- Facebook announced its Libra in June 2019 with great fanfare, but the excitement was short-lived.
- MasterCard CEO Ajay Banga recently explained why his company chose to withdraw from the Libra association.
- Facebook wants to launch its Libra project in 2020, but it’s currently facing major headwinds.
Shopify, a major online shopping platform, has just joined the Libra organization. Joining the consortium will give the program greater credence while allowing the company to increase its payment modes. Libra has experienced some major exits in the past year. Companies such as EBay, Stripe, PayPal, and Mercado Pago, a Latin online payments firm, revoked their membership just a short while after joining.
The Shopify press release reads in part as follows.
“As a member of the Libra Association, we will work collectively to build a payment network that makes money easier to access and supports merchants and consumers everywhere.”
Facebook announced its Libra in June 2019 with great fanfare, but the excitement was short-lived. This is after U.S. and European lawmakers invoked a series of statutes, including data privacy laws that the project was bound to infringe upon. Soon after, cracks began to appear, and some well-known partners got out of the association.
MasterCard CEO Points Out Major Libra Discrepancies
MasterCard CEO Ajay Banga recently explained why his company chose to withdraw from the Libra association. During an interview with the Financial Times earlier this month, he expressed disappointment with the lack of transparency on a few primary issues. He was particularly uncomfortable with the way the Libra Association handled legal matters.
The main problem was that members of the organization were not fully committed to complying with the legal provisions regarding the fight against money laundering. They also neglected to come up with an elaborate data privacy framework. Banga also explained that Libra’s anti-money laundering guidelines could be interpreted rather loosely. The handling of user data has been an area of great concern among the general public and legislators.
He additionally claimed that the project’s business model was unclear. Initially, the idea of a global currency seemed enticingly noble, but it was not clear how Libra actually wanted to make money. “If you get paid in Libra which go into Calibras, which go back into pounds to buy rice, I don’t understand how that works . . . When you don’t understand how money gets made, it gets made in ways you don’t like,” he said.
Banga said Libra’s policies had changed over time. It was initially marketed as a project aimed at enhancing financial service reach. Libra targeted people in developing countries who were unable to access financial services. With time, it became clear that the Calibra wallet would be at the epicenter of the whole project and would be controlled by Facebook. That didn’t sound right to the MasterCard boss.
People would first have to exchange the Libra cryptocurrency, which is kept in the Calibra wallet into fiat currency in order to use the money to buy goods. This did not seem practical or convenient.
Libra Project Launch Still Uncertain
Facebook wants to launch its Libra project in 2020, but it’s currently facing major headwinds. Consequently, it seems increasingly unlikely that the project will start this year as planned. Some regulators had criticized the project primarily because it could give Facebook too much power over people’s lives. Concurrently having access to users’ personal data as well as people’s funds would allow malicious entities to weaponize its platforms.