PayPulling Out: PayPal pulls out of Facebook’s cryptocurrency
October 17, 2019
2 min read
What's going on here?
PayPal announces its decision to pull out of Libra, a cryptocurrency launched by Facebook.
What does this mean?
PayPal has become the first of many major firms to pull out of Facebook’s attempt to launch a global currency. Facebook intend for Libra to be used as a digital currency that will ease the process of making payments and allow partner firms to accept Libra for transactions (for more information on Libra, see our article on it here). Yet Facebook’s innovation has been met with criticism due to concerns over how Libra will be able to protect people’s money and data, as well as concerns over people taking advantage of the platform, such as money launderers and terrorists.
Whilst PayPal have failed to state their reason for dissolving its relationship with Libra Association, regulatory uncertainty has been the main cause for subsequent firms (Uber, Spotify, Mastercard and Visa) to leave. These departures have propelled regulators and politicians to increase the pressure and scrutiny on Libra, with Mark Zuckerberg having testify before the House Committee on Financial Services on the 23rd October. This committee, titled “An Examination of Facebook and its Impact on the Financial Services and Housing Sectors”, is expected to hear Zuckerberg’s defence for the project as members of congress will seek answers about the privacy and implications of Libra.
What's the big picture effect?
Facebook will be forced to delay the launch date of their cryptocurrency until they receive the approval of regulators. Given the sentiment of the G7 group’s report, that approval is unlikely until Libra can prove it is legally sound, protective of its consumers and can ensure its currency will not be exploited for money laundering or terrorism.
However, if Libra is able to overcome these concerns and win back its prior support, it has the potential to be used worldwide. The G7 draft report acknowledges that cryptocurrencies have the potential to provide a more efficient way to transfer money and make payments whilst criticising the current monetary system for being “slow, expensive and opaque”. There are approximately 1.7 billion unbanked consumers that stand to benefit from cryptocurrencies like Libra, should it be successful. Therefore, providing it can weather the current criticisms and concerns, Libra could become a dominant force in the global finance industry in the near future.
Report written by Hanna Tesfazghi
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