The credit card firm’s CEO, Ajay Banga, said compliance concerns were the reason he pulled out of Facebook’s stablecoin project
Mastercard’s chief executive said the company pulled out of Facebook’s Libra stablecoin project due to concerns about the association’s commitment to compliance with financial regulations and how it would make money.
Ajay Banga told the Financial Times on Monday that important members of the Libra Association wouldn’t give a firm commitment to follow local laws, including know your customer and anti-money laundering regulations, in all circumstances
While the leading Libra members said they would follow all laws and regulations, Banga told the newspaper, “[e]very time you talked to the main proponents of Libra, I said, ‘Would you put that in writing?’ They wouldn’t.”
Mastercard and six other firms withdrew on Oct. 8, after two senators sent a letter threatening to increase regulatory scrutiny of the entire business of financial companies’ participating in Libra. The exodus was just seven days before the association’s formal launch on Oct. 15, and the threat was widely assumed to be the reason at the time.
Along with Mastercard, members Visa, Mercado Pago, eBay, Stripe, and Booking Holdings withdrew. PayPal was the first defector from the original 28 members four days earlier. The withdrawals left the project without a US payments processor.
Beyond the compliance concerns, Banga said he did not see how the Association members would make money. But, he didn’t position that as a concern about a return on investment. Instead, he said, he was concerned that money “could be made in ways you don’t like.”
Reached by email, the Libra Association declined to comment on Banga’s comments.
The Libra Association’s stated plan was to have the governing council of members share the interest from the basket of currencies that will back the stable coin. Telecoms giant Vodaphone’s withdrawal on Jan. 21 left the group with just 19 members out of the 100 it hopes to attract.
Banga also criticized Facebook for building the proprietary Calibra wallet for the cryptocurrency. Calibra head David Marcus has said that Facebook’s wallet would not be exclusive.
Of course, as an alternative payments system, Libra would be in direct competition with Mastercard.