Facebook Libra loses PayPal support in 'huge blow' for cryptocurrency

Mastercard and Visa also rumoured to be reevaluating their involvement in controversial currency

Facebook faces significant resistance from financial regulators over its forthcoming Libra cryptocurrencyy (Reuters)

PayPal has withdrawn its support for Facebook‘s Libra cryptocurrency, following significant regulatory scrutiny of the project.

The online payments firm was part of the Libra Association - a 28-member nonprofit organisation set up to oversee the roll-out of the cryptocurrency next year.

Without elaborating on why PayPal had withdrawn its support, a spokesperson for PayPal said it remained "supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future."

They added: “Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”

Other key partners, including Mastercard and Visa, are also reportedly questioning their involvement in the association.

Calling it "another huge blow to Facebook's digital currency project", Don Guo, chief executive at brokerage technology firm, Broctagon Fintech Group, told The Independent the decision came as "no surprise".

He added: "While some level of caution is sensible, avoiding any risk whatsoever could have a serious opportunity cost. Across the globe, new digital payment systems like WeChat Pay are taking off. Those who don't get involved now could find themselves left out of the upcoming digital payments revolution."

Facebook's cryptocurrency would potentially allow billions of users around the world to make and receive payments through apps like WhatsApp, Instagram and Messenger.

But after it unveiled Libra in June, Facebook faced questions from lawmakers around the world about its motives in developing its own currency.

French Finance Minister Bruno Le Maire said last month that he would block any attempts to launch or develop Libra in Europe as it poses a threat to "monetary sovereignty".

MPs in the UK expressed similar doubts, claiming Libra was an attempt by Facebook to "turn itself into its own country".

The Libra Association has consistently said that it announced the cryptocurrency months ahead of its planned launch in order to address concerns.

"We welcome this scrutiny and have deliberately designed a long launch runway to have these conversations," a spokesperson recently told The Independent​.

Following PayPal's withdrawal from the project, Libra said it would be meeting in Geneva next week to discuss the controversial cryptocurrency's future.

"This journey to build a generational payment network like the Libra project is not an easy path," the spokesperson said. "We recognise that change is hard, and that each organisation that started this journey will have to make its own assessment of risks and rewards of being committed to seeing through the change that Libra promises."