Visa and Mastercard drop out of the project
Paypal dropped out of the Libra project early last week. This got the ball rolling, and over the weekend 5 new partners also took themselves out of the project. That included the two world-wide card companies Visa and MasterCard. In addition, the payment company Stripe, eBay and Latin American Mercado Pago pulled-out just before the weekend.
Both Visa and Mastercard have said that they will not join the Libra Association but will continue to monitor the development of the project. Emphasis is placed on the importance of the regulatory environment around such a digital currency.
Both eBay, Stripe and Mercado Pago made similar statements. It is clear that all companies will keep the door open and re-evaluate the project when it becomes more regulatory clear.
Pressed out of the collaboration?
This is bad news for Facebook and Libra. There are no more major US payment companies left. The first official meeting of Libra Council is scheduled for today, Monday, October 14. This could be the reason why several companies made their decision last week.
In addition, a letter from two US senators was sent to several of the companies that have now resigned. Here, companies were encouraged to withdraw from Libra:
“We urge you to carefully consider how your companies will manage these risks before proceeding, given that Facebook has not yet demonstrated to Congress, financial regulators — and perhaps not even to your companies — that it is taking these risks seriously.”
Libra responds – and looks ahead
Co-founder and perhaps Libra’s foremost spokesman, David Marcus, was early to comment on the news. Through a number of tweets, he emphasized that one should be careful about judging the project because of these events. At the same time, he thanks Visa and Mastercard for enduring this long. With a humble tone, Marcus promotes the understanding that the companies have to wait until there is more regulatory clarity around Libra.
The EU will build legislation on cryptocurrency
Both Germany and France have previously stated that Libra may weaken national currencies and are concerned about Facebook’s plans. This has spread throughout the EU, which now states that Europe needs a common approach to cryptocurrency, such as Libra. This was stated by Valdis Dombrovskis in a hearing last week, where he said that he himself will come up with a proposal for new legislation.
The EU has no specific regulation of cryptocurrency. This was not seen as a major problem a short six months ago. Libra is now on the agenda of virtually all regulatory entities and the EU now sees the need for clear lines.
In addition, there have been reports that G7 countries – France, the United States, Japan, Canada, Italy, Germany, and the United Kingdom – have stablecoins and Libra on the agenda. They do not want any stablecoin-projects to be started until this has been properly addressed:
“The G7 believes that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed. Addressing such risks is not necessarily a guarantee of regulatory approval for a stablecoin arrangement ”
Regulation can be important
Regardless of whether Libra is finally implemented, they are taking on an important battle for an entire industry. Since this summer’s announcement of Libra, cryptocurrency and stablecoins have become a major theme worldwide. The consultation in both the US and Europe is being conducted, and clarity is needed regarding cryptocurrency regulation.
Clear laws and regulations for cryptocurrency can be positive in the big picture. This provides clarity on what is law, removes a lot of uncertainty, and can thus pave the way for the adoption of good projects.