Of all the things Facebook has done over the past few years, launching a digital currency was not only the most ambitious but also the most fraught with potential problems. That's especially true for a company with the number of privacy concerns that continue to pop up seemingly every week.
That's why it's a big deal that on Friday, The Wall Street Journal reported that PayPal, one of the founding members of the supposedly independent Libra Association, decided it's out. That's after other partners, Mastercard and Visa, have grown reluctant to continue their involvement following substantial pushback from both the U.S. and E.U. governments.
I don't think anyone questions that Facebook has the reach or the know-how to make a digital currency happen. Facebook is uniquely suited to bring financial services to huge numbers of people, including underbanked communities, by enabling payments across its network.
With a global reach of more than two billion users, it isn't hard to see why financial payment companies were interested in supporting Facebook's efforts to facilitate transactions. But access to a huge customer base isn't the problem.
The company also has plenty of smart people working on a team headed by David Marcus, who, ironically, is a former president of PayPal. If anyone can figure out the technical side of making this work, I'm sure Facebook and Marcus can. This isn't an engineering problem.
It's a trust problem. And trust is a big problem for Facebook.
In reality, Facebook could probably handle the technical side on its own. What it gets from partners like PayPal, Mastercard, and Visa is credibility. Without established partners willing to co-sign their trusted names to this effort, Facebook loses much of its credibility with both users and regulators.
While an impressive group of companies signed on to be a part of the Libra Association, which would serve as an outside governing body for the digital currency, those companies are starting to reconsider whether they want to be tied so closely to Facebook.
Those partners aren't reconsidering their role in Libra because they don't think it can work, but rather, they're starting to wonder if it's worth it. That's reasonable when you consider the scrutiny Facebook is facing on a range of fronts, from how it stores users' personal information to the way it shares that information with outside contractors.
According to a leaked audio transcript obtained by the Verge, Facebook's CEO Mark Zuckerberg told employees that Facebook has "led the thinking and development on [a currency] so far, but the idea is to do this as an independent association, which is what we announced with about 27 other companies. By the time it launches, we expect we'll have 100 or more companies as part of it."
That seems like an ambitious prediction--it's hard to get to 100 when your founding partners are either already on the way out or looking for the door. Then again, that's part of the problem with Libra. How is it possible that Facebook, considering all of the criticism and problems it has faced in the past few years, could think creating a digital currency is a good idea right now?
To be honest, the idea seems completely tone-deaf. But that's Mark Zuckerberg, who--as a true believer--only sees Facebook through the idealized lens in his own mind. Zuckerberg wants us to measure him only by his good intentions, not Facebook's bad behavior. He clearly doesn't see the concerns the rest of us share, and doesn't understand why they might be a problem.
Apparently, at least one partner has started to sing a different tune. If more follow, we may finally see if Facebook is willing to face the music.