PayPal Leaves Libra Association
PayPal Leaves Libra Association: The controversy surrounding the Libra Association has been growing. There’s a more significant number of regulators and government authorities that are questioning the reliability of the Libra Coin. Facebook and its associates had planned to launch their blockchain digital currency by 2020. Unfortunately, with that date growing closer, more jurisdictions are banning the money. India and China, two of the largest markets for Facebook, banned the coin recently.
Additionally, members in the Libra Association have begun backing out from the project. PayPal has already left the Libra Association, with Visa and Mastercard soon to follow. The Libra Association learned of PayPal’s decision to go by not reporting to a scheduled meeting.
The official announcement of PayPal leaving the association came on Friday, October 4th, from the Bloomberg Report. This unexpected move has prompted an entirely new level of controversy for the digital coin. Many analysts are speculating that the is the first nail in the coffin for Libra and that it won’t be long until the entirety of the Libra Association is broken. Everyone is now wondering if Mark Zuckerberg and his band of misfits will release the coin for public sale on WhatsApp and Facebook Messenger.
There’s a lot of history behind this decision that will also affect the internal operations with the Libra Association. David Marcus runs the Libra Coin through a subsidiary company called Calibra. However, Marcus used to be the chief executive officer at PayPal. The decision for his former employer to leave the association could result in David having concerns. This was reflected through Sarah Weir, a Reporter with Bloomberg in San Francisco. She took to Twitter, speaking on how this split will create more issues for Libra Future, as multiple employees worked for PayPal but now work for Calibra. Many speculate those employees will leave their positions with Calibra and return under PayPal’s employment.
There are now multiple brokerages and firms commenting on this unsuspecting decision from PayPal. The 1st to speak publicly regarding this issue was PayPal, with a company spokesman indicating that the payment service is committed to having the same products they’re infamous for having. The spokesman also noted that PayPal is focused on advancing its future in the digital space and haven’t given up on its mission. This could possibly mean that PayPal is now looking into their own variation of blockchain.
The Response from Libra’s Dante Disparate, the Head of Policy and Communications, stated: “It requires a certain boldness and courage to take on an endeavour as ambitious as Libra. The journey will be long and challenging. The type of change that will reconfigure the financial system to be tilted towards people, not the institutions serving them. We’re better off knowing about this lack of commitment now, rather than later.”
This response from Libra indicates that the association isn’t happy with PayPal’s decision. However, anybody that is connected to the Libra Association isn’t officially committed to the future of the coin. They’ve signed a letter of intent to join the association, but plan on this level is permissible by law. Subsequently, PayPal’s decision was legal. These statements from Dante should also worry other associates, who will see clearly that once an enemy of Facebook, your always an enemy of Facebook. They are the Tech World Mafia.
Dante Disparate also believes that upwards of 1,500 corporations would have joined the association on some level. Unfortunately, the decision from PayPal will create even more concerns over the Libra Coin. Dante stated: “Some of Libra’s early supporters are growing uneasy about where all the attention is coming from.”
The Industry Talks
PayPal didn’t provide any official reasoning for leaving the project five months before its to launch. Sources familiar with PayPal’s decision have indicated that the corporation was concerned about the relationships being built between the Libra Association and Regulators on a worldwide scale. Sources close to Stripe, Visa and MasterCard have all indicated that their respective employers have the same concerns regarding the digital coin. Many individuals in the blockchain industry have publicly come out and spoke about the issues facing Facebook.
The first to publicly speak on this matter is the founder and chief executive officer of KeyoCoin, a Travel Rewards Digital Currency maintained by Matt Baer. He stated to reporters: “Facebook’s expedition into the world of cryptocurrencies was always going to turn heads. Congress, central bankers and government officials are now breathing down Libra’s neck. France and Germany are pledging to block it from entering Europe, some of Libra’s early supporters are growing uneasy about where all the attention is coming from.”
Matt Baer’s comments continued with, “There’s no doubt that such a high profile departure will be felt like a nail in the side for Facebook and the Libra Association. It’s too early to say if it’s also the first nail in the coffin for the currency itself. There is still plenty of confidence that the project will succeed, and a good number of supporters throwing their weight behind it. However, any hopes that Libra will be a truly global currency are fading fast.”
One of the Founding Partners for BX3 Capital, Kyle Azman, stated: “Paypal withdrew because it doesn’t want to be subject to the strict regulatory scrutiny that is going to come down on all of the members of the association. I expect most of the companies will drop out before making a financial commitment.”
The question everyone is asking themselves now is if multiple other companies with the association will leave in the coming months. PayPal could be the first of many, but many speculate this is a one-off scenario prompted by overwhelming media exposure towards Libra. Matt Baer stated: “One thing is certain. If Facebook wants to shrug off PayPal’s departure, it will need to show that it has taken regulators’ fears of money laundering and tax evasion seriously. The libra association needs a clear plan for compliant rollout, while also convincing members that the considerable regulatory scrutiny will not bleed into their businesses.”
David Marcus is doing his absolute best to avoid the destruction of Libra. He’s remained calm during onslaughts of interview questions. On October 2nd he stated to the public through his Twitter account that, “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.”
Some analysts believe the scrutiny of regulators isn’t the only thing prompting companies like PayPal to leave the Libra Association. Kyle Azman thinks that this decision was made because the transaction company has an internal project their working on for the blockchain space. He believes that they left the association because Libra would become a direct competitor for whichever product is released by PayPal. The Co-Founder for LibraCamp, an ecosystem startup from Tomer Weiss, stated: “Maybe in the short term, PayPal does not see how the involvement in Libra will provide them with benefit. The payment system of Paypal and the payment system of Libra will compete with each other.”
There’s always the chance that PayPal has officially subjected themselves to the exclusion of a revolutionary product. This could be a premature decision that negatively effects the payment service going forward. Additionally, this decision of public record and if PayPal decides to re-enter the blockchain market in a new partnership, finding the deal will become a difficult task. Withdrawing in the early stages of a cryptocurrency is a substantial red flag, with even some traders stating on Reddit that this decision has saddened them.
Business owners in the blockchain and digital space have also spoken out. One Reddit user stated: “99.99% of my customers use PayPal checkout on my online store. I was hoping that since PayPal was one of the Libra founders, this meant I could seamlessly go from PayPal to Libra. Then deposit that Libra onto an exchange where I could easily convert it to BTC. That would’ve meant I could very painlessly buy BTC with all my online store earnings.”
User Data Problems
There are multiple reasons why Facebook and PayPal might’ve split their partnership. Another critical reason for PayPal’s leaving could be because of how Facebook handles the data of users. Their lack of data privacy could prompt substantial legal problems for PayPal going forward when the coin is released in January 2020. The reputation with the general public for Facebook has dropped significantly since their data breach in 2018. Many industry insiders outside of PayPal have also expressed their concerns about Libra’s data policies. It even became a significant subject point during hearings at the United States Senate.
The Co-Founder of MoneyTransfers, Johnathon Merry, stated: “Libra is not seen by many as a benevolent project. Instead, it’s seen as a way for Facebook and by association, Paypal to control our economies and extract even more money from people.”
Those that choose to remain with the Libra Association will face significant legal problems in the short future. The growing pressure for legislators in Europe, America, Asia, Australia and Africa cannot be ignored by Facebook or their associated members anymore. Those who aren’t taking it seriously can expect to face the same class-action lawsuits that Ripple Labs had to fight against in 2019. The fate of associated members like Visa, MasterCard and Uber could become much weaker on a global scale by committing to the illegal actions of Libra. Considering that PayPal is one of the most trusted third-party payment services on the internet, the avoidance of potential lawsuits is a significant priority.
The Class-Action Lawsuit against Ripple was prompted by the accusation of the selling and purchasing of unregistered securities. It’s still a lawsuit that active in the United States Federal Courts today. The United States has already expressed that if Libra commits any illegal actions as a financial institution, they will face severe fines and prison times. Additionally, when Ripple began their class-action lawsuit, the valuation of their exchange dropped. The same thing could occur with Facebook for their libra coin. Most in the industry would agree that the decision to sue Ripple was a class-action lawsuit is valid, but that the lengthy process affecting their internal operations isn’t appropriate. Unfortunately, Ripple has become a target for lawsuit-ready individuals or corporations.
There have been serious concerns regarding the true decentralized nature of the Libra Coin. Most doubt that the coin is secretly being managed in a centralized manner, with hand-picked individuals receiving nodes that benefit their capabilities at engaging with Libra. The advertised pure digital currency has had serious claims stating that by managing the coin through messaging services, it’s permitted as a centralized network. This blatant lie to 2.5 Billion Potential Customers worldwide could be another issue that prompted PayPal to leave the Libra Association. The more corporations in the Libra Association that choose to leave the project will cause for increased vulnerability with the digital coin. It would also comprise the nodes and make Facebook more susceptible to getting caught by legislating regulators.
When the Libra Association inevitably becomes more dispersed, with more members decision to leave, the coin will be susceptible to hacks. There’s a small number of nodes that have been designed for the Libra Coin, but half of them would need to be comprised for the coin to be hacked. There are only one hundred nodes built for the Libra Coin to date, which means only fifty coins would need to be comprised for the network to become unsafe. All members in the exchange have selected their nodes, which are being maintained on highly secure desktop computers. When and if these associated members leave, those nodes won’t be managed on a secure databank. This is was creates the issue of the hacking.
Robin Lee Allen, the Managing Director for Esperance Private Equity spoke on the permissioned ledger issues facing Facebook. He stated: “Libra is set up like a central banking consortium. Permissioned access gives power to certain actors. In this case, Uber, Andreesen Horowitz and PayPal.”
The Founder for Pureknock Communications, William McCormick, stated: “Libra is not decentralized, open, permissionless, or censorship-resistant. It’s a corporation of stakeholders with a $10M buy-in who vote and coordinate validating nodes that are distributed all over the world to processes and update state changes to the electronic ledger.”