Social media giant Facebook’s upcoming cryptocurrency may have been opposed by many, but it is moving forward nevertheless.
Facebook’s ambitious project Libra was intended to create a Swiss-based, global digital currency. Under global criticism and mounting regulatory pressure, Libra project was withdrawn. This gave birth to Diem, which is said to be next version of Libra.
And now, the project isn’t even Swiss-based anymore, as Diem’s primary operations are being moved from Switzerland to the United States.
Diem is also withdrawing its application for a payment system license from the Swiss Financial Markets Authority (FINMA). The company’s plans “take the project fully within the US regulatory perimeter and no longer require a license from FINMA,” Levey said.
Originally called Libra, the cryptocurrency is now known as Diem and many expect it to become the blueprint for US’ central bank digital currency (CBDC), eventually.
Diem, the digital currency project backed by Facebook, has abandoned plans to secure a payment license from Switzerland’s FINMA watchdog. The organization will move its operations to the U.S. and has partnered with crypto-friendly bank Silvergate to issue a dollar-backed stablecoin.
What are stablecoins?
Stablecoins are cryptocurrencies that are backed by stable assets, which keeps their prices from changing erratically. In the case of Diem, it is backed by the US Dollar.
Shifting to stablecoin from cryptocurrency has been the result of regulatory pressure. Diem was supposed to be a global cryptocurrency. Facebook’s Global cryptocurrency plan received pushback from many regulators, experts and countries, who were worried about the amount of power it would give Facebook over a global currency.
Libra’s governing body, which was formally created in November 2019, later tightened the scope of the project, announcing in April 2020 that it would launch a group of stablecoins that were each backed by a single fiat currency or asset instead of the basket-backed token.
Shift from Libra to Diem
In an interview to coindesk, CEO Stuart Levey said, “I think regulatory stakeholders really are welcoming a more autonomous association. They want to see an association strong enough to make its own decisions and have a leadership team that is capable of directing the project. It is in part for that reason we decided to change the name, to move from Libra to Diem, and that will be effective [Tuesday]”.
In April 2020, Libra and its partners abandoned plans to hold a basket of currencies and sovereign debt in favor of stablecoins backed by major currencies and sought the Swiss regulator’s approval.
In December, Libra rebranded as Diem in a renewed effort to gain regulatory approval, with its scope scaled back further to a single dollar-backed digital coin.