Vodafone is the latest high-profile member to withdraw from the Libra Alliance, following PayPal, Visa, Mastercard, Stripe, Mercado Pago eBay, and others, which have all bailed on the flat lining cryptocurrency designed by Facebook. Facebook has stated Libra will not launch in any market until it first gains approval from the US regulators.

Strategy Analytics view:

Vodafone’s withdrawal from Libra is no surprise to us. Given the global scale of Facebook, regulators in the US and other countries view Libra as a high risk to established financial systems which they currently oversee. The inability of these regulators to control Libra, and fear that it could be used for money laundering and terrorism at scale over encrypted channels have created an insurmountable barrier. And, the final nail in the coffin? Regulators’ have some compelling reasons not to trust Facebook - playing fast and loose with its users data (privacy); Facebook’s inability to control the super-distribution of fake news and malicious content; and Facebook’s avoidance of lawful intercept by applying end-to-end encryption across its family of messaging apps.

Vodafone has publicly urged Facebook to separate from Libra by appointing an independent CEO for Libra. Clearly, that request has fallen on deaf ears. For Vodafone, M-Pesa now remains its primary channel for driving financial inclusion and digital money services to the unbanked across its footprint. However, the slow demise of Libra raises some interesting questions, particularly as central banks in other countries (e.g. China, Canada among others) conduct studies into launching their own cryptocurrencies to rival those from digital players:

• Would a similar alliance between telcos and established providers of financial services be more likely succeed in delivering a similar proposition? E.g. Libra sans Facebook?
• Which types of companies or brand would be best positioned to support the successful deployment and adoption of a cryptocurrency?
• Do consumers see real value in cryptocurrencies and do they care about its potential benefits?
• What (legitimate) use-cases will likely drive cryptocurrency adoption in developed and emerging markets?