The future of Facebook's planned digital currency Libra is uncertain as backers are reticent to lend their public support in the face of mounting scrutiny from US regulators.
"Wary of attracting regulatory scrutiny, executives of some of Libra's backers have declined Facebook's requests to publicly support the project," the Wall Street Journal reported.
Facebook, which announced Libra in June, had the initial backing from companies such as Mastercard, PayPal, Visa, Spotify and Uber. The social media giant is looking at enrolling up to 100 companies in the venture and intends to release the currency in 12 countries by the first quarter of next year. The group aims to raise as much as $1 billion (Dh3.6bn), with each participating company pledging an initial investment of $10 million.
“Major defections could imperil Libra… without a network of financial partners that could help transfer currencies into Libra and global retailers to accept it as a form of payment, Libra’s reach would be limited,” WSJ reported.
Policy executives from Libra’s more than two dozen backers – a group called the Libra Association – are expected to meet in Washington on Thursday to discuss the future of new cryptocurrency.
US officials and central bankers have expressed concerns about the safety of the network and said it could facilitate money laundering, terrorist financing, enable anti-competitive activity as the social media juggernaut gets into finance and the creation of "new coercive forms" of debt collection.
David Marcus, head of Libra project, tweeted that he has “no knowledge of specific organisations’ plans to not step up”. He said “commitment” to the mission is more important than anything else.
“Felt like addressing this. 1) official 1st wave of Libra Association members will be formalised in the weeks to come. Change of this magnitude is hard and requires courage… it will be a long journey.”
Facebook is working through the legitimate concerns that “Libra has raised”, he added.
Rolling out a cryptocurrency would open a new stream of revenue for the company, which has been struggling. Its net profit plunged 49 per cent year-on-year to $2.6bn in the second-quarter.
At the time of launch, Facebook said it would revolutionise the global payments system – giving a safe option of money transfer to huge unbanked population. There are nearly 1.7 billion adults without a bank account or access to financial services globally.
However, almost two-thirds of them own an internet-connected mobile phone that can facilitate access to these services, according to a 2017 World Bank report.
Industry analysts are not very convinced about the future of Libra.
“Given its history of managing our data, it should not take much to convince people that Facebook managing our money is probably a terrible idea,” said Neil Campling, co-head Global Thematic Group at Mirabaud Securities.
Libra is unlikely to become a reserve currency that is backed by central banks and used in international trade, as it may not win the necessary regulatory approvals, a report by S&P Global Ratings said. Intense examination could either lead to delays or limited scope in Libra’s initial rollout, it added.
However, Facebook is hiring experts in regulatory risk to ensure smooth roll-out of Libra. It hired Jeff Cartwright, formerly the director of regulatory risk at US crypto exchange Coinbase, as a policy and compliance manager. Another former Coinbase employee Mikheil Moucharrafie was hired as compliance officer.