PayPal has dramatically pulled out of Facebook’s Libra cryptocurrency project.
The worldwide electronic payments giant was one of the linchpins of Mark Zuckerberg’s crypto masterplan under the Libra Association – a group of 28 organisations such as eBay, Visa, Vodafone and Uber.
Facebook aims to launch Libra next year to its two billion worldwide users after announcing plans to throw its hat into the cryptocurrency ring in June under a newly-formed umbrella organisation called Calibra.
PayPal had been a founder member of the project which has been peppered with criticism from dozens of financial regulators.
In a quickly-released statement, the e-payments firm unveiled its intention to jump ship.
“PayPal has made the decision 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 democratise access to financial services for under-served populations,” a PayPal spokesman said.
“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future.
“Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”
The politely-worded announcement wasn’t met with equal graciousness. Instead a response from the Libra Association was particularly barbed, saying that reconfiguring the financial system to be “tilted towards people, not the institutions serving them, will be hard”.
It added: “Commitment to that mission is more important to us than anything else.
“We’re better off knowing about this lack of commitment now.”
This latest blow to Libra comes on the back of mounting criticism. Most recently, French Finance Minister Bruno Le Maire suggested that the idea of two billion people turning to Libra for online transactions would leave governments in the dark when deciding financial policy.
Le Maire issued a joint statement with Germany’s Vice Chancellor Olaf Scholz, advising the European Central Bank (ECB) to “accelerate its thinking on a public digital currency”.
Despite the withdrawal being viewed as a huge blow for Libra, some analysts are suggesting the sudden move wasn’t a surprise.
One observer – Broctagon Fintech Group CEO Don Guo – even suggested that others within the association may also be feeling nervous about Libra.
“Given the frosty reception that the currency has received from the likes of France and Germany, PayPal will undoubtedly be thinking about the possibility of regulatory scrutiny,” he said.
“How long these cold feet will last remains to be seen. Payments giants like PayPal, Mastercard and Visa seem to be waiting to see what other market players will do.
While some level of caution is sensible, avoiding any risk whatsoever could have a serious opportunity cost.
“Across the globe, new digital payment systems like WeChat Pay are taking off, and with Facebook and WhatsApp’s global community, Libra has the potential to take this to the next level by creating a bigger, more global version that could unite the world’s payment systems.”
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.