Carpe Diem: The Demise of Facebook’s Stablecoin

Meta, previously known as Facebook, unveiled its plans in 2019 to launch a cryptocurrency targeted at the unbanked. After two and a half years of controversy and regulatory pressure, that project, Diem, appears to be unraveling.

Let’s dive into what happened to Diem, and what this tells us about the regulatory environment surrounding crypto and stablecoins.

The origin of Project Libra

The Diem project, previously known as Project Libra, had been in the works for years before its formal announcement in June 2019. Under the helm of David Marcus, former president of Paypal and leader of Facebook’s Messenger division, its goals were ambitious.

Project Libra aimed to launch a universal digital currency tied to a basket of major currencies and government debt. Its goal was to lower the cost of sending money globally, while increasing payment accessibility through Messenger, Whatsapp, and Instagram. The list of partners for the Libra Association boasted the biggest names in payments, including Visa, Stripe, Paypal, and Mastercard.

Initial list of 27 partner organizations in the Libra Association

Just a few months after the initial announcement, however, the Libra Association began to crumble. Facing pressure from governments and regulators in both the US and internationally, major partners began to pull out. Paypal was the first major domino to fall, followed by Visa, Mastercard, Stripe, and other major partners. Democratic senators threatened increased oversight in members of Libra Associations non-crypto businesses if they associated with Libra.

In October 2019, Facebook CEO Mark Zuckerberg testified before Congress to discuss his plans for Libra. While the hearing was meant to be about Libra, members from the U.S. House of Representatives’ financial services committee took the opportunity to question Zuckerberg about a variety of different scandals surrounding Facebook. Topics ranged from the Cambridge Analytica scandal, to the fact-checking of political ads, to biases Facebook’s ad algorithms.

The Demise of Diem

Libra renamed itself as Diem in December 2020, but the cloud of regulatory scrutiny continued to hang over it. With its name change came a shift in focus as well. Once aimed at providing cheap and accessible access to moving money globally, Diem withdrew its license application in Switzerland in May 2021 and shifted its focus exclusively to the U.S. Partnering with San Diego-based bank Silvergate Capital, Diem aimed to issue a U.S. Dollar-backed stablecoin.

Soon thereafter, the writing was on the wall for the demise of Diem. Just a few weeks after Facebook announced its digital wallet product, Novi, in collaboration with Coinbase, David Marcus announced that he would be leaving Meta and stepping down from his position as head of Meta’s crypto efforts.

Now, the end of Diem as we know it is official. Silvergate Capital, the bank that Facebook initially partnered with to issue the Diem stablecoin, has purchased the IP assets and technology of the Diem Association for $200 million.

facebook’s failure

Despite its ultimate downfall, Diem was one of the early indicators of Mark Zuckerberg’s recognition of the importance of crypto. Interestingly, Facebook’s name change to Meta also has a parallel with Libra’s name change to Diem. Both name changes occurred when Libra / Facebook found themselves embroiled in controversy.

It’s clear that Facebook has major crypto and web3 ambitions. But perhaps Diem was doomed from the beginning, given the intense regulatory scrutiny Facebook is under and its numerous scandals regarding user privacy. Furthermore, stablecoin regulation itself has been a controversial topic among regulators, especially as governments begin to explore CBDCs. While Facebook and Diem’s failure may have been inevitable, this will unlikely be the last foray of a major tech company into crypto. Maybe a company with a less controversial history and reputation than Facebook will be able to achieve Diem’s original mission.

Photo of author

Written By BowTied SizeLord

M&A Investment Banker in the Streets, Defi Degen in the sheets. Follow me to maximize your US Trash Token flow.

Disclosure

This article may contain links to third-party websites or other content for information purposes. BowTiedIsland may receive a commission at no cost to you if you purchase a product after clicking one of these links. The Third-Party Sites are not under the control of BowTiedIsland, and BowTiedIsland is not responsible for the content of any Third-Party Site. All information contained herein is the opinion of the writer and does not constitute financial advice. We aim to act as a neutral third party and aid in your research and analysis.


The Jungle


Crypto, Investing, and E-Commerce with BowTied Bull

The future is internet based, therefore we have a triangle based approach with crypto, e-commerce business making and Investing in traditional assets

Break Into a 6-Figure Wall Street Career

Learn how to efficiently break into investment banking and private equity. The Banker’s Bible is a definitive resource that offers an   A-Z blueprint and also gives you 24/7 access to real finance professionals. 

Fitness With BowTiedOx

BowTiedOx provides you a place to find all of his latest programs and guides.

Weekly newsletters that cover fitness, health, and mindset, all grounded in the fundamentals of physiology.

Media Production with BowTied Turkey and BowTied Tamarin

Video is no longer optional.

Don’t get left behind.

Your brand deserves professional videos to engage your audience.

Art & Graphic Design with BowTied Patriot

BowTied Patriot is a graphic artist who specializes in photography, mixed medium custom artwork, and NFT creation.

Join BowTiedPatriot as he dives into making Art in Web3.0 and The Metaverse.

Cooking with BowTiedOctopod

Learn secrets from a fine dining chef for maximum flavor and time-saving efficiency

Newsletters on Ingredients, Techniques and Flavor hacks that will have you eating better. We will never eat bugs!

Meme Warfare with DgenFren

Increase your online engagement, organically influence narratives, and build your online persona by using marketing that your target audience actually wants: memes.

Learn How to Sell with BowTiedSalesGuy

Sales is one of the most transferrable life skills, yet few know how to actually sell.

Traditional sales tactics don’t cut it in today’s hyper competitive world.

Learn the secrets from a Chad Salesman and change your Life forever.

Ecommerce with BowTiedOpossum

Learn the skills to start and build your first online business.

Want to build a business that travels with you?

Learn from an industry veteran that has worked on and with brands you already know.