Facebook assembled a group of companies to participate in a global cryptocurrrency-based payments network.
PayPal Drops Out of Facebook’s Libra Payments Network
le 7 October 2019
Payments company’s move comes as other financial partners reconsider their involvement
PayPal Holdings Inc. is withdrawing from the group of companies Facebook Inc. assembled to launch a global cryptocurrency-based payments network, dealing a blow to the social-media giant’s ambitions to transform financial services.
The San Jose-based payments company “made the decision to forgo further participation” in the Libra Association, the group backing the libra cryptocurrency, a spokesman said in an email. PayPal remains supportive of libra’s mission and will continue to discuss how to work together in the future, the spokesman said.
PayPal’s announcement comes days after The Wall Street Journal reported that Visa Inc., Mastercard Inc., and other financial partners that had agreed to back libra are reconsidering their involvement following a backlash from U.S. and European government officials.
“Each organization that started this journey will have to make its own assessment of risks and rewards of being committed to seeing through the change that Libra promises,” said Dante Disparte, head of policy and communications for the Libra Association, in an email. Mr. Disparte added that 1,500 entities have said they are interested in participating in libra.
“We’re better off knowing about this lack of commitment now, rather than later,” Mr. Disparte wrote in a subsequent email.
Libra is the brainchild of David Marcus, a former PayPal president who joined Facebook in 2014 to lead its Messenger division. In 2018, he formed a team within the social-media company to explore applications of blockchain, the technology that underpins bitcoin and other cryptocurrencies.
Like PayPal, libra was envisioned to be a way to send money between two people as well as a way to pay for goods and services online. Unlike PayPal, libra will run not on existing payments infrastructure but on a yet-to-be-developed blockchain network backed by a pool of real assets and currencies.
The number of people that use Facebook every month is around 10 times the number of people that use PayPal every year, and the opportunity to deliver financial services to them motivated PayPal to sign on to libra early. PayPal also powers payments on Facebook’s existing platforms, including a new in-app shopping offering announced in March; libra was seen as a way to further cement ties between the two companies.
“We believe that our more than 20 years of payments expertise can not only contribute value to the Libra Association, but it also gives us the opportunity to work with and learn from other leading organizations,” PayPal Chief Executive Dan Schulman wrote in a blog post in June. The post has since been deleted.
Lawmakers and regulators in the U.S. and Europe were quick to criticize libra after it was unveiled in June, citing concerns about how Facebook and other companies involved would protect users’ privacy and stop criminals and terrorists from using it to launder money.
This summer, PayPal was one of a number of companies that received a letter from the U.S. Treasury Department that asked for a complete overview of its money-laundering compliance programs and how libra would fit into it.
Authorities have previously faulted PayPal for enabling illicit activity. In 2015, it agreed to pay $7.7 million to settle allegations that it violated U.S. sanctions by processing payments for blacklisted individuals and organization.
In 2017, PayPal disclosed that it received subpoenas from the U.S. Justice Department over its anti-money-laundering compliance program.