Facebook’s brand-new project is facing uncertainty as many for its investors have backed out due to regulatory unpredictability.

Libra is a blockchain currency proposed by the American tech-giant Facebook. Currently, the project is in its first stages where only a rudimentary experimental code has been released. The launch of the project is planned to be in 2020. According to Facebook, Libra is going to be created as a stablecoin which is different to other cryptocurrencies such as Bitcoin as it is pegged to established currencies such as the dollar and euro.

The plan is for the Libra token to be backed by financial assets such as a basket of currencies and US Treasury securities in an attempt to avoid volatility. The Libra Association will create new Libra currency units based on demand. These units will be retired as they are redeemed for conventional currency. According to Facebook, each investment partner will inject an initial $10 million so that Libra may have a full asset backing on the day it launches.

Unfortunately for Facebook, last week all five major payment providers; Visa, Mastercard, Stripe, eBay, PayPal and Mercado Pago, pulled out as investors. This has made the foundation of the entire project especially unstable. It was revealed that Booking Holdings (from Booking.com) have also recently pulled out. Currently, Netherlands-based PayU is the only remaining member operating in the online payments processing sector. Most of these companies cited regulatory uncertainty as the reason for departing the project.

It is believed that this could be due to the warning from the G7 group of nations who claim that Libra would be risking a disruption of the global financial order. This report outlined nine major risks posed by cryptocurrencies such as Libra. This was followed by a letter from the US Senator Brian Schatz and Sherrod Brown, which threatened a higher level of scrutiny from regulators for all Libra payment-related activities. The draft also warned that Libra could stifle competition among other providers and potentially threaten financial stability if the digital currency movement turns out to be less popular than expected.

The remaining 21 members, including rideshare firms Lyft and Uber, venture capitalist firms Andreessen Horowitz and Union Square Ventures, music streaking service Spotify, and telecoms company Vodafone, have all confirmed their involvement in the project at a Geneva meeting last week.

A spokesman told the BBC that the currency was still very much on track to launch in 2020, that is of course, if suitable regulatory approval is granted. Since there is little experience with stablecoins and cryptocurrencies in general, it would be difficult for regulators to foresee all potential problems and risks and establish legal guidelines in order to eliminate them.

Ellie Nikolova

The Uncertain Future of Facebook’s Crypto-Currency ‘Libra’