Technology

Facebook Libra Loses Paypal and its Credibility

Facebook scratched off

PayPal has become the first company to drop out of Facebook’s Libra Association, a cryptocurrency and related association, formed earlier this year to build global digital currency Libra, along with a chain of nearly 29 members.

PayPal’s decision comes as the embattled project continues to face queries from regulators around the world. Libra and its digital wallet Calibra were revealed by Facebook in June. PayPal made the announcement in a statement on Friday but did not specify what had prompted the decision.

“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future,” PayPal said in a statement. It added that it would be focusing on its own core businesses and forego participation in the group. With the exit of PayPal, Libra Association now has 28 members, including Uber Technologies Inc, Lyft Inc and Spotify Technologies.

The company did not cite a specific reason, saying only in a statement that it decided “to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations.”

As Facebook deals with the loss of PayPal‘s backing for its ‘cryptocurrency‘ Libra, the tech giant must now get ready to answer EU regulators’ questions about the potential risks posed by the project.

The French government has said it would block the development of Libra in the EU, while US regulators have suggested the financial underpinnings of the currency, which will involve pegging the value of one Libra against a basket of currencies held in reserve, could bring the project under the auspices of securities regulators.

The report further added that wary of attracting regulatory scrutiny, executives of some of Libra’s backers have declined Facebook’s requests to publicly support the project. Before that, in August, Brussels’ antitrust body raised concerns about Libra potentially causing competition restrictions.

The news couldn’t come at a worse time for Facebook, since Mastercard (one of its backers) is now reportedly planning to launch its own altcoin, according to a WSJ report. This move came as a shock last week, as Mastercard is one of the founding members of the Libra Association that plans to launch cryptocurrency next year.

Losing PayPal does not necessarily signal the eventual unwinding of Libra, but the company was a major financial player, alongside existing members like Mastercard and Visa, of the Libra Association. Moreover, it’s unclear if fellow Libra Association member eBay, from which PayPal was spun out in 2015, plans to continue participating.

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