PaypPal has become the first company to withdraw from Facebook’s Libra cryptocurrency project, dealing a potential setback to the social media giant amid regulatory scrutiny of its plan.

PayPal announced its withdrawal after pulling out of a key meeting of the Libra Association in Washington on Thursday.

The company said in a news release that it had decided to “forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities.”

But a source close to PayPal told The Financial Times that the company was concerned Facebook has not done enough to address the regulatory backlash against the project, especially over money-laundering concerns.

“It doesn’t seem that there was a lot of pre-work done with regulators,” the source said. “[Payments] companies don’t want that [regulatory scrutiny] to bleed into their businesses.”

The Libra Association said it plans to continue to move forward with the project without PayPal.

“The type of change that will reconfigure the financial system to be tilted towards people, not the institutions serving them, will be hard,” Dante Disparte, head of policy and communications for the association, said. “Commitment to that mission is more important to us than anything else. We’re better off knowing about this lack of commitment now, rather than later.”

But The Verge said losing PayPal was not “a great sign for the health of the project,” noting that it was a “major financial player” in the Libra Association. The Wall Street Journal has reported that both Mastercard and Visa were also considering withdrawing over money-laundering concerns.

The regulatory attention on Libra includes an official investigation by EU antitrust officials. Lawmakers in the U.S. have called for Facebook to be subject to U.S. banking laws if it does move forward with the digital currency.

“Although there is a small risk to financial stability today, there is no doubt the potential scale of stablecoins and other cryptoassets yet to emerge may pose regulatory challenges,” Randal Quarles, vice-chair for supervision at the Federal Reserve, warned last week.

, , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *