As Payment Firms Abandon the Libra Association, Who’s Next to Go?
Following last week’s news that PayPal was backing out of the Libra Association, almost all of the payment firms initially linked to the project have now announced their departure.
Over the weekend, news emerged that Stripe, Visa, Mastercard, Mercado Pago, and eBay have all abandoned Facebook’s beleaguered cryptocurrency, striking a blow to Mark Zuckerberg’s plans to create a global payments mechanism.
Regulatory uncertainty appears to be the driving force for the Libra dropouts. But there are a few other members of the Libra Association that are no strangers to lawmakers.
With the cloud of regulatory uncertainty showing no signs of clearing, will the companies already dealing with the turning tide of public opinion be next to leave Libra in the lurch?
A company on first-name terms with regulators across the globe, Uber has to be top of the list. The ride-sharing giant has contended with legal issues in pretty much every jurisdiction in which it operates. Back in 2017, Uber lost a case in the Court of Justice of the European Union. (CJEU) In this case, it was attempting to deny its status as a provider of transport, claiming instead it was an “information services provider.”
The outcome created a ripple effect, as each European nation has interpreted the ruling according to its own laws. This has led to further woes for Uber. For example, in the UK, the company then had to contend with the question of whether its drivers are employees entitled to all the benefits of employment or if they’re independent contractors. The courts ruled that they are indeed employees, leading to a further dispute over whether the company should have been charging VAT on all its rides.
This is just one example, and there are dozens more. As a member of the Libra Association, it will come under further regulatory inspection regarding its involvement in the cryptocurrency.
Given it doesn’t operate in Europe, Lyft has escaped the wrath of the CJEU. However, operating exclusively in North America doesn’t mean it’s managed to escape unscathed. Together with its biggest rival, Lyft has also had to contend with legal wrangles over the employment status of its drivers in California. In September this year, legislators in Sacramento passed Assembly Bill 5, forcing Uber and Lyft to start treating their drivers as employees from January 2020.
Lyft and Uber have also been hit with a class-action lawsuit from a group of wheelchair users in the US. The claimants are suing under the Americans with Disabilities Act, claiming that the lack of on-demand ride-sharing for people in wheelchairs is in violation of the terms of the Act.
Another tech unicorn that’s had its fair share of legal run-ins over the years, could Spotify be among the next to walk away from the Libra Association? In December 2017, the music streaming giant settled a lawsuit with publisher Wixen over claims that it was using music without the correct licensing.
The settlement cost Spotify $1.6 billion. A sum that, despite its size, still seems like small fry when you consider that the complaint alleged that the company failed to pay royalties 21 percent of the time, and the size of its catalog was 30 million songs at the time.
More recently, Eminem’s publisher filed a lawsuit for the same issue, claiming that Spotify was streaming music for which it didn’t have a copyright license. The court documents state that the company placed the song “Lose Yourself” into its “Copyright Control” category, which it uses when it doesn’t know who owns the song.
Although Spotify wasn’t around in 2003 when “Lose Yourself” won an Academy Award for Best Original Song, it seems a shaky defense.
Coinbase has always gone to great pains to maintain a spotless record as far as the law is concerned. It’s one of the few crypto companies that obtained a Bitlicense allowing it to trade cryptocurrencies in New York. It recently delisted Zcash in the UK after its banking partner expressed discomfort with the privacy coins apparent lack of traceability.
Coinbase is also registered as a Money Service Business with FinCEN.
So, Coinbase really has very little to worry about if the regulators decide to start digging into its business as a result of it being part of the Libra Association.
For no other reason than it’s the last payment company left standing in the Libra Association, Dutch PayU could be among the next to go. It hasn’t yet indicated as such, but refused to provide any comment when approached about the news regarding the exit of the other members.
This silence could simply be because nothing has changed from PayU’s point of view, but no news doesn’t necessarily mean good news.
Can the Libra Association Survive?
Of course, all this is pure speculation. However, the Libra Association has been hemorrhaging members in the last few days. It isn’t a huge leap to assume that, with their reputation and core business in mind, more will follow soon.
If they do, the Libra Association may soon be nothing more than the digital asset department of Facebook.