Facebook’s Libra cryptocurrency has suffered a few setbacks recently. As well as facing pressure from global regulators, seven of its 28 founding members have left the project – including high profile firms PayPal, Visa, Mastercard, eBay and Stripe. It leaves 21 companies in the Libra Association, the organisation overseeing the cryptocurrency.
But Facebook is big enough to launch Libra on its own, so why are these members even needed? After all, it is Facebook’s network of 1.59 billion daily active users that form the foundation of its business case to issue a non-sovereign currency. Why share the spoils?
The answer may be twofold. First, by having a council of members this enables Facebook to claim decentralisation status – a key tenet of any cryptocurrency. It’s a far cry from the fully decentralised alternatives of bitcoin et al., but certainly not centralised, so a valid claim.
Second, and perhaps primarily, by having a group of high-profile businesses as Libra members it goes some way towards sugarcoating this disruption in the eyes of the world’s regulators, in readiness for the inevitable pushback.
Many of the departing members – most being payments firms – stood to lose much of their core business if Libra becomes successful. So, in the face of the project facing additional scrutiny, Libra quickly became a net negative prospect for them and a respectful early withdrawal is entirely rational. But their places are likely to soon be taken up by other prospective members waiting in the wings. There are many companies that will want to capitalise on what could be a revolutionary global money system.
Total membership is likely to be expanded as a show of strength. Ben Maurer, Facebook’s blockchain technology lead, explained in June that, “over time, [Libra] is designed to transition the node membership from these founding members, who have a stake in the creation of the ecosystem, to people who hold Libra and have a stake in the ecosystem as a whole”.