It’s been one week since Facebook unveiled its most ambitious venture yet, the Libra currency. However, a few days following the reveal, the new Facebook money has already faced roadblocks and challenges, including that from its partners.
One of Facebook’s selling points for Libra is its promise that the new digital coin is backed by an organization of multinational companies, called the Libra Association. The group includes financial powerhouses like Paypal, VISA, and Mastercard, as well as tech giants like Uber and other multisectoral corporations.
However, reports reveal that some of Facebook’s partner is already starting to have doubts regarding such an ambitious project.
According to a report by the New York Times, some of Facebook’s partners have only signed the agreement to be part of Libra Association partly because there is an out-clause that allows them to withdraw from the organization whenever they feel like the direction it is going to is something that they don’t want. They also know that they weren’t obliged to use or promote the digital token.
According to the report, at least seven of the partner companies share this sentiment.
Furthermore, many companies are hesitant to associate themselves with Libra citing that Facebook’s reputation in terms of data security is too risky, especially that controversies have been Facebook’s breakfast for the last few years.
Facebook in a white paper announcement of Libra said that the Libra Association is “an independent, not-for-profit membership organization, headquartered in Geneva, Switzerland. Switzerland has a history of global neutrality and openness to blockchain technology, and the association strives to be a neutral, international institution, hence the choice to be registered there.”
The association is designed to facilitate the operation of the Libra Blockchain; to coordinate the agreement among its stakeholders — the network’s validator nodes — in their pursuit to promote, develop, and expand the system, and to manage the reserve.
Libra Association is the governing body behind Libra, similar to how Central Banks manages the currency in their home countries.
This task seems daunting for some members of the association, and they are already starting to cast doubts – effectively scaring other companies and influencing their decisions into joining the non-profit organization.
The members of the Libra Association is comprised of “geographically distributed and diverse businesses, nonprofit and multilateral organizations, and academic institutions” which include the “Founding Members” of the organization such as:
- Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
- Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc.
- Telecommunications: Iliad, Vodafone Group
- Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
- Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
- Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking
Facebook hopes that the Libra Association can reach around 100 members by 2020, the target date for Libra to start rolling off to users.
Aside from members of the Libra Association, lawmakers and legislators have also raised concern regarding Libra as it could impact the global banking system.
European officials have expressed concern regarding Libra, citing that the system, if widely adopted, could shake the global economy and rival national banks. French Finance Minister Bruno Le Maire sent a letter to officials from the G7 and International Monetary Fund calling for a group to examine Libra’s impact on the global financial system. Le Maire said that Libra must not become a “sovereign currency,” while a German politician noted Facebook’s potential to become a “shadow bank” to the global financial system.
US Representative Maxine Waters, chair of the House Financial Services Committee, also asked Facebook to halt working on Libra until it answers questions about privacy and security.
One of the biggest blunders faced by Facebook that summoned CEO Mark Zuckerberg in Congress was the allegations that the company allowed U.K.-based firm Cambridge Analytica to use Facebook user data in attempts to sway public opinion in the 2016 elections. According to reports, Cambridge-Analytica improperly accessed 87 million Facebook users’ data. Following the highly-covered Congress testimony, Zuckerberg has promised to fix its security problems and to make sure that the same incident will not happen.