Bye bye cryptocurrency. The digital currency project launched with great fanfare in 2019 by Meta – the new name of Facebook – is officially buried: the Diem association which carried it plans to sell its main assets and dismantle itself for lack of having been able to convince the regulators.
The social media giant had entered the arena of virtual currencies by creating “Libra” in 2019, which was to offer a new method of payment outside traditional banking circuits.
Revolutionize payment methods
Aware of regulators’ concerns about a currency managed by a private company, the American group then decided to entrust its management to an independent entity, based in Geneva (Switzerland), and initially called Libra. This initiative was on the right track but “it had become obvious during our discussions with the American authorities that the project could not advance any further”, justified the director general of the association, Stuart Levey, in a press release Monday.
Diem will therefore sell its intellectual property rights and other assets to the company for $182 million to the bank Silvergate Capital Corporation, which specializes in digital currencies.
Originally, Facebook had imagined a new payment method that made it possible to buy goods or send money as easily and quickly as an instant message. But the project had, from its launch, raised an outcry from central banks, regulators and political decision-makers alike. They worried pell-mell about the risks to the stability of the financial system, the fight against money laundering or the protection of personal data.
“A better and more inclusive payment system”
The fact that Facebook could potentially seek to coin money, in the same way as central banks, had also aroused the indignation of many regulators. After the defection of several major partners such as PayPal, Visa and Mastercard, the organization had quickly revised its ambitions downwards, before renaming itself Diem at the end of 2020. “From the start, the Diem project sought to exploit the benefits of blockchain technology to design a better and more inclusive payment system,” Stuart Levey pointed out on Monday.
The association has managed to build and test a technology-based payments system that also runs bitcoin, which includes safeguards against its use by criminals, he said. At the same time, “we have actively sought feedback from governments and regulators around the world, and the project has evolved and improved significantly as a result,” the official noted.
But the talks eventually broke down and “the best way forward was to sell the assets of the Diem group,” concluded Stuart Levey. The association and its subsidiaries will begin to dismantle “in the coming weeks”, he said.
A “stablecoin” project
Silvergate said in a separate statement that it will pay $50 million in cash and return approximately 1.2 million new shares to Diem for a total amount equivalent to $182 million. With Diem’s assets, the California-based bank notably wants to improve the infrastructure it already has in place for its own “stablecoin” project, a stable digital currency whose price is supposed to be at constant parity with the dollar. .
Silvergate, which plans to launch it later this year, “is committed to continuing to nurture the open source developer community that supports the technology,” said chief executive Alan Lane. “We’re sure they’ll be excited about our vision,” he added.