Facebook-Led Digital Currency Pivots to US Dollar Stablecoin

Diem is moving its operations to Washington, DC, and the Diem Payments Network will register with the Financial Crimes Enforcement Network (FinCEN) as a money services business.

article-image

Source: Shutterstock

share

key takeaways

  • The Facebook-initiated digital currency project Diem will partner with Silvergate Bank to launch a stablecoin pegged to the dollar
  • The project, formerly known as Libra, rebranded to Diem in December in anticipation of a 2021 launch

The Facebook-initiated digital currency project Diem has said it will shift its operations to the US and partner with Silvergate Bank to launch a stablecoin pegged to the dollar.

The project, formerly known as Libra, rebranded to Diem in December in anticipation of a 2021 launch. It has been working to change its vision and strategy since it was first introduced in 2019, when it was met with hostility from global regulators who opposed a new corporate-issued private currency that would compete with government-issued currency.

“We are committed to a payment system that is safe for consumers and businesses, makes payments faster and cheaper, and takes advantage of blockchain technology to bring the benefits of the financial system to more people around the world,” Stuart Levey, chief executive officer of Diem, said in a statement Wednesday.

Moving operations

Diem was formerly based in Geneva, Switzerland and was seeking a license from the Swiss Financial Markets Authority. Now, it’s moving its operations to Washington, DC and the Diem Payments Network will register with the Financial Crimes Enforcement Network (FinCEN) as a money services business.

The crypto-friendly Silvergate Bank will issue the Diem stablecoin and manage the dollar reserve backing it.

Before Facebook formally announced Libra in 2019, the social media giant had already faced pushback from lawmakers over its handling of consumer data and privacy. Facebook CEO Mark Zuckerberg and head of Novi (Facebook’s digital wallet, which also underwent a rebranding, from Calibra) David Marcus had repeatedly assured critics the project would not move forward until U.S. regulators’ concerns were satisfied. As a result, the idea of Diem had morphed and its development seemed to come to a halt until recently. 

Diem Association disassociation

The Diem Association, the consortium of businesses and nonprofit organizations that govern the digital currency, initially launched with 28 members. Not long after the backlash, many of its most prominent members, including PayPal, Visa and Mastercard, withdrew

Since then, PayPal has launched a business division dedicated to crypto, Mastercard has said it will support certain digital assets for settlement on its network this year and Visa has established a pathway for digital currency settlement in the stable coin USDC.

For many companies in the business of digital assets (building wallets, applications and leveraging cryptocurrency networks in other ways) there’s a big and frequent issue whenever they try to settle payments: banks require they be settled in fiat, forcing companies to convert their digital currency to fiat and take on the fees that come with that.

Stablecoins are designed to minimize the volatility of other digital assets. They provide an intersection point between cryptocurrency networks and the fiat payment networks and allow for cross-network settlements. 

Tags

Upcoming Events

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Avail.jpg

Research

Data publishing costs have historically been a bottleneck for rollups, and as more rollups launch, interoperability will continue to be a major challenge. Avail presents a potential solution to rollup fragmentation through its three products: Avail DA, Nexus, and Fusion, which together aim to unify the web3 experience.

article-image

Following the halving, bitcoin’s hovering around $63,600

article-image

Bitcoin’s price was mostly unchanged following the event that occurs roughly every four years 

article-image

The Bitcoin halving is a spectacle that only comes round once every four years

article-image

The SEC alleges that Justin Sun spent nearly 400 days in the US from 2017 to 2019

article-image

Short-term “sell the news” reactions could follow new BTC price peaks months from now, industry watchers say — but only if history repeats itself

article-image

While crypto fundraising remains well off its bull market highs, Q1 data shows capital is returning to the space