Facebook’s Libra currency abandoned by major financial companies

France and Germany last month pledged to block the digital currency Libra from operating in Europe. (AFP)
Updated 12 October 2019

Facebook’s Libra currency abandoned by major financial companies

  • The latest exodus leaves the Libra Association without any remaining major payments companies as members
  • France and Germany last month pledged to block Libra from operating in Europe

Facebook’s ambitious efforts to establish a global digital currency called Libra suffered severe setbacks on Friday, as major payment companies including Mastercard and Visa Inc. quit the group behind the project.
The two companies announced they would leave the association Friday afternoon, as did eBay, Stripe and Latin American payments company Mercado Pago. They join PayPal Holdings Inc. which exited the group a week ago, as global regulators continue to air concerns about the project.
The latest exodus leaves the Libra Association without any remaining major payments companies as members, meaning it can no longer count on a global player to help consumers turn their currency into Libra and facilitate transactions.
The remaining association members, including Lyft and Vodafone, consist mainly of venture capital, telecommunications, blockchain and technology companies, as well as nonprofit groups.
“Visa has decided not to join the Libra Association at this time,” the company said in a statement. “We will continue to evaluate and our ultimate decision will be determined by a number of factors, including the Association’s ability to fully satisfy all requisite regulatory expectations.”
Facebook’s head of the project, former PayPal executive David Marcus, cautioned on Twitter against “reading the fate of Libra into this update,” although he acknowledged “it’s not great news in the short term.”
Libra will press ahead with plans to formally charter the association in three days despite the setbacks, Dante Disparte, its head of policy and communication, said in a statement.
“We are focused on moving forward and continuing to build a strong association of some of the world’s leading enterprises, social impact organizations and other stakeholders,” he said.
“Although the makeup of the Association members may grow and change over time, the design principle of Libra’s governance and technology, along with the open nature of this project ensures the Libra payment network will remain resilient.”
Facebook announced plans to launch the digital currency in June 2020 in partnership with other Libra Association members. Almost immediately afterwards, the project faced relentless scrutiny from global regulators, who said it raised a host of serious questions that the group had yet to answer.
France and Germany last month pledged to block Libra from operating in Europe and backed the development of a public cryptocurrency instead. And US Federal Reserve Chairman Jerome Powell suggested the project could not advance before addressing serious privacy, money laundering, consumer protection and financial stability concerns that must be addressed.
The rapid succession of exits by major financial companies Friday afternoon suggested that scrutiny was taking its toll.
Three days earlier, a pair of senior Democratic senators wrote to Visa, Mastercard and Stripe, telling them to be wary of “a project that will foreseeably fuel the growth in global criminal activity.”
“If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all activities,” Senator Sherrod Brown and fellow Democratic Senator Brian Schatz wrote in the letters.
Brown said in a statement after the announcements on Friday that the companies had been “wise to avoid legitimizing Facebook’s private, global currency.”
Facebook Chief Executive Mark Zuckerberg is scheduled to discuss the project when he testifies before the US House Financial Services Committee on Oct. 23. US Representative Maxine Waters, who chairs the panel, has repeatedly called on Facebook to shelve the project.


Automakers expect Trump will delay decision on imposing EU, Japan tariffs

Updated 13 November 2019

Automakers expect Trump will delay decision on imposing EU, Japan tariffs

  • Foreign companies are eager to highlight US investments to try to dissuade US president

Major automakers think US President Donald Trump will again this week push back a self-imposed deadline on whether to put up to 25 percent tariffs on national security grounds on imported cars and parts from the EU and Japan amid an ongoing trade war with China, five auto officials told Reuters.

The anticipated delay — expected to be announced later this week — comes as foreign automakers are eager to highlight US investments to try to dissuade Trump from using tariffs that they argue could cost US jobs.

US Commerce Secretary Wilbur Ross said earlier this month tariffs may not be necessary. EU officials expect Trump to announce a six-month delay when he faces a self-imposed deadline this week. Trump in May delayed a decision on tariffs by up to 180 days as he ordered US Trade Representative Robert Lighthizer to pursue negotiations.

Lighthizer’s office recently asked many foreign automakers to provide a tally of investments they have made in the US, several auto industry officials told Reuters.

The White House and Lighthizer’s office declined to comment.

FASTFACTS

• US is considering 25 percent tariffs on national security grounds on imported cars and parts from the EU and Japan.

• President Donald Trump in May delayed a decision on tariffs by up to 180 days as he ordered US Trade Representative Robert Lighthizer to pursue negotiations.

On Wednesday, Tennessee Gov. Bill Lee, a Republican ally of Trump’s, plans to attend a groundbreaking at Volkswagen AG’s Chattanooga assembly plant where they will mark the beginning of an $800 million expansion to build electric vehicles and add 1,000 jobs. The high-profile event will also include remarks from Germany’s ambassador to the US.

VW announced the plan to begin producing EVs by 2022 in Tennessee in January.

Daimler AG said in late 2017 it planned to invest $1 billion to expand its manufacturing footprint around Tuscaloosa, Alabama, creating more than 600 jobs. Tariffs on Japan seem even less likely than the EU, experts say.

Japanese automakers and suppliers have announced billions of dollars in investments, most notably a $1.6 billion joint venture plant in Alabama by Toyota Motor Corp and Mazda Motor Corp.

Trump and Japanese Prime Minister Shinzo Abe signed a limited trade deal in September cutting tariffs on US farm goods, Japanese machine tools and other products.

Although the agreement does not cover trade in autos, Abe said in September he had received reassurance from Trump that the US would not impose auto tariffs on national security grounds. Lighthizer said the two countries would tackle cars in negotiations expected to start next April.

Stefan Mair, member of the executive board of the BDI German industry association, said a deal to permanently remove the threat of tariffs was needed. “The investments that are not being made are costing us the growth of tomorrow, even in sectors that are seemingly not affected,” he said.

Germany’s merchandise trade surplus with the US — $69 billion in 2018 — remains a sore point with the Trump administration as does Japan’s $67.6 billion
US trade surplus last year — with two-thirds of that in the auto sector.