Why each Libra members mutiny hurts Facebook

Theres a strategic cost to the defection of Visa, Stripe, eBay, and more from the Facebook-led cryptocurrency Libra Association. Theyre not just names dropping off a list. Each potentially made Libra more useful, ubiquitous, or reputable. Now they could become obstacles to the tokens launch or growth.
Fearing regulators inquiries not just into their Libra involvement but the rest of their businesses, these companies are pulling out at least for now. None had made precise commitments to integrating Libra into their products, and theyve said they could still get involved later. But their exit clouds the projects future and leaves Facebook to absorb more of the blowback.
Why each Libra members mutiny hurts Facebook

Heres what each of the departing Libra Association members brought to the table and how they could spawn new challenges for the cryptocurrency:


With one of most widely-accepted payment methods, Visa could have helped make Libra universally spendable. Its also one of the most prestigious names in finance, lending deep credibility to the project. Visas departure leaves Libra looking more like tech companies barging into payments, conjuring fears of their move fast, break things approach that could cause financial ruin if Libra runs into problems. It also could leave Libra with a much weaker presence in brick-and-mortar shops. No one will want to own a cryptocurrency that doesnt appreciate in value and cant be easily spent.
Why each Libra members mutiny hurts Facebook


The involvement of MasterCard alongside Visa made Libra look like the incumbents adapting to modern technologies. This made it less threatening, and gave cryptocurrency an air of inevitability. MasterCard would have also brought an even wider network of locations where Libra could one day be used for payment. Now MasterCard and Visa might actively work against Libra to prevent their payment methods being made obsolete by Libra and its elimination of transaction fees through the blockchain. Two of Libras biggest allies could become its biggest foes.


Facebook has repeatedly told regulators that its Calibra app plus integrations into Messenger and WhatsApp would not be the only Libra wallets, pointing to PayPal . Facebooks head of Libra David Marcus told Congress when asked about the social networks outsized power to exploit Libra through its own Calibra wallet that you have companies like PayPal and others that will, of course, collaborate, but [also] compete with us. Now Facebook wont have a scaled payment method it doesnt own to point to as a likely alternative for people who dont want to trust Facebooks Calibra, Messenger, or WhatsApp to be their Libra wallet. The Libra Association also loses PayPals enormous network of online merchants that accept it, plus the inroad to integration into its peer-to-peer payback app Venmo. PayPal convinced the mainstream public to trust online payments the exact kind of trust Facebook desperately needs. The fact that Marcus was also the former president of PayPal but couldnt keep it in the association raises concerns about the groups coalition-building prowess.


Stripes enormous popularity with ecommerce vendors made it a valuable Libra Association member. Together with PayPal, Stripe facilitates a huge portion of online transactions outside of China. Its ease of integration made it a top pick for developers Facebook surely hoped would build atop Libra. Stripes exit destroys a critical bridge to the fintech startup ecosystem that could have helped institutionalize Libra. Now the association will have to work on engineering payment widgets from scratch without Stripes assistance, which could slow adoption if it ever launches.
Theres a clear reason all these payment processors bailed. Senators Brian Schatz (D-HI) and Sherrod Brown (D-OH) wrote a letter to Visa, MasterCard, and Stripes CEOs this week explaining thatIf you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related activities, but on all payment activities.
Why each Libra members mutiny hurts Facebook


As one of the longest standing ecommerce companies, eBay bolstered beliefs that Libra could be used to power transactions between untrusted strangers without a costly middleman. It might have also put Libra into practice on one of the top western online marketplaces outside of Amazon. Without destinations like eBay onboard, average netizens will have fewer opportunities to be exposed to Libras potential to eliminate transaction fees.

Mercado Pago

One of the lesser-known Libra Association members, Mercado Pago helps merchants receive payments via email or in installments. The idea of connecting financially underserved populations has been core to Facebooks pitch for why Libra should exist. The Libra Association has been light on the details of how exactly it serves this demographic, relying on the inclusion of partners like Mercado Pago to help it figure this out later. Mercado Pagos departure leaves Libra looking more like a financial power grab rather than a tool to assist the disadvantaged.

Whos Left?

On Monday, the remaining Libra Association members will meet to finalize the initial member list, elect a board, and create a charter to govern the project. This forced the hands of the companies above, who had their last chance to depart this week before being pulled deeper into Libra.
Why each Libra members mutiny hurts Facebook
UNITED STATES JULY 16: David Marcus, head of Facebooks Calibra digital wallet service, prepares to testify during the Senate Banking, Housing and Urban Affairs Committee hearing on Examining Facebooks Proposed Digital Currency and Data Privacy Considerations on Tuesday, July 16, 2019. (Photo By Bill Clark/CQ Roll Call)
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