Facebook’s dream of creating its own global cryptocurrency is officially coming to an end

Libra was originally slated to launch in less than a year. Two and a half years later, the project – renamed Diem last year – officially collapsed after various setbacks and regulatory pressure made it impossible to start.

On Monday, the Facebook-backed Diem Association announced that it would dissolve and sell intellectual property and other assets related to the operation of its planned cryptocurrency network to Silvergate Capital Corporation, as part of a deal valued at $182 million. The Diem Association expects to begin to “calm down” in the coming weeks, according to the announcement.
The project was hampered from the start by concerns from regulators, lawmakers and other financial services industry watchers over a cryptocurrency run by Facebook (now called Meta), which has struggled to forestall such issues. as crime and abuse of user data on its existing platforms. And Diem’s ​​end is a sign that regulators, who have explored a range of ways to crack down on Meta but have yet to act on much of it, have some sway over the tech giant and its ability to expand into new product areas.

“While we gave positive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not go forward,” the CEO of the Diem Association said Monday. Stuart Levey, in a statement. He added that the band believes their work on Diem will inform future projects that could “deliver the benefits that have driven the Diem association from the start.”

Silvergate plans to use Diem’s ​​assets to continue investing in building a blockchain-based stablecoin and global payment network, the company said in a statement.

Complicated from the start

When Facebook announced Libra, the plan was to create a universal cryptocurrency accessible through digital wallets – all of which would be built on blockchain, the technology that underpins other cryptocurrencies such as bitcoin. In theory, this could make it cheaper and easier to send money and pay for things around the world. Libra, he said, would be backed by a reserve of fiat currencies, such as the dollar and euro, to help prevent the volatility that has plagued other cryptocurrencies.
The structure and governance of the project was complicated from the start, which probably didn’t help gaining regulatory support. Although Facebook launched the project, the company said it would not govern Libra and its reserve; that obligation would fall to the Switzerland-based Libra Association, a group initially made up of more than two dozen companies and nonprofits that included Facebook (Facebook) but also PayPal (PYPL), Lyft (LYFT) and others. Facebook launched an internal unit called Calibra, which was to create a digital wallet that people could log into using their Facebook accounts to send and receive Libra. But he also said other companies would be able to create Libra wallets.
Regulators and lawmakers in the United States and elsewhere were almost immediately wary of a new currency that would be available to Facebook’s billions of users at a time when most countries lack the regulatory infrastructure to oversee effectively digital currency. They worried that Libra would threaten national currencies like the US dollar and financial markets, and that it would enable cybercrime and compromise user privacy. They also worried that the project would give Facebook even more power.

“We need to get the message out loud and clear to [Facebook CEO and cofounder Mark] Zuckerberg that he’s not a country on his own and he can’t always do whatever he wants,” Rep. Sylvia Garcia, a Democrat from Texas, told reporters months after the launch of the Some of the Libra Association’s founding partners, including PayPal, Mastercard and Visa, pulled out of the project as regulatory scrutiny intensified.

Hearings, name changes and the departure of a key executive

Facebook and members of the Libra Association have worked to engage with regulators, including during congressional hearings, and pledged to comply with U.S. anti-money laundering laws and “know your customer.” , as banks must.

In its Monday statement, Diem’s ​​Levey said the project had “considerably evolved and improved” following feedback from regulators and governments around the world.

Still, the project dragged on with limited progress. In May 2020, Facebook renamed the Calibra payment unit to “Novi”. About six months later, the Libra Association was rebranded as “Diem” to reflect a new scaled-down nature — the coin would now be backed only by the US dollar — and an attempt to outrun Facebook’s first flop effort by announcing the Balance.
In October 2021, Facebook launched a pilot of its Novi digital wallet, but without Diem. Users could instead send and receive a different digital coin. Shortly after, David Marcus, the Novi executive who had led the Libra project, left the company to pursue other projects.

Marcus alluded to the role Facebook’s tainted reputation may have played in the project’s demise in a series of tweets on Monday.

“We gave all our heart, blood, sweat and tears to what I will always call Libra,” Marcus noted. “We were driven by the mission and for the right reasons (which remain as valid today as they were then). vision.”

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