Facebook's Diem digital currency project moves to the U.S.
May 13, 2021 4:47 AM ETMeta Platforms, Inc. (META)METABy: Yoel Minkoff, SA News Editor16 Comments
- A long-delayed digital payments project from Facebook (NASDAQ:FB), called Diem (formerly known as Libra), is pursuing yet another avenue to get its model off the ground. The company is relocating its main operations from Switzerland to the U.S. as it scales back its global ambitions. It even withdrew its application for a payment system license from the Swiss Financial Market Authority, noting that the certification wasn't necessary as it pursues a different direction.
- "It's a realization that the effort will require a presence that is acceptable to U.S. regulators," said Richard Levin, chairman of financial technology and regulation practice at law firm Nelson Mullins.
- Flashback: Facebook first unveiled Libra in June 2019 as part of an effort to expand beyond social networking and "empower the billions of people" that don't have bank accounts. The project, which was backed by a basket of major currencies, immediately ran into fierce opposition from policymakers around the world. There were already existing privacy concerns about how Facebook handled user information, and they saw the potential for the new scheme to enable crime, money laundering and erode their control over the monetary system. A quarter of the project's founding members also dropped out before the inaugural meeting in Geneva, including PayPal, eBay, Stripe, Visa and Mastercard.
- Current efforts: Diem Networks U.S., a unit of the Diem Association, will run a blockchain-based payment system that allows real-time transfer of Diem stablecoins and will be registered with the U.S. Department of the Treasury's Financial Crimes Enforcement Network. Diem's scope will be scaled back to a single dollar-backed digital coin, which will be issued and managed by California-based Silvergate Bank. While the company has played an outsized role in the initial phases of the project, Facebook says that after the network has launched, its role and responsibilities will be the same as any of the other founding members.
- Back in January, other backers of the Diem project, including Uber and Spotify, said they'll wait to see how the public receives the currency before electing to use it.