PayPal is on the verge of quitting Facebook’s Libra project after having pulled out of a key meeting in Washington on Thursday.
All 28 backers of Facebook’s plan for a new global digital currency were due to gather to discuss how Libra would tackle increasing opposition from regulators, but people familiar with the event said PayPal had not been present — the only one not to show.
A decision by the payments group to quit Libra would be a big blow for the project, which is being steered by David Marcus, a Facebook executive who was previously PayPal’s president.
One person close to PayPal said the company was concerned that Facebook has not done enough to address the backlash against the project, especially over money-laundering concerns.
“It doesn’t seem that there was a lot of pre-work done with regulators,” the person said. “[Payments] companies don’t want that [regulatory scrutiny] to bleed into their businesses.”
The person said PayPal was unlikely to sign up initially but may rejoin the project at a later date. The company declined to comment.
We recognise that change is hard, and that each organisation that started this journey will have to make its own assessment of risks and rewards of being committed to seeing through the change that Libra promises
Other members of what Facebook has dubbed the Libra Association, which have each pledged $10m to participate, have recently voiced their concerns about the project, which aims to shake up the global payments market and make it nearly free for users to send each other money.
They have yet to hand over any of the $10m. A meeting has been scheduled in Geneva for mid-October when they would formalise their participation.
According to people familiar with the project, Libra’s backers in the payments sector, which include Visa, Mastercard and Stripe, have been particularly nervous about the regulatory attention, which includes an official investigation by EU antitrust officials. The companies did not respond to requests for comment.
Dante Disparte, head of policy and communications for the Libra Association, said: “This journey to build a generational payment network like the Libra project is not an easy path. We recognise that change is hard, and that each organisation that started this journey will have to make its own assessment of risks and rewards of being committed to seeing through the change that Libra promises.” The spokesperson added that “1,500 entities” had indicated they would participate in Libra.
Speaking in Brussels on Thursday, Randal Quarles, vice-chair for supervision at the Federal Reserve, warned again about the risk digital currencies pose to the financial system in general.
“Although there is a small risk to financial stability today,” he said, “there is no doubt the potential scale of stablecoins and other cryptoassets yet to emerge may pose regulatory challenges.”
His comments follow similar warnings from Fed chair Jay Powell and other central bankers including Mark Carney, the governor of the Bank of England.
Additional reporting by Brendan Greeley
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