Facebook’s Cryptocurrency Dead on Arrival? Major Ally Paypal Opts Out of Partnership with Libra
Paypal, a worldwide online payments platform, has announced the severance of its partnership with Facebook’s cryptocurrency Libra.
A statement released by the company disclosed that the decision was made in order for the company to focus more on its business and services. They maintained that they would continue to support Facebook in the future.
“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 democratize access to financial services for underserved populations. We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future.”Extract from released statement by Paypal inc.
However, Libra in a tweet expressed that they recognise the change required for such an endeavour is hard and each organisation must evaluate what they are willing to commit to see Libra’s promises actualised.
What exactly is Libra?
Libra is a digital coin by Facebook. At the moment, it is designed to allow its users to send or receive money or pay for things within the social network. Eventually, it hopes to be used for transactions outside the network.
Along with Mastercard, PayPal and several other large organisations, Facebook’s plan is to create a global currency whose balances and transaction would run on stablecoin using Calibra, a wallet that allows the buying of Libra using local currency.
Facebook has raised $280 million and hopes to raise $1 billion in total before the official launch of the digital coin in 2020.
Paypal leaving Libra just before its planned 2020 launch makes them the first to officially back out of a 28-member association and puts further strain on Libra’s goals. The company has, in recent times, suffered from negative speculations.
French finance minister Bruno Le Maire believes Libra would put the sovereignty of governments at risk. He has made it clear that France won’t support Libra in Europe.
“All these concerns around Libra are serious, So I want to say this with a lot of clarity: In these conditions, we cannot authorise the development of Libra on European soil.”Bruno Le Maire, French finance minister Reported by CNBC
Also, the chairman of the US Federal Reserve, Jerome Powell, has raised doubts about the possibility of accepting Libra, highlighting the risk of piracy among others.
“Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability, Because of a whole lot of open regulatory questions, the project “cannot go forward” without having clarification on matters concerning regulations and the law in general.”Jerome Powell, US Federal Reserve
Despite all the concerns being raised, Libra seems bent on going forward with its global currency plans. Libra revealed in a tweet that they would be hosting a first Libra Council meeting, expressing that about 1,500 entities have indicated interest to participate.
The trouble with Libra
By creating a global currency through decentralised cryptocurrencies, many governments are concerned that Libra could greatly affect their central bank’s monetary policy.
Libra as a global currency challenges the dominance of the US dollar because, with its global reach, Libra could raise its reserve fund to be worth over $2 trillion, making it a big force in financial markets. This could put the sovereignty of governments at risk.
It isn’t surprising that no single bank has so far been announced as one of the 28 founding members of the Libra project. For banks, it could indeed become a devastating problem as Facebook’s network creates the perfect platform to reach customers that even big banks like JP Morgan could ever reach.
Facebook has said that it will wait until it has regulatory approval from all quarters before launching Libra. But if opponents are citing the sovereignty of currencies and national security as major concerns, Libra could face many unprecedented stumbling blocks.
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