Possible End of the Road for Meta’s Stablecoin Project
According to the Wall Street Journal, an anonymous source revealed that Diem Association sold its technology to Silvergate Capital, a California-based bank that services the crypto industry. The deal is said to be worth $200 million.
There were earlier reports that the consortium was holding discussions with investment banks to sell the stablecoin project’s intellectual property. As reported by Bloomberg, the sale would enable Diem Association to return capital to investors.
Meta first announced its intention to launch a stablecoin, originally called Libra, via a whitepaper released in 2019. The initial plan was to have a stablecoin backed by a basket of fiat currencies. However, the ambitious endeavour saw pushback from governments and regulators almost immediately, who believed that a privately-issued stablecoin by the social media giant would be fraught with regulatory peril. U.S. politician, Maxine Waters, called for a moratorium on the project until regulators were able to check the risks involved with the venture.
France’s Minister of Economy and Finance, Bruno Le Marie, vehemently opposed Meta’s plans at the time, stating that he would prevent the development of their stablecoin in Europe. Increased regulatory scrutiny also came from countries such as the United Kingdom and Japan, with concerns that Meta’s stablecoin could threaten sovereign currencies.
Diem Association Tried to Appease Regulators
Despite global regulatory pressure, Meta and the Libra Association had previously been moving ahead with the Libra stablecoin. Meta’s CEO Mark Zuckerberg and David Marcus (co-creator of Libra and head of the stablecoin’s digital wallet Calibra) testified before the U.S. House Financial Services Committee regarding the project. Eventually, to appease global regulators, the whole project gradually underwent rebranding and the Libra whitepaper was amended, suggesting the creation of a group of stablecoins, each backed by a single fiat currency.
Later in May of the same year, Calibra was rebranded to Novi. And in December 2020, with Libra undergoing a name change to Diem, a consortium was formed that would be known as the Diem Association to oversee the launch of the Diem dollar.
Notable Partners and Individuals Left Stablecoin Venture
Meta’s sour relationship with regulators cost the company many of its partners. Backers of the stablecoin project such as PayPal, Mastercard, Stripe, Visa, eBay, and Vodafone left the venture, citing regulatory concerns.
Key individuals also departed Meta’s crypto project, such as Kevin Weil, a co-founder of Novi and Diem, and Morgan Baller, who operated as Novi’s strategy head. Nassim Eddequiouaq and Riyaz Faizullabhoy, engineers for the Novi wallet, also departed the project and joined the crypto arm of the venture capital firm Andreessen Horowitz. At the end of 2021, Marcus, who was a prominent person behind the Diem/Novi endeavour, announced that he would leave the Meta venture as well.