More than two years ago, Facebook went public with its controversial stablecoin plans. These have not yet been implemented, but the project is now turning its back on its Swiss homeland.
The Diem Association is about to change course again. The consortium around Facebook is planning to issue their stablecoin in the USA for the time being. The organization announced this on May 12th by Press release and also announced a cooperation with the Californian Silvergate Bank.
Diem actually wanted to launch the stablecoin (Diem USD) linked to the US dollar in Switzerland. It has now withdrawn the application to the local regulatory authority FINMA. Instead, they’ll apply for membership in the US Financial Crimes Enforcement Network (FinCEN) make an effort.
Diem justifies the move to the USA with the changing crypto regulatory climate in the country. CNBC reported that the consortium’s headquarters will be located in Washington DC.
Diem cooperates with Silvergate
In the course of the partnership, Silvergate Bank, known for its crypto affinity, is responsible for issuing and managing the stablecoin reserves. The Network US, however, will be responsible for the operation of the payment infrastructure. Unlike Bitcoin, Diem USD does not run on a public, but on a permissioned blockchain. Access to the stablecoin is therefore only given to authorized participants.
Alan Lane from the Silvergate executive suite affirmed the transformative potential of stablecoins in his statement. As expected, CEO Stuart Levey was also benevolent:
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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. We look forward to working with Silvergate to make this shared vision a reality.
Stuart Levey, CEO Diem Association
It is still unclear when the stablecoin will see the light of day. Rumor has it that a Diem pilot project is scheduled to start this year.
Facebook under attack
Facebook’s stablecoin project has been in development since 2019. Diem, once known as Libra, has since attracted displeasure from government officials and government agencies around the world. The original draft provided for a globally available means of payment that should be secured by a whole basket of different national currencies. The Libra Association was also able to gather a considerable selection of major financial service providers, many of whom have since turned their backs on the project.
Given Facebook’s enormous reach, many saw Libra as a threat to the state’s currency monopoly. Mark Zuckerberg even had to answer personally before the US Congress. The whole debate also provided an important impetus for the regulation of stablecoins and the dispute with state digital bank currencies.
Since its rebranding as Diem, the project has therefore pursued more modest goals. Instead of a global currency, a range of different stablecoins are now planned, which are to be linked to individual national currencies. The USD should make the start.
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