Facebook’s planned stablecoin once looked like a red rag to regulators. These times seem to be a thing of the past, however, because the Diem team is trying with all their might to change their own image.
Facebook’s Diem is just a placeholder on the road to becoming a US central bank digital currency (CBDC). At least that’s how Christian Catalini imagines it, the chief economist behind the stablecoin formerly known as Libra. He dreams of a productive penetration of public and private payment infrastructure.
As part of the Coindesk organized Consensus 2021 Catalini recently pondered the development of Diem. He described the highly controversial initial plans for the project as naive. At that time, the stablecoin was designed as a global means of payment that was supposed to be supported by a range of national currencies.
After a huge backlash, Libra was renamed Diem. For the time being, the US dollar remained the only local currency to be mapped for the stablecoin, which could go live this year. However, it appears that the emphasis on cooperation with the regulatory authorities moved to the top of the project agenda.
Diem as a CBDC supplement
After a stopover in Switzerland, Diem announced his return to the USA just a few weeks ago. As a reason, advances in crypto regulation were launched in Washington. With the declarations of loyalty to the authorities, Catalini has now gone one step further. He clearly subordinated his planned stablecoin to a state CBDC:
The public sector has a great competitive advantage in developing everything to do with stability, money, value preservation and macroprudential policy. We don’t want to change anything about that. Rather, we want to build on this infrastructure and leverage it to accelerate use cases for consumers both domestically and globally.
Catalini envisions the evolution of the US financial infrastructure towards a layered model. A state CBDC could therefore form the basic layer in the future. He imagines Diem, however, as “a payment network that enables new use cases and applications, in addition to what the public sector will use.”
No global substitute currency
Catalini also did not leave other criticisms of the project uncommented. Since the social media giant Facebook is significantly behind the project, discussions about data protection always accompanied the development of the stablecoin. Catalini also promised groundbreaking innovations here. O-Ton: “Diem becomes private by design.” Of course, they are still working hard on better countermeasures against money laundering.
The chief economist also emphasized that Diem also worked with financial authorities and central banks outside the United States. Particularly interesting: People from inflation-ridden countries who use the US dollar as a store of value should therefore not see Diem as a viable alternative.