Key Takeaways
- Anonymous sources have revealed that Facebook is selling the technology behind its Diem stablecoin.
- Silvergate Capital Corp has reportedly agreed to buy Diem for $200 million.
- The sale marks the end of Facebook’s long standing battle to get Diem approved by U.S. regulators and lawmakers.
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Facebook’s cryptocurrency initiative Diem appears to be coming to an end. Reports emerged that the company would sell its technology to California bank Silvergate Capital Corp for $200 million.
Facebook Drops Diem
It appears Facebook is done with the Diem stablecoin.
Reports emerged Thursday morning that the social media service operating under Meta Platforms Inc would sell the technology behind its Diem stablecoin in a bid to pay back its early investors. Anonymous sources told the Wall Street Journal that the California bank Silvergate Capital Corp has agreed to purchase Diem for $200 million.
Diem (formally Libra) launched in 2019 and was pitched as a way for Facebook users to seamlessly transact on the social media platform without the need for third-party intermediaries or complex currency conversions.
From the beginning, Diem’s development has been plagued with issues, both from a regulatory standpoint and due to members of Congress opposing the project, citing privacy and antitrust concerns. The President’s Working Group on Financial Markets doubled down on these concerns, stating that combining a stablecoin issuer with a big corporation “could lead to an excessive concentration of economic power.”
Diem’s regulatory woes came to a head in 2019 when Facebook CEO Mark Zuckerberg defended the project before congress in an attempt to get lawmakers on its side. Despite Facebook enlisting the support of fintech giants Visa, PayPal, Mastercard, and Stripe, regulators were not convinced Diem would meet all regulatory and compliance needs.
In a last-ditch attempt to address Diem’s regulatory issues, Facebook brought on Silvergate Bank in May 2021 to issue the Diem stablecoin, a move that the company hoped would help aid the regulatory process after years of opposition. However, the partnership was ultimately unsuccessful in addressing Diem’s issues, as it appears Facebook is finally throwing in the towel.
In recent months, opinions on stablecoins have been mixed. In December, the U.S. Senate Banking Committee held a hearing on stablecoin regulation, with several senators expressing hesitancy over incorporating dollar-pegged crypto assets into the wider economy. More recently, a consortium of U.S. banks proposed a new USDF stablecoin to offer a more secure stablecoin option for consumers in the U.S.
While the Diem stablecoin was unsuccessful for Facebook, future private stablecoins may have better luck as policymakers become more receptive to the idea of digital dollars.
Disclosure: At the time of writing this feature, the author owned ETH and several other cryptocurrencies.
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