After surviving a major re-branding and fierce opposition from regulators and central bankers, Facebook's effort to create a global stablecoin usable on its platform has reportedly been scrapped, according to a Bloomberg report.
BBG reported late Tuesday that Facebook-owner Meta has been looking for a buyer for its Diem project after the Federal Reserve and several powerful American lawmakers (including notably Sens. Sherrod Brown and Elizabeth Warren) produced enough resistance to the project to leave it finally dead in the water. At one point, a couple of Democratic senators sent threatening letters to people involved with the project.
The Diem Association, a cryptocurrency initiative once known as Libra backed by Meta Platforms Inc., is weighing a sale of its assets as a way to return capital to its investor members, according to people familiar with the matter. Diem is in discussions with investment bankers about how best to sell its intellectual property and find a new home for the engineers who developed the technology, cashing out whatever value remains in its once-ambitious Diem coin venture, said the people, asking not to be identified because the discussions aren’t public.
As a result, the cryptocurrency ambitions of Meta chief Mark Zuckerberg have unraveled.
Just in on @TheTerminal: *META-BACKED DIEM IS SAID TO SEEK BUYER AFTER COIN PLANS DASHED— Beth Williams Liou (@BWilliLiou) January 25, 2022
Former Twitter CEO and bitcoin evangelist Jack Dorsey could not resist taking a quick shot...
carpe diem https://t.co/QTN2JzehUZ— jack⚡️ (@jack) January 26, 2022
The news has also hammered shares of Silvergate, the obscure banking partner that was supposed to issue the stablecoin, before being bogged down in resistance from regulators.
In addition to the "rebranding" (the project was originally known as Libra), the project sent anti-trust hawks into a tizzy, while central bankers accused Facebook of trying to usurp their control over the money supply. In the years since its introduction, the SEC has won the "battle of the regulators" over who will be the primary regulator of stablecoins, while the Fed has sought to create a stablecoin of its own nicknamed "Fedcoin".
Given the intense hostility to the Diem project (which is technically controlled by a nonprofit foundation that is itself controlled by Meta), some speculated that Diem might be co-opted and become Fedcoin by default.
After all, it was the Fed that dealt the killing blow to the project, per BBG.
Diem said in May that an affiliate of the firm, Silvergate Bank, was to be the issuer of the Diem USD stablecoin, a type of cryptocurrency pegged to the U.S. dollar that’s typically used to buy and sell other crypto. After a lengthy back-and-forth between the Diem advocates and regulators, Fed officials finally told Silvergate last summer that the agency was uneasy with the plan and couldn’t assure the bank that it would allow that activity, the people said.
Without a green light from the bank’s regulator, Silvergate was left unable to issue the new asset with confidence the Fed wouldn’t crack down, and so the Diem effort had no coin.
Facebook had already abandoned the original Libra concept - one coin backed by a basket of global currencies - in favor of creating a more traditional dollar-linked stablecoin more in line with what the Fed might want.
So, now that Diem is up for grabs, the big question is: will the Fed step in, co-opt the technology, and use it to catch up with the PBOC, which has already produced its own "e-RMB" (even if the project appears to still be in the troubleshooting phase)?