When Facebook announced the Libra cryptocurrency and the associated Calibra wallet, it made a big point of how it is leveraging the infrastructure that powers Messenger and WhatsApp and the popularity of the two messaging services to provide financial services for everyone in the world. The company's ambitious project isn't even up and running and there are signs that early backers are looking to withdraw their support.
According to a report from the Financial Times, at least three members of the Libra Association are weary of the regulatory pressures that surround almost every aspect of Facebook's business. The body has a total of 28 members that include financial industry heavyweights like Mastercard, Visa, as well as Spotify and Uber -- all of which have pledged upwards of $10 million for the Libra project with the ultimate goal of disrupting the global payments market.
The social giant has drawn the attention of U.S. authorities as well as the European Commission for several reasons, the most notable example being the company's penchant for anticompetitive behavior. All acquisitions, big and small, are now under the regulators' microscope, which is concerning for some Libra members who are thinking about pulling out.
Interestingly, Facebook itself is said to have grown tired of the lack of public support from the other members of the Libra Association, who seem to express their approval of Libra as a concept but not so much as a financial service. Their main concern is that the project "raised fears over the risk of money laundering, tax evasion and disruption to wider financial stability," judging by statements from officials in the UK, US, Canada, EU, and Australia.
It's not just Trump that sees Libra as problematic. Democratic representative Rashida Tlaib described the Libra Association as a potential "crypto mafia" that has the potential to strengthen members' businesses in anticompetitive ways. Facebook has defended against that claim by saying that joining parties have done so because they "can add value on the network and provide services that are relevant to the people we serve.”
In the meantime, scammers are capitalizing on the demand from people who believe in Facebook's Libra, even though it hasn't been launched. Others see Facebook's regulatory troubles as the perfect opportunity to take the financial industry by storm, with Binance as a notable example with its Venus cryptocurrency. In any case, cryptocurrencies have yet to prove themselves as a proper alternative for secure payments, with fraud and theft being so prevalent that $3.1 billion were lost at exchanges in 2019 alone.