Mastercard CEO Ajay Banga has pointed out some reasons why the payments giant quit the Facebook-led Libra stablecoin project. He had developing concerns over Libra’s business model and compliance.
The 60-year old CEO also worried that the Libra Association’s members would not commit to compliance measures, such as know-your-customer (KYC) and anti-money laundering (AML) controls or data management controls
Libra’s unclear business model
First, Banga does not understand Libra’s business model. He said when we do not understand how money gets made, it gets made in ways we do not like.
He said financial inclusion would mean a government is able to pay citizens in a certain currency, which they must be able to understand how to use and must be usable in day-to-day transactions for items like food. He added that there were no obvious means for the Libra Association to become profitable or make money from its users.
Second, Libra began as a financial inclusion tool, but when it turned into a proprietary digital wallet, Calibra, it raised a red flag for Mastercard. Banga said it does not sound right.
Mastercard left the Libra project alongside its rival Visa back in October. Although Mastercard did not say at the time why it had decided to leave, Visa’s spokesperson said it had pulled out because the project had not been able to “satisfy all requisite regulatory expectations.”
In a lecture series in 2018, Banga considered cryptocurrencies as “junk” and they should not be recognized as a medium of exchange.
Out of the 28 founding members of Libra, eight of them have left. British telecom conglomerate Vodafone was the last to leave in January with the excuse that the firm decided to focus on its own digital payments service.
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