The difficult development of the Diem stablecoin
Originally, Diem was called Libra, and the stablecoin was officially offered by Facebook. But the project was met with a swarm of angry regulators during the year 2019, which forced the “Zuckerberg coin” to change its strategy on pain of having to cease to exist.
Since then, the project has changed its name to Diem, and has greatly changed its ambitions. It is no longer a stablecoin backed by a basket of currencies, but a stablecoin backed by the dollar. It was a first step to break away from the shadow of the giant Facebook, which continued to hover over the project.
Another change, Diem had exported from Switzerland, where he had established his Diem Association, to the United States. And the Silvergate bank had become the sole issuer of the stablecoin Diem, another way for the project to show off.
The message was clear: Diem is no longer a project overseen by Facebook, and its approach now intends to take into account the wishes of regulators, so that they no longer put obstacles in the way. But that was not enough, according to the latest developments in the case.
👉 To read – Facebook’s Diem reaches 50 million transactions during its testnet
Diem fails to stand out from Facebook
A pilot of the Novi wallet, which is associated with Diem, was launched last week. Available only in the United States and Guatemala for now, it allows the exchange of USDP, that is to say the dollar stablecoin of Pax. It is not known when the Diem will be added to Novi.
This pilot is already not to the taste of legislators. Members of the United States Senate Banking Committee published an open letter at the time of this launch. Addressed directly to Mark Zuckerberg, it underlines their concerns:
“Facebook is following digital currency plans again […], the company has already launched a pilot for a payment infrastructure, although these plans are not compatible with existing financial regulations. “
👉 To go further – The PAX of Paxos becomes the USDP – An initiative necessary to compete with other stablecoins?
A response from Diem
This forced Diem to issue a statement in response, assuring again and again that the project is no longer linked to Facebook. It reads:
“Diem is not Facebook. We’re an independent organization, and Facebook’s Novi is just one of the 20 or so who make up the Diem Association. Novi’s pilot with Paxos is unrelated to Diem. “
The project explains that it has precisely complied with the expectations of the regulators, and that the latter seem to be satisfied:
“We have been told by a senior regulator that Diem is the best-built stablecoin project the US government has seen. “
Will this be enough? It remains to be seen. The project has seen such detours since 2019 that it seems difficult to say with certainty that it will succeed. It is in any case very far from the Libra which had been outlined more than two years ago.
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About the author: Marine Debelloir
Associate Editor on Cryptoast, I fell into the pot of cryptocurrencies a few years ago. I am passionate about the innovative technologies that arise from the blockchain and I like to find the most delicious information to share with you.
All articles by Marine Debelloir.