Booking Holdings, which owns travel-arrangement websites Booking.com, Kayak and Priceline, is the latest company to bail from Facebook's Libra project, leaving the fledgling payment system's future in doubt. Visa and Mastercard said Friday they were, while PayPal and Stripe have also pulled out.
Facebook has faced scrutiny over its plans to create a separate, private currency system to allow cross-border payments. The Libra Association, based in Switzerland, was supposed to give the currency project a comfortable arm's length distance from Facebook, which wouldn't own Libra.
Despite those efforts, financial regulators, as well as members of Congress on both sides of the political divide, have cited privacy issues involved in the social networking company controlling a currency, while also expressing concern about money laundering.
President Donald Trump in July tweeted that Facebook should be subject to U.S. banking laws if the Libra project were to move forward. In July, federal lawmakers drafted a bill that would effectively bar large technology companies like Facebook from becoming a licensed banking institution.
Facebook CEO Mark Zuckerberg is scheduled to appear before a House panel on Oct. 23 about the company's impact on financial services and on the housing market.
Booking.com is the latest departure, but the impact of Libra's loss of Visa and Mastercard cannot be understated. The two hold an effective duopoly over credit and debit cards in the U.S. and Europe, and are making substantial inroads into developing countries' payment systems. Their initial agreement to join the Libra Association instantly gave Facebook's project legitimacy. It also gave Facebook access to Visa and Mastercard's networks, which could have given a pathway for users to convert traditional currency into Libra.
But both companies made it clear from the onset that their interest in Libra was at least partly out of curiosity. It now appears that the political pressure on Facebook to drop the project was enough to convince a chunk of the original members to cut ties.
After announcing its departure, Visa said it would re-examine a potential membership in the Libra Association if and when Facebook is able "to fully satisfy all requisite regulatory expectations" in its development of Libra — a sign that the regulatory and political hurdles Libra is facing were becoming too much to bear.
"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," the company said.
Gartner analyst Avivah Litan said that while the defections are "a big setback" for Facebook and Libra, they won't kill the project. "It's not the end of the effort, it just becomes much more contentious," she said.
Analysts from Cowen Washington Research Group gave a similar outlook, describing the company departures in a report as a "positive as it gives Facebook more time to work with regulators."
"That should give the social media platform more time to coordinate with regulators on how Libra could work without risking a legislative response that would kill the stable coin," the analysts said.
With the recent departures, Libra's membership now consists mostly of venture capital firms and nonprofits. Uber, Spotify and Lyft were still listed as members. Vodafone, the Europe-based telecommunications company that has a substantial presence in Africa and has specialization in mobile payments, was also still listed as a member.
The Libra Association said in a statement last week that it is "focused on moving forward."
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