Taking Stock Of Libra’s Vital Signs

Libra on smartphone

With the recent news that some of Libra’s backers are, at least for now, shying from vocal support for the Facebook cryptocurrency project, it’s worth taking stock of Libra’s vital signs.

The patient may not be dead, but the breathing is getting a bit labored.

Stepping back a bit, headlines on Wednesday (Oct. 2) seem to imply that all proceeds apace. The Libra Association is slated to meet in Switzerland later in the month and  representatives are tasked with appointing a board of directors.

As is germane to Switzerland, there’s been a bit of support from regulators here — verbal support anyway. As has been reported, Mark Branson, CEO of Swiss financial supervisor FINMA said that Libra poses fewer concerns than do cryptocurrencies that trade and crypto firms that operate with no supervision.

“I am much more nervous about projects which develop in a dark corner in the financial system somewhere, spread themselves out through cyberspace and one day are too big to be stopped,” Branson, said at a recent Zurich event.

“Here is something which is being done transparently,” he said, referring to Facebook’s Libra, which will be closely regulated and subject to anti-money laundering (AML) laws.

“We are not here to make such projects impossible. We will respond to them with an open mind, with an attitude that the same risks require the same rules. Our rules and standards are non-negotiable,” Branson said, according to reports.

The consortium has 28 members … but some of them are wavering in support as regulatory scrutiny is on the upswing.

Those that are reportedly wavering include heavy hitters in the payments and networking space — Visa, Mastercard and PayPal, among others.

And the hurdles have been there from the beginning. Mastercard Executive Vice President of Digital Solutions Jorn Lambert told Karen Webster in late June, about a week after the news broke, that beyond the regulatory challenges there are the big questions that will only be answerable once those charter decisions have been made: “What does this cryptocurrency do that a fiat currency cannot do? What problem will this really solve?”

Against the backdrop of those existential questions, the goal of Libra and the consortium (and where Facebook is arguably the representative “face”) is an ambitious one — to connect the 1.7 billion people around the world that at present to not have access to bank accounts, and where digital coins promise a measure of financial inclusion.

As former PayPal COO Bill Ready told Karen Webster in an interview published in late June, “Libra is about addressing and creating base-level infrastructure where it isn’t there first. But from there, if you can provide that, it opens the opportunity for a lot of monetization to potentially occur for a lot of different players in the same way you would see in developed markets.” As to size and scope of the project, he said that the promise and potential rests with “multiple major players coming together to throw their expertise and access in, because creating an underlying infrastructure of financial services and digital payments is bigger than any one of those players.”

Importantly, as The Wall Street Journal reported on Tuesday, members such as Visa and Mastercard have yet to commit the $10 million per firm that that will back the project and the payments network that are aiming at a 2020 launch. The old adage is that you should watch what people do, not what they say — and, in effect, agreeing to show up at meetings is not the same as committing capital, in effect having skin in the game.

We may get more of a tell of Libra’s fortunes as at least two dozen of the aforementioned 28 firms are scheduled to attend a meeting tomorrow in Washington, D.C.

The wavering support may — or may not — signal that at least some companies may pull out of the Libra project. We note that such an event would deal a blow to the key ingredient needed to keep everything cooking. That ingredient is trust.

In coverage of Libra right after its launch in June, Karen Webster wrote that “igniting the Libra network, the Libra currency and Calibra wallet requires that people feel comfortable buying into using an entirely new global currency backed by an association they’ve never heard of, based in a country they’ve probably never visited — and using, at least initially, a digital wallet created by Facebook on one of two platforms that are also part of Facebook network: Messenger and WhatsApp. That’s a lot for anyone to understand and process, much less someone living in a developing country with limited education, and for whom money — and trust — may not come easily.”

The trust factor lies at the heart of at least some observers’ fears that the crypto may pose a threat to various nations’ efforts to maintain monetary sovereignty.

In past weeks, Libra CEO David Marcus has said that such notions need to be debunked.

He said via blogs that Libra isn’t going to be a new currency but will offer “better payment network and system running on top of existing currencies.” Since the June announcement of the crypto, the efforts have been designed to be backed one-to-one by a basket of currencies.

And yet ...

Just what Libra is — is a matter of debate. Consider the fact that the head of the U.S. Securities and Exchange Commission (SEC) has demurred from telling a Congressional panel whether the coin would be regulated as a security. As SEC Chairman Jay Clayton has said, “I’m not prepared to make a decision like that here.” The crypto, of course, has been meeting at least some resistance and competition from some corners in Europe, where for example the European Central Bank has been working on its own public digital currency. Various officials in Germany and France have cited Libra as a threat to “monetary sovereignty” and thus should be stopped.

For Facebook, if Libra and the wallet co-offering via Calibra are halted, or key backers become key backer-outers — a leg of monetization strategy may drop away. As Webster wrote in reference to Messenger at the beginning of July, “now we know what Messenger’s monetization scheme is — and it is really, really, really a long game … to ask those consumers to download another app inside Messenger — Calibra — for the sole purpose of sending Libra currency via a Calibra digital wallet to friends, with no other use cases in sight for a very long time.”

For now, at least, Facebook’s stated goal of finding 100 founding members for its association seems a stretch by launch (as has been stated as a goal) given that at least some of the current roster are possibly eyeing the exits. It may be a bit like herding cats, and the $1 billion threshold for funding Libra and fulling the reserve’s coffers seems a ways off too.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border. Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.