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Cracks Are Showing Up in the Libra Association

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Facebook Will Not Peg Libra Cryptocurrency to Yuan
Facebook Will Not Peg Libra Cryptocurrency to Yuan

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Facebook and its Libra stablecoin have consistently found themselves in hot water since it released its whitepaper for the digital asset back in June. Whether it is doubt from cryptocurrency insiders about what the asset represents or negative sentiments from lawmakers over the social media giant and its chequered past with privacy indiscretions, the barrage of criticism has been relentless. 

Now, recent reports seem to opine that some of the companies which initially signed up to be a part of the Libra Association (Libra’s Swiss-based governing body) have begun to develop cold feet.

Facebook is becoming radioactive

Earlier this week, several news outlets published reports with claims that the Libra Association might be in turmoil, as several key members are contemplating an exit from the group based on fears that their association with the crypto project could be bad for their reputation. 

On October 2, finance news source Bloomberg reported that financial giants VISA, PayPal, MasterCard, and Stripe are reportedly looking into walking away, thus relinquishing roles within the Association that they initially paid $10 million to get.

Citing people familiar with the matter, Bloomberg notes, “Executives at the payments companies believe Facebook oversold the extent to which regulators were comfortable with the project and are concerned about the perception that the social network hasn’t behaved responsibly in other areas.”

The Wall Street Journal also picked on this, adding in its report that MasterCard and VISA are wary of the amount of backlash that Facebook and Libra have gotten from regulators around the world. Per the report, both companies are reportedly concerned about the blowback that they could also get as a result of their work with Facebook on Libra; a situation that they would- understandably, of course- very much love to avoid. 

The pressure continues to mount

This isn’t the first time that Libra backers are seemingly threatening to quit. Back in August, the Financial Times reported that two of the Association’s founding members had held discussions on what the appropriate next steps would be for them, as the prospect of fierce regulatory pushback had begun to scare them. 

In an interview with the news medium, a partner reportedly pointed out the irony of a company that wants to be seen as compliant with regulators to be out there supporting the social media giant.

A separate partner criticized Facebook over its rollout strategy, reportedly saying, “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.”

There isn’t much to explain here. Facebook is projecting that the Libra Association could have a member count of 100 by the time the stablecoin purportedly launches next year. However, if some of the 28 existing members are already contemplating an exit and are seen openly criticizing Facebook, there wouldn’t be much of an incentive for anyone else to join. 

In addition to that, an outflow of financial partners could doom the stablecoin itself; no financial partners means that there won’t be anyone to convert the fiat into Libra and vice versa and effect transfers around the world.

The dominos just keep falling for Facebook, thus casting further doubt to the prospect of Libra even launching at all. 

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