Facebook’s plans for its digital currency seem to have failed once again and thus for good. When the Facebook group, which has since been renamed Meta Platforms, launched plans for its digital currency called “Libra” in 2019, the crypto and financial markets reacted euphorically. However, regulators were less enthusiastic about the plans and increasingly scrutinised the project critically.
Name change does not bring the hoped-for turnaround
The Facebook cryptocurrency coin Libra was initially planned as a digital coin that would be backed by a basket of currencies. Later, the planned functionalities were adapted, and the coin was to be linked to individual currencies. This was also adjusted again during the course of Libra’s history, and in the end what remained of the ambitious plans was a stablecoin linked to the US dollar.
Facebook had transferred control to a Swiss organisation early on to avoid accusations of concentration of power. Nevertheless, Facebook’s crypto project already faced massive headwinds in its initial phase. Not only did numerous major partners such as MasterCard, Visa and PayPal pull the ripcord early on and leave as partners. Although Facebook repeatedly made adjustments to its plans and even changed the project’s name to “Diem”, regulators, in particular, were not convinced and expressed concern that Diem could have a negative impact on global money flows and destabilise the financial system.
There were also rumblings at the management level: in November last year, David Marcus, the “father” of Facebook’s digital currency, left the company; he was considered the driving force behind the project.
Is Diem now finally facing the end?
Now, the company Meta is said to have finally pulled the ripcord and is apparently planning to shut down Diem completely. As “Bloomberg” reported with reference to informed circles, the Diem Association is considering selling the company’s assets to repay investors their invested capital. Diem is in talks with several investment bankers about how best to sell its intellectual property and find a new home for those engineers who developed the technology, the industry service quotes from non-public discussions.
According to Bloomberg, the decision was fuelled by the US Federal Reserve. It had dealt a “final blow” to the effort after putting pressure on Silvergate, the banking partner Diem had worked with last year to bring the token to market. In the summer, central bankers had communicated concerns about the plans and informed Silvergate that it could not be assured of approval for the coin issue.
Around a third of Diem’s shares are in Meta’s hands, while other partners listed include crypto exchange Coinbase, ride service provider Uber and software provider Shopify. It is uncertain whether the proposed sale of the assets will succeed and at what price potential buyers would strike.