Earlier this week, initial members of the Libra Association formalized a governance structure after holding their inaugural meeting in Geneva. The transition happened just days after seven high-profile participants, including Visa, eBay and Mastercard, chose to leave the organization.

Libra’s setback happened amid general regulatory upheaval in the crypto industry: In October alone, United States authorities fined EOS developer Block.One for holding an unregistered securities offering and halted TON — the largest private token offering — over similar charges.

Related: TON’s ‘Force Majeure’ Clause — Is Telegram About to Refund Investors?

Regardless, Facebook’s idea for creating an accessible stablecoin for a wider, international audience lives on. Earlier this month, a group of developers unveiled its plans to push for Libra’s mission without Facebook by launching a permissionless fork. But the social media giant itself is not giving up either. In fact, on Oct. 23, its CEO, Mark Zuckerberg, will finally testify before U.S. regulators regarding the salient digital currency project.

A quarter of the initial Libra members have dropped out

When Libra was first unveiled in June this year, it was backed by 28 members, which formed the foundation of the so-called Libra Association — a not-for-profit, Switzerland-based consortium that essentially oversees the cryptocurrency’s operation. By the time Libra would launch, Facebook noted at the time, the organization could comprise as many as 100 companies.

The Libra Association, in turn, is controlled by the Libra Association Council, which has now been assembled by the remaining 21 initial members. Each of them was required to make a minimum investment of $10 million to secure a position. Moreover, each $10 million investment grants an entity one vote on the council, although no council member can acquire more than 1% of total votes — apparently, to prevent a monopoly.

Once Libra’s governance model was publicly presented along with the cryptocurrency itself, Facebook began to face major regulatory backlash. That resulted in two heated hearings in the U.S. Congress, as well as numerous — and predominantly negative — statements from central banks across the world, among other things. Some countries, namely India, appeared especially hostile, and Facebook has gone as far as to cancel Libra’s rollout there.

Consequently, the morale among the initial members of the Libra Association has started to decline. On Oct. 2, reports emerged suggesting that Visa, Mastercard, PayPal and Stripe were no longer certain whether they wanted to be paid-up participants in Facebook’s digital currency. The Financial Times quoted a person “close to PayPal” who said:

“It doesn’t seem that there was a lot of pre-work done with regulators. [Payments] companies don’t want that [regulatory scrutiny] to bleed into their businesses.”

Two days later, the rumors were proved to be true, and PayPal officially became the first initial member to leave the Libra Association. The payment giant’s spokesperson told Cointelegraph:

“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”

Visa, eBay, Stripe and Mastercard soon followed suit, while Booking Holdings and Mercado Pago were the latest to ditch the Libra Association. An eBay representative explained to Cointelegraph that while the company is still interested in the adoption of blockchain and cryptocurrencies, it is not considering integrating them as part of the company’s payments capabilities at this moment:

“We highly respect the vision of the Libra Association; however, eBay has made the decision to not move forward as a founding member. At this time, we are focused on rolling out eBay’s managed payments experience for our customers.”

The representative from eBay evaded answering the question on whether it felt any external pressure to withdraw from Libra. On Oct. 8, U.S. Sens. Brian Schatz and Sherrod Brown sent public letters to Stripe CEO Patrick Collison, Mastercard CEO Ajaypal Banga and Visa CEO Alfred Kelly, essentially threatening the payment juggernauts to enforce more regulatory scrutiny not only on Libra-related payment activities but on all their payment activities. The senators wrote:

“Facebook is attempting to accomplish that objective by shifting the risks and need to design new compliance regimes on to regulated members of the Libra Association like your companies. If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related payment activities, but on all payment activities.”

Mastercard, Stripe and Visa have not responded to Cointelegraph’s requests to clarify whether the letters were part of the reason they chose to quit the Libra Association. The crypto community, which traditionally leans toward libertarian views, met the move with criticism. Brian Armstrong, co-founder and CEO of major U.S. crypto exchange Coinbase, who is now a member of the Libra Association charter, called the action “un-American.”

The Netherlands-based PayU is now the only remaining payment processor on the Libra Association board. While the company claims to reach as many as 2.3 billion consumers, it works predominantly in developing markets, hence excluding the U.S. and most European territories, where regulators seem to be most alert. PayU’s representative told Cointelegraph:

“We believe that the design of the Libra ecosystem has the potential to address a number of societal needs by providing financial inclusion and access to the unbanked and underbanked communities, through the reduction in costs, providing near real time settlement and opening up the market to more innovation. We look forward to collaborating with current and future members of the association as we work towards serving the underserved communities by enabling financial inclusion.”

The senators’ letters could have indeed influenced the payment giants to quit, Juan M. Villaverde, chief crypto analyst at Weiss Ratings, suggested. In an email sent to Cointelegraph, he argued “Companies simply are seeking to avoid any unwelcome scrutiny. They don’t want to be in the crosshairs of regulators.” Moreover, Villaverde mentioned the pushback can be extended to other areas beyond payment providers:

“I don’t think the regulatory backlash will be confined to payment providers only. If governments insist on stopping this project dead in its tracks, they’ll target any big-name company that wants to join the Libra Association.”

Therefore, almost any member of the Libra Association, particularly those who conduct their business in the U.S., is not entirely safe from receiving similar threats from regulators. A centralized model adopted by Libra might be the weakest point of Libra, as members become easy picking for the regulators. The analyst concluded:

“If regulators manage to get companies to stay out of the Libra Association, then the project will be dead in its tracks. This is why decentralization and being permissionless matters in DLT. This ‘attack vector’ does not exist in the likes of Bitcoin or Ethereum.”

Libra says it’s not “in jeopardy” — over 1,500 members are willing to join

Facebook seems to be remaining calm despite the recent losses. On Oct. 15, days after a string of high-profile departures, Bertrand Perez, chief operating officer and interim managing director of the Libra Association, reassured that he is still confident 100 members will have joined the group by the time the project launches.

While Perez did not mention any specific players that could join the association in the near future, he teased some announcements about the membership “in the coming months.” The timeline for Libra’s launch — originally targeted for the first half of 2020 — could be rescheduled, as the group is working to comply with regulations. He finished by echoing Zuckerberg’s comment on the matter.

Related: Zuckerberg’s Charm Offensive on Behalf of Libra With US Lawmakers

In a press statement shared with Cointelegraph, the Libra Association mentioned that “over 1,500 entities have indicated interest in joining the Libra project effort, and approximately 180 entities have met the preliminary membership criteria.” According to Villaverde, there are no irreplaceable Libra members “other than possibly Facebook itself”:

“The reality is Libra’s Federated Consensus model can run with as few as 15 members.

Take Hedera Hashgraph, for example. The worst case scenario for Libra is they’ll have to tone down their ambitions.”

Antoni Trenchev, co-founder of crypto lending firm Nexo, told Cointelegraph that it has been ready to join the association and set the foundations “quite a while ago.” According to Trenchev, for now, though, the company is waiting for the regulatory dust to settle, saying “We definitely expected Facebook to have done more legwork prior to getting full steam ahead.” However, the current situation could be seen as a trial by fire for Facebook. Trenchev continued:

“We do believe that they will learn from this faux pas and change this mentality by refraining from blue-sky thinking in the future. Entities will also be given sufficient time to evaluate everything instead of making rushed decisions, which will benefit everyone in the long run.”

Furthermore, even though the current situation might look dramatic, there is a chance that the companies that are now leaving will reconsider their stance toward Libra later on. Villaverde told Cointelegraph, “They’re afraid of regulatory backlash around the globe. Once the dust settles on the regulatory front, don’t be surprised if they come back knocking.”

That assumption coincides with Facebook’s current position. In an interview with Yahoo Finance on Oct. 15, Calibra’s David Marcus argued that Libra is “absolutely not” in jeopardy after PayPal, Visa, Mastercard, Stripe, eBay, Mercado Pago and Booking Holdings left the association. Notably, he also emphasized that companies outside the formal association will still be able to offer services on the platform, including the ones that have left the group:

“One thing that is not well understood is that you don’t need to be a member of the Libra Association to build services and products. So, if Visa and Mastercard want to issue cards for Libra wallet at a later stage, they can still do it without being members of the association.”

OpenLibra — a permissionless fork trying to outrace the Facebook-lead project

While Facebook continues to find its way out of the regulatory morass, the competition is actively trying to seize the moment. China’s government-sanctioned digital currency, Walmart’s own stablecoin, Binance’s Venus project and EuroCoin are just a few examples of how governments and private companies are developing, or researching, Libra-like coins.

The latest example, however, comes from a third party. On Oct. 8, Lucas Geiger, co-founder of blockchain infrastructure startup Wireline, announced OpenLibra — a permissionless fork of Facebook’s planned stablecoin. According to the project’s website, OpenLibra aims to become “an alternative to Facebook's Libra, that places emphasis on open governance and economic decentralization.” It says:

“OECD Governments will be focused on their own outcomes, and in reality have little legislative power to leverage against a transnational force such as Facebook's Libra. For that reason we are creating OpenLibra.”

Per its Github page, OpenLibra replicates the open source code of Libra but adopts it for Tendermint blockchain software. That makes little sense, says Villaverde, given that Libra’s code itself is not what makes the project so important. “Libra isn’t special AT ALL from a technological standpoint,” he told Cointelegraph, elaborating:

“Stellar, Hedera Hashgraph and XRP run on very similar consensus models. What makes Libra different is the caliber of the companies that want to form part of its federated consensus.”

This makes it hard for any other company to replicate the initiative as its success and backing of the multibillion-dollar companies cannot be forked unlike the distributed ledger technology that underpins the system. Villaverde added, “Unless they support OpenLibra as well — which they will not — then OpenLibra could become the equivalent of Ethereum Classic, a sideshow to Ethereum.”

Maxime Gagnebin Ph.D., Research Scientist working on the blockchain application platform Lisk.io, agreed with that point. “Mass adoption for Libra would have to come from those big partners which would give the Libra blockchain a feeling of legitimacy that you lose as soon as you lose these big partners,” he told Cointelegraph.

Ironically, OpenLibra is also off to a rough start: Soon after the announcement was made, niche media reported that the project’s founder, Geiger, misrepresented at least four individuals and organizations involved in the project. OpenLibra has not responded to Cointelegraph’s request for comment.