Meta’s former stablecoin project, Diem, which initially launched as Libra in 2019, ended after facing significant political and regulatory obstacles in the US, according to Diem’s co-founder, David Marcus.
Marcus made the revelations in a recent social media post, where he described the challenges leading to the project’s termination as heavily influenced by political considerations.
Pushback on regulatory and political front
Libra started out as a payment system that was supported by an assortment of foreign currencies. Major financial companies like Visa MasterCard, PayPal and others supported the project early on.
However, its announcement triggered scrutiny from US lawmakers and regulators, who raised concerns about its potential impact on monetary sovereignty, financial stability, and Meta’s broader influence in the global financial system.
Marcus was one of the Meta executives who testified in front of Congress soon after it’s introduction to allay concerns. Lawmakers pointed to risks to sovereign currencies and cited Meta’s history of privacy controversies as additional challenges to public trust. The withdrawal of some early backers led to Meta’s rebranding the project in 2020 as Diem.
Regulatory challenges continued despite the rebranding of its company and attempts to lower ambitions. This included shifting to a US-dollar stablecoin, and moving to US operations. Marcus stated that although early discussions with Federal Reserve representatives suggested the potential of limited approval, subsequent conditions in politics made progress difficult.
Marcus says:
“There was no legal or regulatory angle left for the government or regulators to kill the project. It was 100% a political kill — one that was executed through intimidation of captive banking institutions.”
A pivotal attempt and a conclusion
Diem Association has teamed up with Silvergate Capital in order to launch stablecoins denominated by dollars. In late 2021 a letter sent by US Senators asked Meta to stop its Novi pilot digital wallet program. The senators expressed concerns over consumer protection and regulation.
Diem Association, then CEO of Diem, announced in January 2022 that it would be selling its assets to Silvergate. This marked the completion of the project. Stuart Levey (then CEO of Diem) attributed this decision to an inability to resolve regulatory issues despite efforts made to reduce compliance and security risk.
After the shutdown of Diem many members moved on to work with other blockchain projects, such as Aptos or Sui. Marcus has since focused on Lightspark, a company exploring the use of Bitcoin’s Lightning Network for payments.
Reflecting on Diem’s journey, Marcus emphasized the importance of neutrality and decentralization in building future blockchain projects. The firm’s history illustrates the interplay between innovation, policy, and regulation in the crypto industry.
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