks Scrambling
Even though Libra’s most prominent members are dropping like flies, there’s no doubt the prospect of a corporation-backed multi-national currency launching has sent the world’s central banks scrambling.
Reuters reported last month that the former head of payments and settlements at the Bank of Japan, Hiromi Yamaoka, said the launch of Libra forced the world’s central banks to think about central bank digital currencies.
Also, legendary Bitcoin educator Andreas Antonopoulos said in a presentation last year that Libra is going to force central banks into action, citing Facebook’s two billion global users and the extent of the data they have control over, which could affect how the digital currency propagates.