Questions and controversies continue to dog Facebook’s entry into blockchain and cryptocurrencies.
According to a report in the New York Times, none of the 27 partners in Libra, the company’s crypto venture, have signed binding agreements regarding their participation. Instead they have opted for nonbinding agreements that do not oblige them to promote or use Libra.
An Impressive List With Membership Benefits
The list of partners released by Facebook last week is an impressive roster and includes competitors from the same industry. For example, MasterCard and Visa are partners as are Uber and Lyft. Venture capital firms like Andreessen Horowitz and large nonprofits like Kiva are also part of Libra. “Even at the beginning of this effort, it (Libra) has to drive competition,” Dante Disparte, Libra’s director of policy and communication, explained in a recent podcast.
The bar to become a founding member of the Libra Association is high. It involves a steep admission fee in the form of a $10 million investment into the cryptocurrency’s reserve and an assortment of requirements, such as minimum required capitalization, as well as access to the resources and technology required to run a Masternode on the Libra blockchain.
The purported benefits of becoming a member of the Libra Association are interest payments from the reserve fund and the opportunity to set governance direction for a coin that, if it is successful, could become an alternate worldwide payment mechanism. Running a Masternode will also provide access to rich payment data from Facebook’s massive network.
A Wary Embrace
Despite these benefits, the partners are approaching the project “warily” and could “easily back out if they didn’t like where it was going”, the NYT report states. The partners have also not paid the $10 million for membership until further details regarding the project are released. According to the Times, they are apprehensive about associating themselves with Libra due to Facebook’s track record of regulatory mishaps and its checkered history of dealing with partners.
Some of their concerns are already being played out. Regulators around the world have fired warning shots against Libra after it was announced. Rep. Maxine Waters (D-CA) called for a “moratorium” on the project until its impact was evaluated by Congress. The Senate Banking Committee has set a public hearing about the project on July 16. Across the pond, France’s finance chief Bruno La Maire said Libra should not be allowed to become a “sovereign currency”. The G-7 has announced a high-level forum, consisting of members from IMF and European finance chiefs, to examine Libra’s implications.
It is likely then that the partners are waiting for regulators to show their cards before committing fully to the venture. According to earlier reports, Facebook has already held talks and discussed Libra with important agencies.
Countering the Times’ narrative, Disparte said there were a “flood of companies” waiting to become members of the Libra Association. Elka Looks, a Facebook spokesperson, told The Times that Facebook was committed to “engaging in healthy dialogue and debate.”