Support us with crypto to keep our newspaper alive
Diem and Libra are two ideas promoted by Mark Zuckerberg who dreams of building Facebook‘s cryptocurrency Today they are under the magnifying glass.
Initially called Libra, the works on this stablecoin started in 2019. The idea of riding the cryptocurrency bubble was a clear advantage to creating the first virtual currency of a social network.
The platform understood this and wanted to highlight this new store of value. A marketing, financial and community asset that could have gathered thousands of followers around the world.
Not everything went according to plan and the Libra project, now renamed Diem, is in full swing. Facebook, now Meta, is even thinking of selling the work started in this axis of development to focus on other horizons. The creation was not really to the taste of the regulators.
Let’s find out the history of Facebook cryptocurrency development. The reasons for this failure and the regulatory pressures that finally brought the project to a head. What are the new ideas and the new horizons of Mark Zuckerberg to develop a card in the image of his social networks?
Diem and Libra: The Idea
Indeed, the beautiful project launched by Mark Zuckerberg has taken a 180 degree turn. Under regulatory pressure from Congress, the Diem bill seems unlikely to go ahead.
Initially, the goal was to provide global access to financial services for all. The Diem Association is made up of members dedicated to building a blockchain-based payment system. Supports innovation, inclusion, and financial integrity. It is supported by Meta Platforms Inc.
Libra
It was in 2009 when Facebook announced its intention to create a stable digital currency. This project was carried out in collaboration with dozens of companies, but the consortium was insufficient in the face of global regulatory scrutiny.
This currency was designed to easily transfer money between Facebook Messenger, Whatsapp and to make purchases on various platforms. Online shopping sites or applications such as Uber, eBay, Spotify or Booking have been mentioned. It was agreed that pounds would be available against any type of currency, as well as in cash at points of sale.
With this currency, Facebook wanted its users to be able to easily transfer money with a smartphone. A technology with no or very low costs worldwide.
Diem
Questioned by the American elected representatives of the parliamentary financial services committee at the end of 2019, Mark Zuckerberg goes out of his way to support his project. It announces that the Libra association is different from the Facebook entity. Many companies leave the project, it changes its name and becomes Diem at the end of 2020.
Diem’s ambitions rise, represented by David Marcus, a French businessman and former president of Paypal. The organization partnered with Silvergate Capital Corp to get the Diem project off the ground. Silvergate Bank has been appointed to issue the “Diem USD” stablecoin. A cryptocurrency or digital currency pegged to the dollar.
The refusal of the Fed
Specifically, the FED or Federal Reserve today needs a solid regulatory framework for these stablecoins. The goal would be to protect investors and assess risks to financial stability, for example. However, today nothing exists, there is no national or international legal framework.
Facebook has proposed several solutions, beginning with the promise that the project would not go ahead without the authorization of oversight bodies. Regulators raise points of concern:
- Diem’s coin would be backed only by the dollar and not by other stablecoins
- The head office is located in Switzerland, a country not known for its financial transparency.
- The technical resistance of stablecoins with a decentralized operation
Is such a coin likely to be hacked? Who has the administrative keys? What protections exist for investors? What safeguards may be in place to prevent money laundering or other forms of illegal activity?
All these issues show that the authorities are not willing to give the green light to the creation of stablecoins in any company.
On the other hand, the United States may not be ready to allow more stablecoins into the market until it launches the true digital dollar. An important point in the current economic war between China and the United States.
