US and European regulators may have just planted a stake in the heart of Facebook's offering that wanted to create its own payment system.
A road full of pitfalls
The payment project, called Diem, is in talks to sell its assets after politicians around the world blocked its launch, according to media reports.
Sales negotiations are far from over and there is a small chance the project could still be bailed out, some well-informed folks said. Bloomberg first reported on the negotiations on Wednesday. The Wall Street Journal later said Diem will sell its technology to a small lender in California for about $ 200 million.
Facebook announced Diem in the summer of 2019, then known as Libra, in partnership with 25 other companies such as Uber, Spotify and the cryptocurrency exchange Coinbase.
The payment system would be born with a cryptocurrency, known as a stablecoin, a digital asset tied to a reserve of currencies or financial products to preserve price stability.
Politicians, especially in Europe, saw the project as a challenge to monetary sovereignty, given Facebook's global reach of 2,9 billion monthly users who would eventually have access to Diem.
Stop! Traditional coins still have the power!
The executive arm of the EU introduced a bill a year later for cryptocurrency markets (MiCAs) with strict guarantees for Investors and guarantees that users can get their money back. Diem has been banned from operating in Europe until MiCA rules are in place, which is expected in 2024.
Diem abandoned his Swiss headquarters in May 2021 and opened an office in the United States in hopes of launching his currency there, but that hasn't made life any easier.
Diem had aimed to partner with a Federal Reserve regulated bank, Silvergate, which would issue the token, tied to the value of the US dollar. In July, however, companies were informed that neither the Fed nor the Treasury Department were comfortable blessing the project, according to people familiar with the matter.
The government's move to essentially put the project on ice stems in part from the ongoing effort by US financial agencies to draft a report that would set out their vision for a regulatory framework for stablecoins, people said.
But one of them also pointed to a reasoning eventually included in the final report: Facebook's business model was the biggest problem. And what do you think of all this? Will sovereign authorities always try to put the stakes between the feet of these new technologies that advance? Let us know in the comments section below.
