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Visa, Mastercard, Stripe, eBay drop out of Facebook's Libra payments network

Facebook Inc.'s initiative to launch a digital coin may be in jeopardy as more major backers pull out from the project.

Visa Inc., Mastercard Inc., Stripe Inc. and eBay Inc. will step back from the Libra initiative, Facebook's digital coin that it intended to launch in 2020. The companies follow just one week after PayPal Holdings Inc. left the project.

Since the social media giant unveiled its plans four months ago, it has been met with backlash around the globe. Earlier this week, a pair of Democratic senators sent letters to the chief executives of Visa, Mastercard and Stripe, threatening increased regulatory scrutiny on all of the companies' payments activities, not just those related to Libra.

With at least five of the project's initial 28 founding members now gone, the Libra Association — the Geneva-based consortium of Facebook and other entities intended to oversee the Libra project — might be in trouble. The 28 companies had said they would invest $10 million each in a consortium to govern the coin.

MoffettNathanson analyst Lisa Ellis said that Libra "will fail" without the involvement of these major payments players.

"They bring essential, deep payments expertise, trusted payments brands, global acceptance and settlement networks, and relationships with every major financial institution, government, and regulatory body around the world," Ellis said in a note following PayPal's departure.

Compass Point analyst Isaac Boltansky said the financial services companies have "an understandable reticence" to go "through the Washington ringer ... for a Big Tech firm that will be in the crosshairs for the foreseeable future and a product that is far from fully formed."

"Libra has raised a number of fascinating questions that should advance the broader regulatory conversation, but neither financial services firms nor Washington appear ready to move at Libra's proposed pace," Boltansky said in an email.

Uber Technologies Inc., Lyft Inc., Spotify Technology SA, Iliad and Vodafone Group PLC are among the other firms that initially committed to help build and maintain the Libra payments network.

Although the payments companies decided not to join the Libra Association at this time, spokespeople at Visa, Mastercard and Stripe said their companies will continue to monitor the effort and evaluate participation.

"Our ultimate decision will be determined by a number of factors, including the Association's ability to fully satisfy all requisite regulatory expectations," the spokesperson for Visa said in an emailed statement. "Visa's continued interest in Libra stems from our belief that well-regulated blockchain-based networks could extend the value of secure digital payments to a greater number of people and places, particularly in emerging and developing markets."

Stripe similarly expressed support for projects like Libra that "aim to make online commerce more accessible" to people around the world. "We will follow its progress closely and remain open to working with the Libra Association at a later stage," a spokesperson said in an emailed statement.

Mastercard cited its focus on its own efforts to enable financial inclusion around the world.

"We believe there are potential benefits in such initiatives and will continue to monitor the Libra effort," a spokesperson said in an emailed statement.

EBay is pulling out of the project to focus on rolling out its managed payments experience, a spokesperson wrote.

Amid the departures, the Libra Association remains "focused on moving," said Dante Disparte, the organization's head of policy and communications.

"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," Disparte said in an emailed statement.

The Libra Association Council will host its first meeting Oct. 14, when it will announce the confirmed initial members of the Libra Association.