Facebook to launch Diem, a stablecoin that will compete with U.S. dollar
It wasn’t long ago that Facebook wanted to revolutionize the finance world with the launch of its own global digital currency called Libra Coin. For almost a year, the news about Libra dominated the headlines and how it would forever change the world economy.
Facebook Libra Coin was first announced on June 18th as a game-changing cryptocurrency that will upend US dollars and empowers billions of people around the world. However, Libra Coin faced strong opposition from governments around the world.
Then in a blow to Facebook, the tech giant lost several backers. In October 2019, five corporate backers, Visa, Mastercard, Stripe, eBay, and Mercado Pago joined PayPal in announcing they would no longer be part of a Facebook-backed digital payment group, Libra Association. The final nail in the coffin came in summer of 2019 after the regulators stopped the project on its track, citing national security concerns. The US lawmakers also considered a bill that would ban Facebook Libra and other big tech companies from offering financial services and digital currencies.
However, in December 2020 at the time when the country was still going through the coronavirus pandemic, the Libra Association quietly went through a complete makeover, resurrected itself, and changed its name to “Diem.” Diem is an independent group organized by Facebook to manage digital currencies. Its members include Andreessen Horowitz, Coinbase, Spotify, Lyft, and Uber.
Fast forward four months later, the Diem Association it’s aiming to launch a pilot with a single stablecoin pegged to the U.S. dollar in 2021, according to a report from CNBC, citing a person familiar with the matter. The association, which is now based in Switzerland, is currently in talks with Swiss financial regulators to secure a payment license.
Per CNBC, the person, who preferred to remain anonymous as the details haven’t yet been made public, “said this pilot will be small in scale, focusing largely on transactions between individual consumers. There may also be an option for users to buy goods and purchases, the person added. However, there is no confirmed date for the launch and timing could therefore change.”
According to its updated whitepaper, Diem Association said four key changes have been made to address regulatory concerns that deserve specific attention, each of which is addressed briefly below and then in more depth in the updated white paper: “Offering single-currency stablecoins in addition to the multi-currency coin, enhancing the safety of the Libra payment system with a robust compliance framework, forgoing the future transition to a permissionless system while maintaining its key economic properties, and building strong protections into the design of the Libra Reserve.”
So, what’s next for Diem? Even though the Diem Association has lost some key members like Visa, Mastercard, and Stripe, the association may face new regulatory challenges from international financial regulators as details of the project execution unfold.