Meta's former head of its Libra project says roadblocks from regulators effectively shut down the company's cryptocurrency effort — and the way he sees it, it was "100% a political kill."
Libra was a stablecoin digital currency project announced by Facebook in 2019 to provide financial services to billions of "unbanked" people around the world.
A nonprofit Libra Foundation was formed by Meta to govern it, which drew participation from major companies like Mastercard, PayPal, Uber, and Spotify.
The effort quickly drew scrutiny from lawmakers and regulators, leading many of the companies to back out.
David Marcus, the onetime Meta exec previously in charge of Libra, said on X that his testimony before both the Senate Banking Committee and the House Financial Services Committee in 2019 was "the starting point of two years of nonstop work and changes to appease lawmakers and regulators."
Marcus said that by the spring of 2021, Meta "had addressed every last possible regulatory concern" regarding Libra, which was later renamed Diem. Among those were "serious concerns regarding privacy, money laundering, consumer protection, and financial stability," Federal Reserve Chair Jerome Powell said in the 2019 House Financial Services Committee hearing in which Marcus testified.
"The story, as I heard it, is that Jay Powell was told by Treasury Secretary Janet Yellen at one of their biweekly meetings that allowing this project to move forward was 'political suicide,' and she would not have his back if he let it happen," Marcus said on X.
Marcus said that he "wasn't in the room when this conversation happened" and the purported exchange meant that "effectively, this was the moment Libra was killed."
Spokespeople for Meta and the US Treasury did not immediately respond to a request for comment from Business Insider.
"Shortly thereafter, the Fed organized calls with all the participating banks, and the Fed's general counsel read a prepared statement to each of them, saying: 'We can't stop you from moving forward and launching, but we are not comfortable with you doing so.' And just like that, it was over," Marcus added.
Marcus also posted a letter written by US senators to Libra Association participants Visa, Mastercard, and Stripe, highlighting a section that said the companies could expect a high level of regulator scrutiny on all payment activities.
"Facebook appears to want the benefits of engaging in financial activities without the responsibility of being regulated as a financial services company," Sen. Sherrod Brown (D-OH) and Sen. Brian Schatz (D-HI) wrote .
"Facebook is attempting to accomplish that objective by shifting the risks and the need to design new compliance regimes on to regulated members of the Libra Association like your companies," the senators wrote. "If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities."
The Meta-backed Diem Association said in January 2022 it was winding down and selling its assets to crypto-focused bank Silvergate for $182 million.
"There was no legal or regulatory angle left for the government or regulators to kill the project. It was 100% a political kill — one that was executed through intimidation of captive banking institutions," Marcus said.
Meta CEO Mark Zuckerberg testified before Congress about the company's financial services plans a few months after Marcus. Zuckerberg was grilled by lawmakers who worried the effort could disrupt the global financial system and subsequently give Meta, already a powerful tech giant with billions of users, influence there.
Donald Trump, who was president at the time, said in 2019 that Libra would "have little standing or dependability" and that the US dollar is the "only one real currency" in the country. Benoit Coeure, a member of the European Central Bank's board, likewise cautioned that virtual currencies "could challenge the supremacy of the U.S. dollar."
"I believe that this is something that needs to get built, but I get that I'm not the ideal messenger for this right now," Zuckerberg said in his testimony. "I'm sure there are a lot of people who wish it was anyone but Facebook who proposed this."
Facebook in 2019 was still grappling with the fallout and scrutiny from the Cambridge Analytica scandal .
Zuckerberg said during his appearance before lawmakers that Facebook would drop out of the Libra project if it didn't gain the approval of US regulators.
Reflecting on what went wrong with Meta's stablecoin efforts, Marcus said last year that they were too "idealistic."
"If you de-peg and it's a centralized company that's managed privately, governments really don't like that — they want to be in control of their unit of account, they want to be in control of their currency," he said. "You don't want a private company to become massive in controlling the unit of account and managing reserves at a single point of failure."
Since Libra's shutdown, Marcus cofounded payments startup Lightspark, which he now heads. Lightspark said he did not have further comment on Meta's Libra efforts beyond his post on X.
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