He’s connected one-third of the world, and now he wants a piece of what makes it go round. That’s Mark Zuckerberg and his ambitious new Libra project – a Facebook-borne digital currency announced earlier this year. It’s a typically vaulting proposal from the Silicon Valley stalwart, one that promises to upend the global financial flow. But in the last month, the wheels have come off. Spooked by the spectre of state intervention, Libra’s biggest backers have bailed en masse. The scheme isn’t for the scrapheap yet, but the path ahead looks far from certain.

In essence, Libra is a bitcoin-like payments system, designed to rival government-backed currencies worldwide. Stored in a proprietary digital wallet, the currency would – its creators hope – one day be used to pay bills, send money, and make instant offline and online purchases. The project’s scope speaks to Zuckerberg’s ultimate goal: to wean Facebook off its near-total reliance on targeted advertising, and to advance the network’s creep into every facet of daily life.

To lend the currency credibility, a scheme was devised to bring big business on-board. The so-called ‘Libra Association’ had a barnstorming start; titans of the payment world, Visa, Mastercard and PayPal, all signed up, as did consumer favourites Uber, eBay and Spotify. It made sense: for a paltry consideration of $10 million, they could book their place on the next-big-thing bandwagon.    

But then it started to go south. First, in early October, PayPal pulled out, offering no real explanation. The trickle then became a flood – Mastercard, Visa, Booking.com, payments firm Stripe and a host of others all called time. E-commerce giant eBay, whose sprawling platform would have served as fertile ground for Libra, was sanguine, saying it “respected” the project but would be departing too. Visa added a little more meat to the bones, sharing doubts over the scheme’s “ability to fully satisfy all requisite regulatory expectations”.        

This seems to have been the case with most – an ebbing of early optimism as reality dawned: lawmakers would not be giving Libra an easy ride. In America, condemnation of the currency has become something of a political equaliser in divisive, pre-election times. From the Oval Office to the Federal Reserve and the cloisters of the Democratic Party, there has been condemnation. Shaken by the Cambridge Analytica scandal, politicians place little trust in Facebook – having witnessed the mismanagement of their electorate’s data, they’re taking a hard line on financial security.     

Their fears stretch to the risk of criminality too – money-laundering and Libra are often uttered in the same sentence – and even terrorist financing. Spurred by these worries, the Treasury Department approached the scheme’s biggest backers, requesting an overview of their risk mitigation measures. This warning shot was followed by an opening salvo – Democratic Senators Brian Schatz and Sherrod Brown warned CEOs that if they aligned with Zuckerberg, they could “expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities”. Soon after, the dropouts started. 

This week, Zuckerberg was hauled before the House Committee on Financial Services. Waves of criticism crashed over him during the fractious hearing, but he made a heartened defence of the scheme. Libra was a prime example of “American innovation,” he said, adding that the US’s financial infrastructure was “outdated”. 

But he faces a fight on many fronts. The EU regards Libra as an affront to Europe’s single currency, sharing in American concerns of money-laundering and illicit transactions. Brussels is preparing legislation to limit Libra’s scope, and have warned that their regulation will be robust and unremitting.

From a practical standpoint, Libra is also foundering. The support of payment industry incumbents – Visa, Mastercard, etc. – guaranteed easy avenues for moving money into and out of the digital realm, and their ubiquity in retail arenas provided a measure of certainty. For Libra to function as hoped, everyday payments – a pint of milk or cup of coffee – have to be as seamless as cross-border deposits – something now in jeopardy. 

Perhaps worse, with erstwhile allies now on the outside, they’re free to harry Libra as a commercial rival. From PayPal down, each stands to lose from the emergence of a new, flashy digital competitor. Cordial as they currently are, the payment giants won’t idly allow a Zuckerberg incursion for long – and from the sidelines, their fire can be particularly withering.

But Libra’s architects remain bullish. David Marcus, who is heading up the project, acknowledged the exodus wasn’t good news in the short term, but cautioned against reading too much into the development. “In a way, it’s liberating,” he said. Indeed, if nothing else the flight yields Facebook more power to steer the scheme as they see fit, uninhibited by influential backers.   

Still, the chances of launching in 2020 – as planned – seem remote. That’s not to say the project is winding down – Zuckerberg’s executives have schmoozed Washington bigwigs in recent weeks, bestowing upon them the cryptocurrency’s virtues. And he’s not alone: Apple, Amazon and Google each have payment platform ambitions, and could all hit the same stumbling blocks. They share a vision of finances unfettered by central bankers and middlemen – but regulators, it seems, won’t be so easy to sidestep.

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