INSUBCONTINENT EXCLUSIVE:
There a strategic cost to the defection of Visa, Stripe, eBay, and more from the Facebook -led cryptocurrency Libra Association
They&re not just names dropping off a list
Each potentially made Libra more useful, ubiquitous, or reputable
Now they could become obstacles to the token launch or growth.
Fearing regulators& inquiries not just into their Libra involvement but the
rest of their businesses, these companies are pulling out at least for now
None had made precise commitments to integrating Libra into their products, and they&ve said they could still get involved later
But their exit clouds the project future and leaves Facebook to absorb more of the blowback.
Here what each of the departing Libra
Association members brought to the table and how they could spawn new challenges for the cryptocurrency:
Visa
With one of most
widely-accepted payment methods, Visa could have helped make Libra universally spendable
It also one of the most prestigious names in finance, lending deep credibility to the project
Visa departure leaves Libra looking more like tech companies barging into payments, conjuring fears of their move fast, break things
approach that could cause financial ruin if Libra runs into problems
It also could leave Libra with a much weaker presence in brick-and-mortar shops
No one will want to own a cryptocurrency that doesn''t appreciate in value and can''t be easily spent.
MasterCard
The involvement of
MasterCard alongside Visa made Libra look like the incumbents adapting to modern technologies
This made it less threatening, and gave cryptocurrency an air of inevitability
MasterCard would have also brought an even wider network of locations where Libra could one day be used for payment
Now MasterCard and Visa might actively work against Libra to prevent their payment methods being made obsolete by Libra and its elimination
of transaction fees through the blockchain
Two of Libras biggest allies could become its biggest foes.
PayPal
Facebook has repeatedly told regulators that its Calibra app plus
integrations into Messenger and WhatsApp would not be the only Libra wallets, pointing to PayPal
Facebook head of Libra David Marcus told Congress when asked about the social network outsized power to exploit Libra through its own
Calibra wallet that &you have companies like PayPal and others that will, of course, collaborate, but [also] compete with us&
Now Facebook won''t have a scaled payment method it doesn''t own to point to as a likely alternative for people who don''t want to trust
Facebook Calibra, Messenger, or WhatsApp to be their Libra wallet
The Libra Association also loses PayPal enormous network of online merchants that accept it, plus the inroad to integration into its
peer-to-peer payback app Venmo
PayPal convinced the mainstream public to trust online payments — the exact kind of trust Facebook desperately needs
The fact that Marcus was also the former president of PayPal but couldn''t keep it in the association raises concerns about the group
coalition-building prowess.
Stripe
Stripe enormous popularity with ecommerce vendors made it a valuable Libra Association member
Together with PayPal, Stripe facilitates a huge portion of online transactions outside of China
Its ease of integration made it a top pick for developers Facebook surely hoped would build atop Libra
Stripe exit destroys a critical bridge to the fintech startup ecosystem that could have helped institutionalize Libra
Now the association will have to work on engineering payment widgets from scratch without Stripe assistance, which could slow adoption if it
ever launches.
There a clear reason all these payment processors bailed
Senators Brian Schatz (D-HI) and Sherrod Brown (D-OH) wrote a letter to Visa, MasterCard, and Stripe CEOs this week explaining that&If you
take this on, you can expect a high level of scrutiny from regulators not only on Libra-related activities, but on all payment
activities.
eBay
As one of the longest standing ecommerce companies, eBay bolstered beliefs that Libra could be used to power
transactions between untrusted strangers without a costly middleman
It might have also put Libra into practice on one of the top western online marketplaces outside of Amazon
Without destinations like eBay onboard, average netizens will have fewer opportunities to be exposed to Libra potential to eliminate
transaction fees.
Mercado Pago
One of the lesser-known Libra Association members, Mercado Pago helps merchants receive payments via email or
The idea of connecting financially underserved populations has been core to Facebook pitch for why Libra should exist
The Libra Association has been light on the details of how exactly it serves this demographic, relying on the inclusion of partners like
Mercado Pago to help it figure this out later
Mercado Pago departure leaves Libra looking more like a financial power grab rather than a tool to assist the disadvantaged.
Who Left?
On
Monday, the remaining Libra Association members will meet to finalize the initial member list, elect a board, and create a charter to govern
This forced the hands of the companies above, who had their last chance to depart this week before being pulled deeper into Libra.
UNITED
STATES & JULY 16: David Marcus, head of Facebook Calibra digital wallet service, prepares to testify during the Senate Banking, Housing and
Urban Affairs Committee hearing on &Examining Facebook Proposed Digital Currency and Data Privacy Considerations& on Tuesday, July 16, 2019
(Photo By Bill Clark/CQ Roll Call)
Who left includes venture capital firms, ride sharing companies, non-profits, and cryptocurrency
They are less tied up with the status quo of payment processing, and therefore had less to lose
The blockchain-specific companies were likely hoping to piggyback on financial giants like Visa to get Libra approved and create more
legitimacy for their industry as a whole.
Pegging Libra to just the $ could soothe regulators, a16z says
These partners could help fund an
ecosystem of Libra developers, create daily use cases, spread the system in the developing world, and push for alliances between Libra and
Facebook will need to fight to keep them aboard if it wants to avoid Libra looking like a unilateral disruption of the economy.
For Libra to
actually launch, Facebook needs to make serious concessions and divert from its initial vision
Otherwise if it continues to butt heads with regulators, more members could flee
One option floated by Libra Association member Andreessen Horowitz a16z Crypto partner Chris Dixon was for Libra to be denominated in US
dollars instead of a basket of international currencies
That might lessen fears that Libra intends to compete directly with the dollar.
It become apparent that Facebook will not get its ideal
cryptocurrency out the door
This is the brand tax of 100 scandals coming back to bite it
Now the best it can hope for is to get even a watered-down version launched, prove it can actually help the underbanked, and then hope to
convince regulators it well-intentioned.
