Facebook’s cryptocurrency dreams shattered

Facebook’s cryptocurrency dreams shattered
Mark Zuckerberg had planned to launch his own cryptocurrency, but the bank that was supposed to do so has taken over his “Diem” project and plans to issue its own stablecoin as early as this year.

A dead end for Zuckerberg’s project

The association behind the “Diem” project announced Monday it was divesting its assets and intellectual property to Silvergate Capital, a crypto bank.

Through a combination of stock and cash, the bank paid $182 million for the project.

Silvergate revealed that the assets purchased from Diem, include the development, implementation and operational tools needed to launch a Blockchain-based payment network.

Diem was intended to be a stablecoin alternative to fiat currencies, with coverage in a wide range of currencies and government debt. However, the crypto project announced by Facebook in 2019 was put on hold for a significant period of time by regulatory pressures. 

One of the risks was that Diem was seen as a potential threat to the US dollar, as social media giant Facebook has nearly 2 billion active users. The lack of user privacy protection and the fear that Diem could disrupt financial stability were the main reasons why the project faced many obstacles and was eventually stopped.

The project even tried rebranding from Diem to Libra to gain acceptance, but even this did not help it.

First it was abandoned by prominent sponsors such as Mastercard, Visa and PayPal – due to endless scrutiny. And then that year, David Marcus, a Facebook executive who oversaw cryptocurrency ventures, left. 

Diem contacted global regulators for feedback, which helped the project move forward. But over time, “it began to be obvious from the dialogue with federal regulators that the project could not move forward,” said CEO Stuart Levey.

Marcus expressed his frustration at the behaviour of some regulators in a Twitter post on Monday.

Silvergate’s stablecoin on the market this year

Silvergate is one of the few traditional banks to have looked into cryptocurrencies so far.

The San Diego-based bank is familiar with the network as it has been a Diem partner since its inception. It now plans to launch its own stablecoin this year in what looks like another rebranding of Diem. 

In an interview on CNBC’s “Mad Money” show, Silvergate CEO Alan Lane said, “The Facebook engineers who have developed this over the last few years are world-class.

” We worked with Diem last year and got to know the team very well. We couldn’t be more excited to take the helm and bring stablecoin to market, later this year.”

Silvergate’s goal is to expand the daily use of stablecoin, linked to reserve assets like the dollar, from the current scenario where it is mainly used for crypto trading.

“We see an opportunity to introduce stablecoin to be used by people… to pay for things,” Lane added.

Asked about the value Silvergate places on Diem’s assets, Lane said: “When we think about using blockchain technology for payments and remittances the potential value is off the scale.”

“It’s kind of the original promise of Bitcoin, but people don’t want to spend their Bitcoin with all the volatility today. But blockchain technology is here and we think that’s what stablecoin issued by Silvergate can deliver.”

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