Facebook’s crypto project sold after political backlash
Facebook’s cryptocurrency is no more.
The Diem Association — a group Facebook spearheaded to launch the Diem stablecoin — said Monday it will sell its intellectual property and assets to the California bank Silvergate, a go-to firm for the crypto industry.
The announcement caps a nearly three-year odyssey on the part of Facebook and its partners to launch a digital currency, which was first dubbed Libra in 2019 until its rebranding as Diem in 2020. (Facebook has also since renamed itself as Meta.) Lawmakers and regulators in the United States and Europe ultimately derailed Diem's ambitions, stoked by fears around how such an offering on the scale of Facebook would impact the financial system and the control central banks assert over money. The so-called stablecoin — a type of cryptocurrency tied to other kinds of assets — never launched.
Diem's backers failed to move the needle even after they assembled a small army of lobbyists, rebranded the project, downplayed Facebook's involvement and pared down their ambitions for a single digital currency. Many assumed the writing was on the wall after David Marcus, Meta’s point person on Diem, departed the project late last year, as well as other key figures involved.
“As we undertook this effort, we actively sought feedback from governments and regulators around the world, and the project evolved substantially and improved as a result,” Diem Association CEO Stuart Levey said in a statement Monday. “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead. As a result, the best path forward was to sell the Diem Group’s assets, as we have done today to Silvergate.”
Meanwhile, the Federal Reserve and the European Central Bank have started exploring launching their own virtual currencies — work that accelerated in part because of concerns about Diem.
The Diem Association, then known as the Libra Association, first set up headquarters in Switzerland before abandoning those plans in May 2021 and moving to the U.S. The change didn't make life easier.
Diem had initially aimed to partner with Silvergate, a Federal Reserve-regulated bank, to issue a token tied to the value of the U.S. dollar. Last July, however, the firms were informed that neither the Fed nor the Treasury Department were comfortable blessing the project, according to people familiar with the matter.
The government’s move to essentially put the project on ice stemmed in part from the ongoing effort at the time by U.S. financial agencies to draft a report that would lay out their vision for regulating stablecoins, the people said.
But Facebook's business model turned out to be the biggest problem, according to one of the sources familiar with the discussions.
“The combination of a stablecoin issuer or wallet provider and a commercial firm could lead to an excessive concentration of economic power,” U.S. regulators said in the stablecoin report released last year. “These policy concerns are analogous to those traditionally associated with the mixing of banking and commerce, such as advantages in accessing credit or using data to market or restrict access to products.”
“This combination could have detrimental effects on competition and lead to market concentration in sectors of the real economy,” they said.
In a statement released on Monday evening, Silvergate said it plans to use Diem's assets to launch its own stablecoin later this year.
“In the digital asset industry, money moves across the globe around the clock,” Silvergate CEO Alan Lane said. “Through conversations with our customers, we identified a need for a U.S. dollar-backed stablecoin that is regulated and highly scalable to further enable them to move money without barriers."
