David Marcus, co-creator of Facebook's Libra (via LinkedIn).

Facebook remains defiant in wake of Libra defections

The loss of Mastercard, Visa, Stripe, eBay, and Mercado Pago has hurt the stablecoin project, but the social media giant promised to move ahead

Facebook’s plan to create a blockchain-based stablecoin called Libra took a body blow on October 11, when five main partners including MasterCard and Visa withdrew.

But Facebook’s Libra frontman, David Marcus, responded to the news with tweets written to project calm and resolve. 

“I would caution against reading the fate of Libra into this update,” wrote Marcus, who heads up Calibra. That division of Facebook said it would make a cryptocurrency wallet. It was also designated the company’s official Libra Association member. 

“Of course, it’s not great news in the short term, but in a way it’s liberating,” Marcus added. “Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.”

Distrust proves formidable

Facebook planned to have the cryptocurrency governed by an autonomous non-profit, the Libra Association. The social media giant, which has been harshly criticized for its poor privacy record, announced the project with 28 partners. Facedbook hoped having only one vote out of a hoped-for 100 would insulate the project from the idea that Libra belonged to Facebook. Unfortunately for them, it hasn’t.

With the company’s 2.7 billion users of Messenger, WhatsApp, and Instagram messaging services as potential users, elected officials and financial leaders around the world expressed serious doubts. The fear was that the private currency could quickly become powerful enough to affect global financial stability. 

Pressure on the project had been building for months. France and Germany had announced in September that they would ban Libra outright. They promised to push the European Union to do the same. On October 4, digital payments firm PayPal became the first partner to drop out

But the biggest hit came on October 8.

Senate banking committee members Sherrod Brown (D-Ohio) and Brian Schatz (D-Hawaii) wrote to Mastercard, Visa, and digital payment firm Stripe, warning them to stay out of Libra. 

“If you take this on,” the Senators wrote, “you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities.”

Marcus tacitly admitted that this not-too-subtle threat had been the last straw.

No hard feelings

“Special thanks to @Visa and @Mastercard for sticking it out until the 11th hour,” Marcus tweeted. “The pressure has been intense (understatement), and I respect their decision to wait until there’s regulatory clarity for @Libra_ to proceed, vs. the invoked threats (by many) on their biz.”

He added, “I can tell you that we’re very calmly, and confidently working through the legitimate concerns that Libra has raised by bringing conversations about the value of digital currencies to the forefront.”

Sen. Brown had a different message. 

“Large payment companies are wise to avoid legitimizing Facebook’s private, global currency,” he said in a statement on October 11. “Facebook is too big and too powerful, and it is unconscionable for financial companies to aid it in monopolizing our economic infrastructure.” 

He added, “I trust others will see the wisdom of avoiding this ill-conceived undertaking.”

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.