Dissolution recorded for the Diem building which has been formed in recent years in support of Facebook’s ambitions in cryptocurrencies.
“From our dialogue with the regulators, it is clear that the project will not be able to go further. It is in these terms that the Diem association threw in the towel. And announcement the sale of its assets. The buyer: the parent company of the Californian bank silver gate. The sum supposed : 200 million dollars.
Diem carried a major initiative that Facebook had formalized in mid-2019. Broadly speaking, it was a question of creating “a global currency and financial structure […] serving billions of people. An ecosystem that would carry a “stable, blockchain-based cryptocurrency open-source […]guaranteed by a reserve of real assets and governed by an independent association”.
The blockchain in question was the result of the work of a subsidiary of Facebook: Calibra, registered in Switzerland a few weeks upstream. She used the Move programming language, which makes it possible to implement smart contracts.
The reserve was to come, on the one hand, from users who would buy Libra (name of the crypto). On the other, investors who would acquire “Investment Tokens”. These tokens would eventually receive dividends on the interest generated by the “low-risk assets” in which the reserve would be invested.
The Libra association, an independent non-profit organization based in Geneva, would be the only one authorized to create and destroy Libra. The stock could grow or shrink depending on demand. With, in all cases, collateral of a value at least equivalent to the face value of the “coins” in circulation.
Over to sovereign currencies?
Entities wishing to be able to operate a validation node on this payment network had to meet certain criteria. For example, for private companies, promotion and notoriety. And invest at least $10 million in Investment Tokens. Which would also give them a vote on the board.
A first circle of 27 members was formed. Among them, technology companies, academic institutions, investment funds, payment service providers (Visa, Mastercard, etc.) and telecom groups such as Iliad.
Even before the formalization of the approach, the American Senate had, in line with an article in the WSJ, sent a open letter to Facebook. He inquired about the operation of this crypto then still hypothetical. Since then, senators have had the opportunity to audition Mark Zuckerberg. They are not the only ones – and by far – to have demanded accounts.
In particular, the issue of monetary sovereignty arose. The Libra association had to make concessions. In particular accept the principle of stablecoins backed by a single currency. And not to a “basket of low-volatility assets”, as was the case at the outset.
Facebook announced the launch of its currency: “If it’s a sovereign currency, it can’t be! A private company cannot and must not create a currency which would compete with the currencies of the States”, objects @BrunoLeMaire #DirectAN #Libra pic.twitter.com/d8ewwCl6XV
—LCP (@LCP) June 18, 2019
Becoming Diem in December 2020, the association had to water down its wine onother aspects. In particular on a medium-term objective: moving towards a blockchain without permissions. Which was to allow anyone to act as a node. While remaining on a Byzantine-type consensus (base: HotStuff protocol).
Diem: concessions were not enough
the top management of the association had also evolved. With, placed at the helm, Stuart Levey, former Treasury and lawyer at HSBC Holdings. The activities had also been relocated to the United States. In the background, a partnership with…Silvergate. The bank had become the sole authorized issuer of the stablecoin backed by $. The association had meanwhile withdrawn its application for approval as a payment institution filed in September 2019 with the Swiss financial markets policeman.
Diem’s last press release dated back to October 2021. He was there question the interest of the American Congress for the project. And more specifically his concerns about money laundering and “other criminal activities”.
“Diem is not Facebook”, lamented, on this occasion, the association. She was referring to Novi, a project attached to Facebook … and which, in absolute terms, survives her today. Behind this brand, a digital wallet developed by Calibra. The initial objective was to launch it at 1er half of 2020. First on WhatsApp and Messenger, then as a standalone mobile app. Above all for payments between individuals. Then, in the longer term, for the payment of bills, purchases in small shops or even public transport.
According to the latest news, Novi is in test in the United States and Guatemala. In partnership with Coinbase. It manages a single currency: USDP (Pax Dollar), official cryptocurrency of the Paxos blockchain. The idea was to make the transition to the Diem network as soon as he had the blank check from the authorities…
1/13 Four years ago we came together as the founding team of ≋Libra to use crypto to democratize access to the financial system. As the last person from the original ≋ founding team involved in this phase of Diem, here are some personal thoughts and reflections on the journey.
—Christian Catalini (@ccatalini) January 31, 2022
Main illustration © Diem