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Is the meta stablecoin Diem on hold?

 


“Bank the Unbanked” was the motto of the stablecoin project Diem. The consortium was founded in 2019 by Facebook (today Meta), supported by well-known companies such as Andreessen Horowitz and in the past Mastercard and Visa. On the website and in lectures, it was always said that Diem wanted his project to give everyone affordable access to finance who was previously without a bank account.


Diem regularly made headlines with this idea of ​​a stablecoin issued by private companies. According to insider reports from Bloomberg , the end of the stablecoin, which was once traded as “Facebook Coin”, seems to have been decided.


What happened?

Meta did not respond to questions about the reasons for this step by the time of going to press. Despite this, Bloomberg said the sell-off of the company's assets would begin and Meta would scramble to find new jobs for developers. Meta holds two-thirds of the shares, while the remaining consortium members hold one-third.


Looking back at the events of the past year, the storm has been brewing since November 2021 at the latest. Admittedly, the project has not been under a lucky star since it was founded and announced.


Nevertheless, three reasons in particular for Diem's ​​failure can now be named:


1. European regulators against the project

As soon as the white paper was published in June 2019, there was an outcry from European regulators. At that time, Diem was still called Libra, was based in Switzerland and had just submitted an application to the Financial Market Authority to operate a payment system. The critics saw the danger in one thing above all:


increasing risk of promoting black markets, money laundering and terrorism,

the threat to data security,

an attack on the role of the European Central Bank and

the threat to financial market stability, particularly in times of crisis.

At the time, Zuckerberg emphasized the will to cooperate. Still, companies like Mastercard and Visa left the project. In addition, the critics did not calm down after the publication of the updated Whitepaper 2.0. At an online meeting of finance ministers and central bank governors in December 2020, Olaf Scholz, current Chancellor and then Finance Minister, said: "A wolf in sheep's clothing is a wolf".


Eventually , Libra renamed itself Diem. The project and consortium then turned their backs on Europe and moved to the USA – hoping to get more support here.


2. American authorities also critical

In the US, Diem probably ultimately failed because of the Fed. After moving to America , the Diem Association initially stamped the project properly. The original Diem stablecoin based on a weighted basket of currencies (EUR, USD, Pound, Yen and RMB) ultimately became the Diem USD stablecoin.


For this, Diem won Silvergate, a business bank for crypto and business, as an issuer. However, the Fed dealt a "final blow" to this partnership by threatening the bank, it said. That was the final whistle.


3. Original developers: inside long out

In 2021, the first founding developers left the project. After the idea generator and former head of NOVI, David Marcus, announced his resignation at the end of the year in November, the last one seemed to have lost his conviction.


Nevertheless, an initially hopeful NOVI pilot project started in Latin America. Despite this, no project involving the US dollar came about. Instead, there were rumors that NOVI was collaborating with the Paxos stablecoin.



And yet, regardless of what you think of Meta or the idea of ​​a private global company wanting to launch a global cryptocurrency, Diem has to be given credit for fueling the cryptocurrency debate around the world. This resulted in some opponents, but also some supporters.

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