Last week, Democratic Sens. Brian Schatz (Hawaii) and Sherrod Brown (Ohio) sent letters to leadership at Visa, Mastercard, and Stripe, encouraging them to pull out of Libra, a planned cryptocurrency project spearheaded by Facebook.
Among other concerns, the senators griped that Facebook "has not provided a clear plan for how it will prevent Libra from facilitating criminal and terrorist financing, destabilizing the global financial system, interfering with monetary policy, or exposing consumers to risks currently limited to accredited investors." They then raised the issue of child sex abuse photos and videos, claiming such things would be facilitated by combining encrypted messaging with encrypted payments.
"If you take this on," the senators warned, "you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities."
The letter of concern—or threat—from government bullies seems to have had its intended effect. Within days, all three companies (plus other prominent would-be partners) ran away scared and abandoned the project.
At least for now. A Visa spokesperson told The Verge that while the company will not be joining the Libra Association right now, "our ultimate decision will be determined by a number of factors, including the Association's ability to fully satisfy all requisite regulatory expectations."
Note that last clause, a pretty clear echo of the senators' threats. Now Libra doesn't have any partner capable of payment processing (especially since PayPal already pulled out). Stripe and eBay also replied to The Verge with vague declarations of non-cooperation with Libra while leaving door open for signing on in the future.
The first meeting of the Libra Association Council is happening today in Geneva, Switzerland. Facebook chieftain Mark Zuckerberg is scheduled to testify next week before the House Financial Services Committee, and the government's fears about Libra will no doubt be further piled on him.
As Jim Epstein previously wrote at Reason, Libra is:
a useful reminder that Silicon Valley can't ever compete with bitcoin's mission of reclaiming control of money from the state….Libra is best understood as PayPal 2.0, and yet the white paper invites specious comparisons to bitcoin, noting that "existing blockchain systems have yet to reach mainstream adoption."…
The difference is that bitcoin is a decentralized technology that nobody controls…Libra's engineering hurdles are comparatively simple because its a centralized payment system run by a bunch of big companies…Libra is fundamentally a top-down system that runs using a database, which will never change.
Why is bitcoin's decentralization worth all that extra time and effort? Because governments can't stop it.
Epstein foresaw exactly this week's outcome: "Libra, on the other hand, will be controlled by a handful of big companies that will have no choice but to comply with government dictates."
Reason TV was also prescient on the threats that an operation such as Libra faced from government that other cryptocoins such as bitcoin do not: