PayPal is on the verge of bailing from Libra project: report

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In what could be a lethal blow to Facebook Inc.’s controversial Libra project, PayPal Holdings Inc. is reportedly on the verge of withdrawing its support for the global digital currency.

PayPal PYPL, +1.74%  , one of 28 key technology and financial-institution partners of Facebook FB, +0.60%  , was a no-show at the Libra Association Meeting in Washington, D.C., on Thursday, sparking speculation it is bailing on the controversial project. Its absence was first reported by the Financial Times.

A person close to PayPal said it is concerned Facebook has not done enough to dissuade concerns the currency is susceptible to money-laundering, according to the FT. The Libra project is headed by David Marcus, who was previously PayPal president.

PayPal and Facebook declined comment on the report.

Libra Association members have each pledged to contribute $10 million to the project, which has faced blistering criticism from federal lawmakers on several fronts. Facebook Chief Executive Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg have been asked to testify before the House Financial Services Committee about Libra, CNN and The Hill reported on Friday. A hearing with Sandberg could come as soon as this month; the committee is waiting to confirm a date with Zuckerberg to testify in a separate hearing, CNN reported, citing a congressional source.

When Libra was unveiled in June, Facebook described it as an easy, inexpensive way for consumers to transmit money globally via digital wallets on their smartphones without the need for a bank. An independent, third-party organization, the Libra Association, would govern the currency.

But the project drew immediate blowback from regulators around the world over concerns it might undercut government-backed currencies, threaten consumer privacy, and be a boon for the financing of drugs, terrorism and other illegal activities.

In contentious testimony before the House Financial Services and Senate Banking committees in July, Marcus assured lawmakers that Facebook and the Libra Association would address all regulatory concerns.

Read more: Senate releases testimony of Facebook exec before Libra hearing Tuesday

They were not convinced.

”I think that he [Marcus] skirted some of the most significant questions,” Rep. Maxine Waters, a California Democrat, said in an interview with Bloomberg TV following the testimony. “I don’t know what it is, I don’t know how it works.”

Waters called on Zuckerberg to testify on the project.

FB shares were marginally higher in after-hours trading Friday after closing up 0.6%. Shares are up 37% in the year to date. The S&P 500 SPX, +1.42%  is up 17% in the year to date.