Facebook abandons its digital currency project

The digital currency project launched with great fanfare in 2019 by Meta, the new name of Facebook, is also buried: the Diem association which carried it plans to sell its main assets and dismantle, failing to have convinced the regulators .

The social media giant had entered the arena of virtual devices by planning what was first dubbed “libra” in 2019. It was to offer a new method of payment outside traditional banking circuits.

Aware of regulators’ concerns about a design managed by a private company, the American group then decided to entrust its management to an independent entity, based in Geneva (Switzerland), renamed Diem at the end of 2020.

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This initiative was on the right track, but “it had become clear during our discussions with the American authorities that the project could not go any further”justified the director general of the association, Stuart Levey, in a press release, Monday, January 31.

“The idea of ​​Facebook making a cryptocurrency had everyone panicking”reacted for Agence France-Presse analyst Rob Enderle, of Enderle Group. “For regulators, this was going too far. They made it clear they couldn’t trust Facebook” on this project. Diem will therefore sell its intellectual property rights and other assets for 182 million dollars (162 million euros) to the bank Silvergate Capital Corporation, which specializes in digital devices.

Risks to the stability of financial markets

Originally, Facebook had imagined a new payment method that made it possible to buy goods or send money as easily and quickly as an instant message. But the project had, from its launch, provoked an outcry, both from central banks, regulators and political decision-makers. They worried pell-mell about the risks to the stability of the financial system, the fight against money laundering or the protection of personal data.

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The fact that Facebook could seek to mint the currency, in the same way as central banks, had also provoked the indignation of many regulators. After the defection of several major partners, such as PayPal, Visa and Mastercard, the organization had quickly revised its ambitions downwards, before renaming itself Diem at the end of 2020.

“From the outset, Project Diem sought to harness the benefits of blockchain technology to design a better and more inclusive payment system”, said Mr. Levey on Monday. The association has managed to build and test a technology-based payments system that also runs bitcoin, which includes safeguards against its use by criminals, he said.

Acquisition of assets by a Californian bank

In parallel, “We sought feedback from governments and regulators around the world, and the project evolved and improved accordingly”a statement to the manager.

But the talks eventually broke down and “the best way forward was to sell the assets of the Diem group”, a conclusion of Mr. Levey. The association and its subsidiaries will begin to be dismantled ” in the next weeks “he specified.

Silvergate, the bank buying Diem’s ​​assets, said in a separate statement that it will pay $50 million in cash and reverse approximately 1.2 million new shares to Diem for a total amount equivalent to $182 million. .

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With Diem’s ​​assets, the California-based bank wants in particular to improve the infrastructure it has already put in place for its own “stable coin”, a stable number design whose price is supposed to be at constant parity with the dollar. Silvergate plans to launch later this year.

The World with AFP

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