Powerful blow to Facebook's cryptocurrency, Visa and Mastercard have withdrawn



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Powerful blow to Facebook's cryptocurrency, Visa and Mastercard have withdrawn



AMERICAN card companies Mastercard and Visa have withdrawn from Facebook's digital libre currency issuance project, signaling a surge in pressure from regulators around the world, who warn of numerous digital currency risks.

Visa and Mastercard announced their withdrawal from the Libra Association on Friday night, joining PayPal Holdings, which dropped out of Libra just over a week ago.



EBay Inc, Stripe Inc and Latin American payment processing company Mercado Pago also followed in their footsteps. This means that the Facebook project is no longer supported by any major financial company and that its chances to grow into a global financial player are minimized.

Facebook announced the libra in June, joining forces with 28 partners, including Mastercard, Visa, Spotify Technology, Paypal, eBay, Uber Technologies and Vodafone Group, in the Libra Association, which is set to manage the new digital currency.

“Visa has decided it will not be part of the Libra Association at this time,” the company said in a statement. “We will continue to analyze the project and our final decision will depend on a number of factors, including the Libra Association's ability to fully meet all regulatory expectations,” it added.

France and Germany have already announced the blockade

Regulators are critical of Facebook's digital currency, warning of risks to the security of transactions and user data. France and Germany have already announced the blockade of libra in Europe, proposing instead the issuance of a public cryptocurrency managed by central banks.

US Central Bank President Jerome Powell has signaled that the libra cannot get the green light until its mover offers guarantees on solutions to serious data and user protection, money laundering and financial stability problems.

A group of seven leading economies in the G7 are planning to send a similar message to the public, according to a draft report received by the BBC, drawn up by a task force composed of central bank officials, the International Monetary Fund (IMF) and the Financial Stability Board.

According to the Task Force, “global stable, asset-backed digital currencies”, fixed at, for example, the dollar and the euro to minimize the risk of large fluctuations in value, may pose problems for central banks in setting interest rates.

An additional problem is the suppression of competition, as well as the threat to financial stability in the event that users suddenly lose confidence in the digital currency.

“The G7 believes that no stable digital currency issuance project should go live until it finds an adequate response to legal, regulatory and supervisory challenges and risks,” a draft G7 Task Force report received by the BBC reads.

Cryptocurrencies are potentially a faster and cheaper channel for money circulation and payment transactions, but the current system is often “slow, expensive, and non-transparent.”

Currently, about 1.7 billion people worldwide would welcome improved access to banking and financial services, according to the G7 task force.

Facebook and the Libra Association declined to comment on the report, and a G7 spokesman was not available for comment.

The report will be presented to finance ministers this week at the IMF's annual gathering in New York.

The Libra Association Board of Directors is scheduled to hold its first meeting in Geneva today.

Powerful blow to Facebook's cryptocurrency, Visa and Mastercard have withdrawn

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