Facebook’s troubled cryptocurrency initiative, Libra, suffered new blows on Friday as the departures of key partners became an exodus.
Stripe, Mastercard, Visa and eBay said they were all pulling out of Libra, a week after PayPal became the first company to drop out. While they continue to support the idea of Libra, the companies said, they will no longer be part of the coalition that is backing the effort.
“EBay has made the decision to not move forward as a founding member,” a company spokesman said. Mastercard said it was focused on its own strategy “and our own significant efforts to enable financial inclusion around the world,” and Visa said its future participation would depend, in part, on Libra’s “ability to fully satisfy all requisite regulatory expectations.”
A spokesman for Stripe said, “We will follow its progress closely and remain open to working with the Libra Association at a later stage.”
Also on Friday, federal regulators obtained a temporary restraining order against the encrypted-messaging company Telegram, moving to shut down its Gram cryptocurrency. The twin developments illustrated the continued fluidity around digital currencies, which are unregulated and are being closely scrutinized for how they might affect established financial systems.
Simon Taylor, a co-founder of 11:FS, a consulting firm that advises companies on blockchain adoption, said Facebook’s and Telegram’s difficulties “show just how important it is to have a clear position with regulators before launching at scale.”
Getting to a position of being regulated takes years of due diligence and hard work,” he said. “This stuff isn’t easy.”
Libra has been met with doubts and questions almost from the moment that Facebook unveiled the effort in June.
At the time, the social network positioned Libra as the potential foundation for a new financial system that would not be directed by Wall Street or central banks. The cryptocurrency could be freely traded inside Facebook’s properties, like Messenger and WhatsApp, and be used for international exchange, Facebook added.
As part of that, the social network said, it had more than 27 corporate partners — including PayPal, Visa, Mastercard and companies like Uber — that had pledged to support the project. The partners are important because Libra will be controlled not by the social network but by a broad network of corporations, Facebook said.
Yet many world leaders, regulators and central bankers — including President Trump and Treasury Secretary Steven Mnuchin — immediately criticized Libra and the idea of an unregulated currency. And they questioned whether Facebook, which is grappling with other regulatory issues around privacy and antitrust, should be heading up such an initiative.
In July, David Marcus, the Facebook executive leading Libra, faced two days of questioning in Congress about Libra. Facebook’s chief executive, Mark Zuckerberg, is scheduled to testify at a congressional hearing about Libra on Oct. 23.
Facebook declined to comment on Friday and referred questions to the Libra Association, a Swiss organization that the company created to oversee the project.
The Libra Association is “focused on moving forward and continuing to build a strong association,” said Dante Disparte, its head of policy and communication. Even if the members change, he added, its underlying principles “will remain resilient.” The group plans to hold a meeting on Monday in Geneva to formalize its membership.
Senator Sherrod Brown, a Democrat from Ohio on the Senate’s banking committee, applauded the withdrawals of some of Facebook’s partners from Libra.
“Large payment companies are wise to avoid legitimizing Facebook’s private, global currency,” Mr. Brown said. “Facebook is too big and too powerful, and it is unconscionable for financial companies to aid it in monopolizing our economic infrastructure. I trust others will see the wisdom of avoiding this ill-conceived undertaking.”
The Libra coalition has been fraying for months. After Facebook announced the initiative, some of the partners began having second thoughts. Many were wary that Facebook’s regulatory issues and the uncertain legality of cryptocurrencies might hurt Libra. Some of the companies, particularly payments providers, rely on good relationships with financial regulators.
The partners had signed nonbinding agreements, so backing out would be fairly easy, executives at seven of the partner companies told The New York Times in June. They also weren’t obliged to use or promote the digital token.
“We will not do anything that we think doesn’t meet our own personal standards, as well as the standards of regulators that we respect around the world,” Al Kelly, Visa’s chief executive, told CNBC this year.
In recent months, as skepticism around Libra was mounting, some of the partners realized the amount of resources they would have to commit to the effort was growing, said one person with knowledge of the situation, who declined to be named because the discussions were confidential.
PayPal, which Mr. Marcus used to lead, said last week that it would leave the Libra initiative so it could instead “continue to focus on advancing our existing mission and business priorities.”
On Friday, Mr. Marcus thanked Visa and Mastercard “for sticking it out until the 11th hour” and pointed to how intense the regulatory pressure had been. In posts on Twitter, he said people should not read too much into the withdrawals.
“Of course, it’s not great news in the short term, but in a way it’s liberating,” he tweeted. “Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.”
Telegram, whose messaging platform is used by around 300 million people around the world, had also been making a push around its Gram cryptocurrency. The company began raising money for the project in late 2017. Its aim was to create a currency that could be sent anywhere in the world.
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