Is PayPal Out As Libra Backer? Money Laundering Concerns Could Tank Facebook Cryptocurrency

PayPal reportedly is ready to pull out of Facebook’s Libra project over concerns the social media giant has failed to address a backlash to the cryptocurrency project related to money laundering concerns.

The Financial Times reported PayPal failed to attend a meeting of Libra’s 28 backers in Washington to discuss regulatory concerns.

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

PayPal had no comment.

Visa, Mastercard and Stripe also are reported losing interest in the project, wary of attracting regulatory scrutiny.

David Marcus, who is leading Libra’s development, tweeted “legitimate concerns” are being addressed and setting up the currency will take courage.

Each of the Libra Association members was to put up $10 million to participate in the project, aimed at shaking up the global payments system. Participation has yet to be formalized though a meeting is set for Geneva next week to finalize the structure.

Cryptocurrency is a digital payment system that uses encryption techniques to regulate the generation of units and verify transactions independent of central banks. Libra would differ from other cryptocurrencies in that it is designed to be less volatile because it is based on a centralized blockchain to keep transactions fast and scalable. The value also is to be tied to a basket of fiat currencies unlike Bitcoin, which created a set number of coins at its inception.

Randal Quarles, vice-chair for supervision at the U.S. Federal Reserve, said though cryptocurrencies do not currently pose a threat to global financial systems, that could change.

“There is no doubt the potential scale of stablecoins and other cryptoassets yet to emerge may pose regulatory challenges,” he said.

French officials have said Paris will not allow Libra to develop on European soil.

“This eventual privatization of money contains risks of abuse of dominant position, risks to sovereignty, and risks for consumers and for companies,” French Finance Minister Bruno Le Maire said recently.

LeMaire’s concerns center on Facebook’s size, saying Libra would present a systemic risk simply because the social networking giant has more than 2.4 billion active users. Facebook was hoping to use Libra to diversify its revenue stream and allow it to back away from targeted advertising.

Facebook has said it wants to bring cryptocurrency to the masses and had planned to launch next year.