Facebook unveiled its ambitious cryptocurrency plan in June 2020: it partnered with a couple of dozens of other companies to launch a stablecoin project, then called Libra and now Diem. But, now that’s dead.
The Diem Association earlier this month officially announced its decision to sell its intellectual property and other assets related to running the Diem Payment Network to Silvergate Capital, the holding company of California-based crypto-friendly lender, Silvergate Bank, for a total consideration of $184 million.
So, what happened? Why the social media giant has to pull such a major project?
The short answer is because of the Facebook brand.
Facebook, which has now rebranded itself to Meta and kept the old name only for its legacy social media platform, always touted that it has established the stablecoin project independently in collaboration with its other partners. But, that was clearly not the case.
Diem (then
Libra
Libra
Libra is a yet-to-be-released cryptocurrency proposed by Facebook, Inc., that will aim to serve as a global payment system and a stable financial infrastructure that people across the world can use. The projected release date of the libra cryptocurrency is currently slated for 2020, while the project is currently being managed by the Libra Association.Headquartered from Geneva, Switzerland, the Libra Association main purpose is founded on three pillars.This includes the provision of a framework of governance oversight for the Libra network and Libra reserve, overseeing active operations and longevity of the Libra payment system, and facilitating the flow of services of the Libra Blockchain.The Libra Association is overseen by the Libra Association Council.This is comprised of organizations from the technology, telecommunication, payment, blockchain, venture capital, and nonprofit sectors.The creators of the coin are Morgan Beller, who initially started working on cryptocurrency and blockchain technology at Facebook in 2017, David Marcus, and Kevin Weil. Before the announcement of the Libra cryptocurrency on June 18th, 2019, Facebook had been considering coining the digital currency GlobalCoin or Facebook Coin.Will Libra Ever Launch? Facebook has expressed multiple times that they will not launch the Libra cryptocurrency until all regulatory matters have been met.Facebook CEO Mark Zuckerberg has since assured lawmakers that Libra would not launch without first acquiring approval from United States regulators. Past participants of the Libra Association who left in October of 2019 include PayPal, eBay, Book Holdings, Mercado Pago, Visa, Stripe, and MasterCard. It should be noted that the source code for Libra is written in Rust that is open-source through the Apache License. What’s unique about Libra is that it will not depend upon cryptocurrency mining while only members of the Libra Association will be in a position to validate and process transactions. Facebook plans to launch a digital wallet known as Calibra in 2020, which will serve as an avenue for acquiring Libra along with Facebook Messenger and WhatsApp.
Libra is a yet-to-be-released cryptocurrency proposed by Facebook, Inc., that will aim to serve as a global payment system and a stable financial infrastructure that people across the world can use. The projected release date of the libra cryptocurrency is currently slated for 2020, while the project is currently being managed by the Libra Association.Headquartered from Geneva, Switzerland, the Libra Association main purpose is founded on three pillars.This includes the provision of a framework of governance oversight for the Libra network and Libra reserve, overseeing active operations and longevity of the Libra payment system, and facilitating the flow of services of the Libra Blockchain.The Libra Association is overseen by the Libra Association Council.This is comprised of organizations from the technology, telecommunication, payment, blockchain, venture capital, and nonprofit sectors.The creators of the coin are Morgan Beller, who initially started working on cryptocurrency and blockchain technology at Facebook in 2017, David Marcus, and Kevin Weil. Before the announcement of the Libra cryptocurrency on June 18th, 2019, Facebook had been considering coining the digital currency GlobalCoin or Facebook Coin.Will Libra Ever Launch? Facebook has expressed multiple times that they will not launch the Libra cryptocurrency until all regulatory matters have been met.Facebook CEO Mark Zuckerberg has since assured lawmakers that Libra would not launch without first acquiring approval from United States regulators. Past participants of the Libra Association who left in October of 2019 include PayPal, eBay, Book Holdings, Mercado Pago, Visa, Stripe, and MasterCard. It should be noted that the source code for Libra is written in Rust that is open-source through the Apache License. What’s unique about Libra is that it will not depend upon cryptocurrency mining while only members of the Libra Association will be in a position to validate and process transactions. Facebook plans to launch a digital wallet known as Calibra in 2020, which will serve as an avenue for acquiring Libra along with Facebook Messenger and WhatsApp.
Read this Term) was meant to be used for transactions within the Facebook ecosystem: Facebook, Instagram, Messenger, and whatnot. Though it was formed as a non-profit with a Swiss headquarter, Facebook Messanger’s former Head, David Marcus was appointed as the Chief Executive; however, he resigned in November 2021.
And all this happened when Facebook’s reputation was tainted with the Cambridge Analytics scandal, which raised concerns over how a massive tech company like that is handling user data.
Regulators around the world were just not comfortable allowing a platform like Facebook to launch a private currency of its own. One of the primary concerns was that a private currency of a company with a 2.91 billion monthly active user base might severely impact the fiat currencies. Many regulators and regulatory heads even publicly raised this concern.
Other concerns include the handling of financial data by a company, which was already facing flakes for its mishandling of user data. Mark Zuckerberg, the CEO of Facebook (now Meta) even had to testify in front of US Congress defending the crypto project.
Desperate Attempts
In its original form, Diem was about to be backed by a ‘collection of low-volatility assets like bank deposits and government securities, in currencies from stable and reputable central banks’. In other words, it was another stablecoin in the industry but the stamp of Facebook.
The project faced regulatory backlash from the beginning that also pushed eight of its founding members, including Visa, Paypal, Stripe, and Mastercard, away from the project.
The Facebook-led non-profit was so desperate that it even redesigned the
stablecoin
Stablecoin
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Read this Term and even rebranded the entire project, calling Libra, Diem, and its native wallet Calibra, Novi.
“When Facebook launched Diem, they immediately ran into regulatory issues around financial stability and data privacy,” said Joe Burnett, Mining Analyst at Blockware Solutions.
“With the company already under pressure to improve their data privacy practices, which significantly affects their core business model of serving highly targeted ads based on data extracted from their users, it’s no surprise they wanted to avoid another uphill regulatory battle.”
Facebook’s Crypto Dream Is Not Over
Though the Diem Association has sold its assets, Facebook is not likely calling it goodbye to the crypto industry. The social media company is now betting big on metaverse under the new brand Meta.
Zuckerburg was always vocal about the company plans of creating a metaverse and even showcased a bit of it in some odd demo. Even though a metaverse cannot be co-related directly with crypto, its dependencies on decentralized games and non-fungible tokens (NFTs) will make it necessary t have support for cryptocurrencies.
Diem also retained the Novi wallet that can store only store the Paxos stablecoin USDP.
“Our future initiatives to support commerce in the metaverse also may use blockchain-based assets in digital payments. Use of blockchain-based assets in payments are a relatively new and unproven technology, and the laws and regulations surrounding them are uncertain and evolving,” a recent regulatory filing by Meta stated.
The company also admitted that these type of digital payments is getting scrutinized by the regulators of several jurisdictions. It further said that it cannot assure the roll-out of the products in a timely manner due to ‘significant uncertainty’.
“Every company will likely continue to have a crypto strategy,” Burnett added. “It’s tough to say what Meta’s next move will be, but it wouldn’t be too surprising to watch them follow the steps of MicroStrategy, Square (renamed Block), and Tesla who have accumulated a Bitcoin position on their balance sheet.”
“With Meta’s user growth slowing as of their last earnings report, they could accumulate Bitcoin with their excess cash flow to preserve and grow shareholder value while they look for other opportunities to generate alpha within the company.”
Meta is also reportedly planning to launch an NFT marketplace on Instagram, its photo-centric social media platform.
“I don’t think it is likely that Facebook will, itself, try and issue stablecoins again in the future,” said Mathieu Hardy, Chief Product Officer at OSOM Finance. “But the US regulators currently seem to believe that “private” stablecoins will coexist along with a potential central bank-issued digital currency, so it’s entirely possible that Facebook simply teams up with a stablecoin issuer to do something that ends up looking very similar to what Diem wanted to achieve.”
Facebook unveiled its ambitious cryptocurrency plan in June 2020: it partnered with a couple of dozens of other companies to launch a stablecoin project, then called Libra and now Diem. But, now that’s dead.
The Diem Association earlier this month officially announced its decision to sell its intellectual property and other assets related to running the Diem Payment Network to Silvergate Capital, the holding company of California-based crypto-friendly lender, Silvergate Bank, for a total consideration of $184 million.
So, what happened? Why the social media giant has to pull such a major project?
The short answer is because of the Facebook brand.
Facebook, which has now rebranded itself to Meta and kept the old name only for its legacy social media platform, always touted that it has established the stablecoin project independently in collaboration with its other partners. But, that was clearly not the case.
Diem (then
Libra
Libra
Libra is a yet-to-be-released cryptocurrency proposed by Facebook, Inc., that will aim to serve as a global payment system and a stable financial infrastructure that people across the world can use. The projected release date of the libra cryptocurrency is currently slated for 2020, while the project is currently being managed by the Libra Association.Headquartered from Geneva, Switzerland, the Libra Association main purpose is founded on three pillars.This includes the provision of a framework of governance oversight for the Libra network and Libra reserve, overseeing active operations and longevity of the Libra payment system, and facilitating the flow of services of the Libra Blockchain.The Libra Association is overseen by the Libra Association Council.This is comprised of organizations from the technology, telecommunication, payment, blockchain, venture capital, and nonprofit sectors.The creators of the coin are Morgan Beller, who initially started working on cryptocurrency and blockchain technology at Facebook in 2017, David Marcus, and Kevin Weil. Before the announcement of the Libra cryptocurrency on June 18th, 2019, Facebook had been considering coining the digital currency GlobalCoin or Facebook Coin.Will Libra Ever Launch? Facebook has expressed multiple times that they will not launch the Libra cryptocurrency until all regulatory matters have been met.Facebook CEO Mark Zuckerberg has since assured lawmakers that Libra would not launch without first acquiring approval from United States regulators. Past participants of the Libra Association who left in October of 2019 include PayPal, eBay, Book Holdings, Mercado Pago, Visa, Stripe, and MasterCard. It should be noted that the source code for Libra is written in Rust that is open-source through the Apache License. What’s unique about Libra is that it will not depend upon cryptocurrency mining while only members of the Libra Association will be in a position to validate and process transactions. Facebook plans to launch a digital wallet known as Calibra in 2020, which will serve as an avenue for acquiring Libra along with Facebook Messenger and WhatsApp.
Libra is a yet-to-be-released cryptocurrency proposed by Facebook, Inc., that will aim to serve as a global payment system and a stable financial infrastructure that people across the world can use. The projected release date of the libra cryptocurrency is currently slated for 2020, while the project is currently being managed by the Libra Association.Headquartered from Geneva, Switzerland, the Libra Association main purpose is founded on three pillars.This includes the provision of a framework of governance oversight for the Libra network and Libra reserve, overseeing active operations and longevity of the Libra payment system, and facilitating the flow of services of the Libra Blockchain.The Libra Association is overseen by the Libra Association Council.This is comprised of organizations from the technology, telecommunication, payment, blockchain, venture capital, and nonprofit sectors.The creators of the coin are Morgan Beller, who initially started working on cryptocurrency and blockchain technology at Facebook in 2017, David Marcus, and Kevin Weil. Before the announcement of the Libra cryptocurrency on June 18th, 2019, Facebook had been considering coining the digital currency GlobalCoin or Facebook Coin.Will Libra Ever Launch? Facebook has expressed multiple times that they will not launch the Libra cryptocurrency until all regulatory matters have been met.Facebook CEO Mark Zuckerberg has since assured lawmakers that Libra would not launch without first acquiring approval from United States regulators. Past participants of the Libra Association who left in October of 2019 include PayPal, eBay, Book Holdings, Mercado Pago, Visa, Stripe, and MasterCard. It should be noted that the source code for Libra is written in Rust that is open-source through the Apache License. What’s unique about Libra is that it will not depend upon cryptocurrency mining while only members of the Libra Association will be in a position to validate and process transactions. Facebook plans to launch a digital wallet known as Calibra in 2020, which will serve as an avenue for acquiring Libra along with Facebook Messenger and WhatsApp.
Read this Term) was meant to be used for transactions within the Facebook ecosystem: Facebook, Instagram, Messenger, and whatnot. Though it was formed as a non-profit with a Swiss headquarter, Facebook Messanger’s former Head, David Marcus was appointed as the Chief Executive; however, he resigned in November 2021.
And all this happened when Facebook’s reputation was tainted with the Cambridge Analytics scandal, which raised concerns over how a massive tech company like that is handling user data.
Regulators around the world were just not comfortable allowing a platform like Facebook to launch a private currency of its own. One of the primary concerns was that a private currency of a company with a 2.91 billion monthly active user base might severely impact the fiat currencies. Many regulators and regulatory heads even publicly raised this concern.
Other concerns include the handling of financial data by a company, which was already facing flakes for its mishandling of user data. Mark Zuckerberg, the CEO of Facebook (now Meta) even had to testify in front of US Congress defending the crypto project.
Desperate Attempts
In its original form, Diem was about to be backed by a ‘collection of low-volatility assets like bank deposits and government securities, in currencies from stable and reputable central banks’. In other words, it was another stablecoin in the industry but the stamp of Facebook.
The project faced regulatory backlash from the beginning that also pushed eight of its founding members, including Visa, Paypal, Stripe, and Mastercard, away from the project.
The Facebook-led non-profit was so desperate that it even redesigned the
stablecoin
Stablecoin
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including gold, silver, or others. Advantages of StablecoinsOf note, stablecoins redeemable in currency, commodities, or fiat money are also said to be backed, whereas those tied to an algorithm are not considered to be so.There are several advantages of asset backed crypto. First, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.For example, Bitcoin and altcoins are highly correlated, so that cryptocurrency holders cannot escape periodic price falls. Stablecoins control for this vulnerability, allowing for the diversification of risk in a portfolio.Stablecoins also possess a mechanism for redeeming the asset backing them. This grants an additional level of confidence associated with the coin and are unlikely to drop below the value of the underlying physical asset, due to the effects such as arbitrage.For example, fiat-pegged coins are coins that are tied to a specified amount of fiat currency, usually on a one-to-one ratio (i.e.1 StablecoinX = $1). The companies that issue these currencies must have fiat reserves in the equivalent amount of the stablecoins they have issued.Crypto-pegged stablecoins constitute coins that are tied to a specified amount of another cryptocurrency, such as Bitcoin or Ethereum. Algorithmic stablecoins use supply-and-demand to automatically maintain a stable value.
Read this Term and even rebranded the entire project, calling Libra, Diem, and its native wallet Calibra, Novi.
“When Facebook launched Diem, they immediately ran into regulatory issues around financial stability and data privacy,” said Joe Burnett, Mining Analyst at Blockware Solutions.
“With the company already under pressure to improve their data privacy practices, which significantly affects their core business model of serving highly targeted ads based on data extracted from their users, it’s no surprise they wanted to avoid another uphill regulatory battle.”
Facebook’s Crypto Dream Is Not Over
Though the Diem Association has sold its assets, Facebook is not likely calling it goodbye to the crypto industry. The social media company is now betting big on metaverse under the new brand Meta.
Zuckerburg was always vocal about the company plans of creating a metaverse and even showcased a bit of it in some odd demo. Even though a metaverse cannot be co-related directly with crypto, its dependencies on decentralized games and non-fungible tokens (NFTs) will make it necessary t have support for cryptocurrencies.
Diem also retained the Novi wallet that can store only store the Paxos stablecoin USDP.
“Our future initiatives to support commerce in the metaverse also may use blockchain-based assets in digital payments. Use of blockchain-based assets in payments are a relatively new and unproven technology, and the laws and regulations surrounding them are uncertain and evolving,” a recent regulatory filing by Meta stated.
The company also admitted that these type of digital payments is getting scrutinized by the regulators of several jurisdictions. It further said that it cannot assure the roll-out of the products in a timely manner due to ‘significant uncertainty’.
“Every company will likely continue to have a crypto strategy,” Burnett added. “It’s tough to say what Meta’s next move will be, but it wouldn’t be too surprising to watch them follow the steps of MicroStrategy, Square (renamed Block), and Tesla who have accumulated a Bitcoin position on their balance sheet.”
“With Meta’s user growth slowing as of their last earnings report, they could accumulate Bitcoin with their excess cash flow to preserve and grow shareholder value while they look for other opportunities to generate alpha within the company.”
Meta is also reportedly planning to launch an NFT marketplace on Instagram, its photo-centric social media platform.
“I don’t think it is likely that Facebook will, itself, try and issue stablecoins again in the future,” said Mathieu Hardy, Chief Product Officer at OSOM Finance. “But the US regulators currently seem to believe that “private” stablecoins will coexist along with a potential central bank-issued digital currency, so it’s entirely possible that Facebook simply teams up with a stablecoin issuer to do something that ends up looking very similar to what Diem wanted to achieve.”
Source: https://www.financemagnates.com/cryptocurrency/diem-is-dead-is-facebook-done-with-crypto/