After nearly three years, the Diem Association, formerly known as Libra and backed by Facebook, is planning to sell its assets, according to a recent report published by Bloomberg.
Since the Facebook corporation, now called Meta Platforms, announced its plans to create a cryptocurrency backed by a basket of fiat currencies, global regulators began to turn against it. The excessive economic power that a non-financial company like Meta, with more than 3.000 billion users worldwide, can accumulate is a huge risk for financial stability. Even the crypto community almost completely rejected its plans to create a digital currency and manage financial data, considering the chaotic history the company has had in managing the personal data of its billions of users.
Constant data leaks, unethical management and the lack of security and transparency offered in the handling of data are part of the reality that has reached the company founded by Mark Zuckerberg, which seems to be planning to dissolve the controversial Diem cryptocurrency project. Bloomberg, the prestigious American financial advisory company, reported that the Diem Association, backed by Meta Platforms, is planning to sell its assets, dissolve the association and return capital to its investors.
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Facebook's Diem Partnership is collapsing
According to Bloomberg's report, Facebook's cryptocurrency project is crumbling in the face of the regulatory pressure it has had to endure since it was first announced in 2019.
In the United States, the Federal Reserve (FED), the Office of the Comptroller of the Currency (OCC) and the Federal Trade Commission (FTC) are among the regulators that have spoken out against the company’s plans to issue its own digital currency. At a global level, the Diem Association has also encountered regulatory hurdles, with the Bank for International Settlements (BIS), the Group of Seven (G7) and the German Finance Ministry pointing out the potential risks to global financial stability that the issuance of a digital currency like Diem would bring.
Faced with regulatory pressure, Facebook changed its plans and scaled back its ambition, saying it would issue a dollar-pegged digital currency rather than a global cryptocurrency. Despite the company’s adjustments to meet regulators’ demands, and the association’s emphasis on being an organization separate from Facebook, the Diem cryptocurrency project remains unpopular with regulators, prompting the Diem Association to consider selling its assets and dissolving.
“Diem is in talks with investment banks on the best way to sell its intellectual property”, Bloomberg reported.
Mass flight of partners
Facebook's ambitious cryptocurrency project started in 2019 with 27 members and investors, including Stripe, Paypal, Mastercard, View, eBay y MercadoPago, who massively abandoned the project a few months later, due to obstacles and regulatory pressure.
As well, David Marcus, who led the Diem project from its inception, recently announced his departure to pursue other plans and goals. Other people like Riyaz Faizullabhoy y Nassim Eddequiouaq, they abandoned their positions within the company to start at the crypto division of venture capital firm Andreessen Horowitz, a current Diem Association member. However, for the developers who remain within the Association, Bloomberg reported that the association is trying to find “a new home” for those who have been building the technology behind Diem.
Novi, Pax Dollar instead of Diem
One of the Diem Association’s most recent successes was the launch of its digital wallet Novi. In October 2021, the association announced the launch of Novi in the United States and Guatemala, in order to facilitate the sending of remittances between the two countries. However, Novi was launched with the Pax Dollar (USDP) stablecoin instead of its own Diem stablecoin. At the time, Marcus noted that Diem would not go public until it received the necessary regulatory approval for its issuance.
Novi has been implemented on messaging app WhatsApp to allow select users in the United States to send value with USDP from message chats.
Despite the progress made with Novi, the chances of Diem going public now appear to be slim to none. Bloomberg clarified that discussions of a possible dissolution of the Diem Association are not yet public and that there is no guarantee of finding a buyer.
Image taken from Pixabay
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