PayPal is the first company to back out of Facebook’s Libra cryptocurrency, as the controversial project continues to experience scrutiny and scepticism.
Libra technically qualifies as an association backed by 27 multinational companies and non profits, such as Mastercard and Visa, with Facebook taking the lead. A Facebook subsidiary called Calibra is intended to be the main tool for consumers to interact with the project.
In order for companies to join the so-called association, they would have to pledge $10m (€9.1m) into a pot.
In a statement, PayPal did not provide its reasoning for leaving the project, it said:
“PayPal has made the decision to forgo further participation in the Libra association at this time and continue to focus on advancing our existing mission and business priorities as we strive to democratise access to financial services for underserved populations.
“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal and we will continue to partner with and support Facebook in various capacities.”
Regulators in America and the EU have expressed particular concerns, with France’s finance minister questioning whether the cryptocurrency would be a way for a player with access to over 2 billion people to privatise money.
Regulators have expressed concern that the cryptocurrency could be a tool to bypass money laundering and tax evasion regulations.
The French government has said it would block the development of Libra in the EU while US regulators have said that since the crypto would be backed by a basket of currencies could mean that securities regulators would have to assess it.
It is being envisioned that Libra could be used directly on Facebook’s various social platforms, such as Messenger, WhatsApp and Instagram, with people being able to make transactions between themselves or make purchases directly through the apps.
Libra’s mission is “to enable a simple global currency and financial infrastructure that can empower billions of people. Libra will be built on a secure, scalable, and reliable blockchain; it will be backed by a reserve of assets designed to give it intrinsic value; and it will be governed by the independent Libra Association, which was formed to manage and evolve this new ecosystem,” reads the association’s Facebook page.