Tensions rise between Facebook and its Libra founding partners
Intensifying regulatory scrutiny of Facebook’s Libra digital currency has spooked some of the project’s early backers, with at least three privately discussing how to distance themselves from the venture.
The 28 members of the Libra Association, which include Visa, Mastercard, Uber, Spotify and the Facebook subsidiary Calibra, made a non-binding pledge to invest at least $10m in the project, which Facebook unveiled in June, with the aim of shaking up the global payments market.
However, the proposed currency has prompted a fierce backlash from global watchdogs and politicians, including an official investigation by EU antitrust officials. Two of the project’s founding backers told the FT they were concerned about the regulatory spotlight and were considering cutting ties. Another backer said they were worried about publicly supporting Libra for fear of attracting the attention of agencies who oversee their own businesses.
“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 said.
With Libra’s backers not speaking out in support of the digital currency, Facebook in turn has become exasperated by the members, according to two people close to the project.
“Facebook is tired of being the only people putting their neck out,” said one of the Libra backers.
Both Facebook and the Libra Association declined to comment.
While Libra’s founding members are generally supportive of the concept of a new currency that could broaden financial inclusion, two of the companies said they had held discussions about what the “right next steps” should be.
“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,” one of the Libra backers said.
As tension grows between Facebook and its partners, regulators are continuing to scrutinise the Libra proposals.
This week it emerged the proposed currency is subject to a probe from the EU’s antitrust regulator. Data protection officials from the US, EU, UK, Australia and Canada this month released a strongly-worded statement over privacy concerns, while the project has also raised fears over the risk of money laundering, tax evasion and disruption to wider financial stability.
The currency has also attracted US political attention. Last month, David Marcus, the head of Calibra, Facebook’s financial services subsidiary, attended two days of bruising congressional hearings in Washington, when some of Facebook’s partners were scrutinised over potential conflicts of interest.
Democratic representative Rashida Tlaib asked whether Facebook was forming a “crypto mafia” with other companies to boost each other’s businesses, citing the “close relationships” between executives at some of the partners and Facebook’s directors.
During the hearings, Mr Marcus said that the members had “joined because they can add value on the network and provide services that are relevant to the people we serve”.