Quiet burial for the Diem stablecoin
Plans announced by Facebook back in June 2019 to launch a stablecoin to act as the internet’s main currency have been shelved indefinitely according to reports, after the initiative’s ambitions were significantly scaled back and several planned launch dates came and went.
Bloomberg's report suggests that Facebook founder Mark Zuckerberg has given up on the project and that his company – more recently rechristened Meta – is seeking to sell its assets and return capital to investors. The planned cryptocurrency has also undergone a change of name in the two and a half years since the first announcement; originally known as Libra but more recently amended to Diem.
Informed sources told Bloomberg that Diem is in discussions with investment bankers to determine the best way to sell its intellectual property and cash out on whatever value the project has maintained.
Pulling the plug will end Facebook's grand plan to bring cryptocurrency, or more specifically stablecoins, to the social network’s billions of users, commented Seeking Alpha’s bulletin Wall Street Breakfast.
“The idea was to have money spent, transferred and paid across its platform just “as easily as sending a text message” and could even bring financial services to many of the world's underbanked citizens. While the company initially hoped to peg the asset to a basket of currencies, which used distributed ledger technology (DLT), it eventually narrowed its focus to one-for-one to the dollar to reduce volatility”.
At the time of Diem’s – or Libra’s – launch on 18 June 2019 Facebook said that the currency would be maintained by a Switzerland-based consortium of 28 companies called the Libra Association. However, the plans received a hostile reaction from the US government and various regulatory bodies around the world, who raised concerns around privacy and monetary sovereignty.
Policymakers cited existing privacy concerns about how Facebook handles user information, and they saw the potential for the new scheme to enable crime, money laundering and erode their control over the monetary system. Both Zuckerberg and former Libra head David Marcus were summoned to testify before the US House Committee on Financial Services. The negative reaction saw several of the original 28 founder members depart before the end of 2019, with PayPal, eBay, Stripe, Visa and Mastercard among those making an early exit.
Last October, Facebook – now rechristened Meta – finally launched a small pilot to test its Novi crypto wallet. However, with the planned launch of the Diem cryptocurrency in early 2021 further delayed it substituted a different stablecoin called the Pax Dollar. This also sparked criticism from lawmakers.
At the end of November Marcus, now the leader of the Novi financial technology unit – announced that he would be leaving Meta at the end of 2021. The project also attempted to move its operations from Switzerland to the US, with the crypto-focused bank Silvergate Capital becoming the exclusive issuer of Diem. However, reports state that the Federal Reserve “dealt the effort a final blow.”
Meta currently owns about a third of the Diem venture, with the other two-thirds retained by venture capital firms and tech players that are members of the association and reported to include Coinbase Global, Uber and Shopify. While discussions are still in the early stages, Bloomberg reports that Diem’s intellectual property might be sold so that capital could be returned to its investor members. The association is seeking a new employer that might “take on the engineers who developed the technology, and cash out the value left in the project”.
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