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Diem

Mark Zuckerberg-backed stablecoin project to fade out soon?

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Mark Zuckerberg-backed stablecoin project Diem seemed to be headed for a dead-end as reports emerged that the Diem Association is supposedly ‘weighing a sale of its assets as a way to return capital to its investor members.’

However it remains unknown with regards to the kind of asset the Diem Association owns, but Bloomberg reported that the group is in talks with investment bankers about selling its intellectual property and finding “a new home for the engineers that developed the technology.”

Having said that, a sale would likely be the final blow to the crypto project that Mark Zuckerberg had once trumpeted. As a matter of fact, on many occasions plans to get the stablecoin off the ground continued to meet tough opposition from reasons such as regulatory pushback and lawmaker concerns.

Things didn’t improve even after rebranding Diem as Libra as several high-profile partners backed out of the project in 2019.

Mark Zuckerberg’s Diem project was scaled down owing to regulatory pressure?

As per media reports, negotiations were not successful between Diem and Fed when the latter did not approve the proposal. Last summer, Facebook started a pilot testing of Novi, the cryptocurrency wallet previously known as Calibra. But the fact that Novi was forced to launch without support for Diem and instead it used a different stablecoin called the Pax Dollar was enough to indicate that Diem’s future remained uncertain.

Things looked hopeful when Facebook exec David Marcus, who was hired by CEO Mark Zuckerberg in 2014 from PayPal to oversee its Messenger app as well as the social network’s crypto plans, said at the time that Facebook remained committed to Diem.

“I do want to be clear that our support for Diem hasn’t changed and we intend to launch Novi with Diem once it receives regulatory approval and goes live,” he wrote. But a month later Marcus announced that he was leaving Facebook. Still, there is no official confirmation from the Diem Association regarding the future of the project.

A representative for the Diem Association Michael Crittenden cited the original Bloomberg’s report on the matter and did say it contained unspecified “factual errors,” but declined to elaborate or comment further into the specifics.

Facebook pressured to drop Novi crypto wallet project by Senators

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In a letter, the US banking committee Senators have vehemently opposed the revival of the stablecoin and wallet project of the world’s leading social media platform, Facebook.

Just a few hours had passed after Facebook’s launch of a pilot version in collaboration with a leading crypto exchange, Coinbase when Senators started handing in a letter of disapproval. There were around 5 Senators voicing their concerns regarding Facebook’s revival of its blockchain-based project.

In a letter, one of the five Senators, Elizabeth Warren, raised her concerns. She is known for her skepticism about crypto and wrote,

“Given the scope of the scandals surrounding your company, we write to voice our strongest opposition to Facebook’s revived effort to launch a cryptocurrency and digital wallet, now branded ‘Diem’ and ‘Novi,’ respectively.”

Elizabeth Warren’s letter

Facebook looking to revive the stablecoin and wallet project

Facebook had decided to launch a stablecoin termed Libra which failed and is now rebranded as the Diem token. The plan for the release of this project saw a lot of hurdles and remarks from a majority of regulators for the past couple of years.

It seems that rebranding the project didn’t have any effect on the financial authorities, as they continue to remain dubious of Facebook’s activities and the crypto industry as a whole.

According to the social media giant, the goal of the wallet is to hold the yet-to-be-released Diem token as well as other stablecoins. The wallet was tested in Guatemala and the US on 19th October in collaboration with Coinbase. The social media platform could learn about the efficiency and demand of their wallet through this testing process.

Senators against the social media giant

There were 5 Senators who co-signed the letter, including Tina Smith, Richard Blumenthal, Brian Schatz, Sherrod Brown, and Elizabeth Warren.

“Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient.”

The Senators claimed in the letter

On the other hand, the social media giant’s partner in the project, Coinbase’s CEO, Brian Armstrong came out in support of David Marcus, the leader of the entire project.

Facebook’s crypto Diem strikes a deal with a risk assessment firm to counter illicit activity

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Facebook’s Diem Networks US has partnered with a risk assessment company called K2 Integrity to develop innovative solutions for the Diem Networks US Financial Intelligence Function [FIF]. According to the official announcement, the main objective of the FIF is to safeguard the Diem Payment Network [DPN] from illicit financial activity.

Diem Networks US has reportedly developed a blockchain-powered payment system for the purpose of making payments cost and time-efficient without compromising the security of its users and the integrity of the financial system. It aims to revamp the payments landscape by incorporating the benefits of blockchain technology to consumers, including those underserved by the current banking system and businesses across the globe.

Stuart Levey, who happens to be the Chief Executive Officer of Facebook’s Diem Networks US, revealed that designing a framework that puts high financial crime compliance standards have been one of the Diem project’s top priorities and went on to add,

“This is an area where we are continuing to innovate. We are excited by this opportunity to partner with K2 Integrity, a team that has a wealth of experience in this space and is respected internationally for their leadership on anti-money laundering and counter-terrorist financing [AML/CFT] issues.”

The official press release highlighted that Diem intends to meet compliance standards, an issue plaguing the entire market.

Facebook Diem Controversies

Formerly known as Facebook Inc’s Libra project, the Digital currency group Diem Association has recently revealed its plans to roll out a US dollar stablecoin. Diem Networks US is one of the units of the widely reported stablecoin project. Since last year, the company has been under the regulatory scanner of regulators around the globe for its potential to disrupt the national sovereignty of currencies.

Due to the fanfare and controversy over the original idea, the Libra cryptocurrency changed to Diem. This was clearly an effort to show that the project has “organizational independence” as it attempted to be more agreeable to governments. However, its ambitious roadmap still seemed to threaten traditional government-run financial systems.

In fact, Facebook Inc.-backed Diem token and Tether [USDT] stablecoin were the main focus of Treasury Secretary Janet Yellen’s closed-door meeting US regulators held on the financial risks posed by stablecoins. Yellen had reportedly urged watchdogs not to delay and “act quickly” in laying down rules to ensure the safety of stablecoins.