Meta (previously Facebook) announced on Jan 31, that it was bringing to an end its stable coin project – Diem. The project was launched in 2019. It was then thought that it would grow to become an alternative to regular currency.
Meta had, in 2019, announced the launch of Diem (originally Libra) via a white paper. The initial positioning of the digital asset was as a payment tool. The stable coin launched as ‘Libra Association’ included other firms such as Uber, Visa, Master Card, PayPal, Andreesen Horowitz,etc. Facebook was to lead the overall initiative.
Diem – Launch to Pull out
The launch of Diem met with mixed reactions. One set of reactions was about the lack of decentralization and security. Another set of reactions focused on the possible effects Libra would have on crypto adoption across the world. The biggest feature of Diem was the power of its network effect due to having two billion users right at the launch itself. Many were fearful of its size and predicted that it would attract excess regulatory attention just for this reason.
As expected, within a month of launch, the co-founder of the project was called for a senate meeting. The general feeling being that if Diem wanted to emerge as an alternative currency, it must be subject to all the regulations of a bank. This caused some of the firms initially associated with the project to back out. Five countries of the EU decided to block Diem in their respective nations.
At this stage, Meta altered its original plans outlined in the white paper. Meta made changes to address some of the regulatory concerns. None of it helped win back regulatory confidence.
Diem had to be closed mainly due to the resistance from financial regulators and governments. Diem’s case illustrates the importance of taking regulatory concerns on board early on in the project.