Why did Meta's crypto project 'Diem (formerly Libra)' fail?


by www.shopcatalog.com

Meta (formerly Facebook) announced in 2019 that it is aiming to develop its own virtual currency ' Libra '. However, Libra was exposed to severe reactions from governments and banks and the withdrawal of partner companies, and in December 2020, it changed its name to ' Diem ' and reorganized its operating organization, but January 31, 2022. It was announced that the project would be dissolved by selling the assets owned by Libra on the day. The Financial Times, an economic magazine, points out that the reason Diem failed was due to 'government rejection of Facebook.'

Facebook Libra: the inside story of how the company's cryptocurrency dream died | Financial Times
https://www.ft.com/content/a88fb591-72d5-4b6b-bb5d-223adfb893f3

One day in 2017, David Marcus , then head of the Facebook Messenger app, came up with the idea, 'Why don't you create a global digital currency and integrate it with Facebook?' did. Marcus, who is known by his peers as 'George Clooney in Silicon Valley' because of his looks, has been known as a cryptocurrency promoter since he was president of the payment service PayPal.

Marcus believed that by combining Facebook, which has 2 billion users, with blockchain and cryptocurrencies, people without bank accounts could move funds safely and cheaply. Even on the page published as 'Answer to Questions about Libra' after the announcement of Libra, Financial Inclusion using Libra solves the problem of access to basic financial services in developing countries and so on. Will be available for financial services. In addition, Facebook's subsidiary operates a digital wallet that exchanges Libra, which is a project that can be expected to have potential commercial profits of billions of dollars (hundreds of billions of yen) for Facebook.

Official answer to the question about the virtual currency 'Libra' announced by Facebook --GIGAZINE



From the beginning of 2018, a cryptocurrency project led by Marcus started under the top secret codename 'Libra'. Since it was expected that if only Facebook was launched from the beginning, it would receive strong criticism, so Libra established an organization called 'The Libra Association' consisting of multiple partner companies, and positioned Facebook as one of the partner companies. It is said that it became. By mid-2019, 28 partner companies such as MasterCard, Visa, Uber, Lyft, eBay and Spotify have joined the Libra Association in response to Marcus's call.

Marcus officially announced the Libra project relatively early in June 2019, highlighting his willingness to listen to regulators. However, the backlash from politicians who were already strongly concerned about Facebook's influence was stronger than expected, and Federal Reserve Chairman Jerome Powell said 'serious concern' about Libra. It was also reported that he told the Fed that he was holding him .

In July 2019, Mr. Marcus attended the Senate Banking Committee and gave a direct explanation of Libra, which was also criticized by members of the ruling and opposition parties. Senator Sherrod Brown argued that 'Facebook burned down the house many times, like a toddler with a match, and called it a'learning experience',' Facebook provides financial services. Claims to be too dangerous. Marcus explained that it was designed to separate financial and social data, but Senator Tina Smith said, 'I can't rest assured that your statement will not share data between these platforms.' I am saying.

Senators aren't sold on Facebook's Libra project --The Verge
https://www.theverge.com/2019/7/16/20696350/facebook-libra-senate-banking-committee-hearing-david-marcus-cryptocurrency



Severe criticism from politicians has disrupted the pace among members of the Libra Society. Facebook wanted member companies to 'show more support for Libra,' but in October 2019 it was revealed that PayPal, formerly president of Marcus, had left . After that, Libra was forced into a difficult situation with companies such as Visa, Mastercard, eBay, Stripe, and Mercado Pago leaving all at once.

Booking Holdings will also withdraw from the virtual currency 'Libra' and a quarter will withdraw from the initial partner --GIGAZINE



Libra named Stewart Levy , CEO of the Libra Association, in May 2020, who was involved in efforts to block terrorist funding in both the Bush and Obama administrations, to show a compromise to regulators. Former Criminal Chief Steve Bannell has been appointed Chief Legal Officer. The effort seems to have been well received by government officials, and Ali Redboard, then Deputy Treasury Secretary, said, 'The selection was really great.' 'They are basically regulatory. When the authorities considered how to build a compliance program, they formed a team that would like to hear from that person. '

In December 2020, it was decided to change the name of Libra to 'Diem' and restart it, and to prepare reserves in US dollars instead of low-risk assets such as government bonds.

Facebook virtual currency 'Libra' renamed to 'Diem', management organization reorganized --GIGAZINE



At the same time as these restructurings, a crypto engineering team across Europe and Silicon Valley has built a system to monitor transactions so that Diem is not used to evade money laundering and sanctions. During the pandemic, he continued to answer detailed regulatory inquiries on video conferences and was expected to begin a pilot program in the spring of 2021 after being reviewed and approved by the Swiss Financial Markets Research Authority (FINMA) .

However, the US Treasury has been waiting for this and has requested FINMA and Diem to temporarily postpone the pilot program. Levi thought the request was psychological rather than substantive, but he still didn't give up on Diem and moved to the United States to partner with California's official bank, Silvergate Bank . And aimed to comply with the regulations of the US government.

Facebook's virtual currency 'Diem' shifts its main business to the United States, aiming to issue stablecoin linked to the dollar --GIGAZINE



However, the Fed and other regulators continued to dislike Diem and refused to approve the pilot program. 'Diem continues to welcome the involvement and scrutiny of the authorities, but we are fair and equal,' Levi said in a letter sent to the FRB and officials on July 6, 2021, saying the treatment of Diem was unfair. 'It is neither fair nor impartial to suspend a limited range of legally permissible pilot programs while other Stablecoins grow unchecked.' I am protesting.

Still, the government's attitude remained unchanged, and Diem's pilot program did not move forward. 'For years, we've treated Facebook like a fly feather, but we're not doing anything to other companies,' said one regulator spoken by the Financial Times. It was a worse blunder than a crime that Diem didn't allow him to move on, 'he said in a sympathetic comment to Diem.

In the meantime, Marcus and his colleagues aim to launch Diem in New York, which has its own cryptocurrency regulations, and to partner with Gemini , which is run by the Winklebos brothers who once filed a lawsuit against Zuckerberg. I did, but none of them worked. Regulations on Diem became even more stringent, with the US Treasury submitting a report on stablecoin regulation in November 2021.

Under these circumstances, Diem decided to disband and began to consider ways to sell its assets to distribute to its partners. Marcus, who announced that he would retire in December 2021, was completely depressed. One Facebook senior staff member said of Marcus, who continued to be blocked by regulators no matter how much he tried to comply with regulations, 'If there are many walls that you do not know you are walking, it is difficult to keep walking. Probably. '

The Financial Times points out that the reason Diem failed was 'because it was something Facebook had come up with,' and said politicians' rejection of Facebook was destined for Diem's failure. 'Diem has spent years reverse engineering their projects to fix all the shortcomings, but never linked to Facebook,' said one government official involved in dealing with Diem. I couldn't fix it. That was the original sin of Diem. ' A person who once worked with Marcus felt a little, 'When I'm with Marcus,'the pure charismatic goodwill that this project brings will allow us to survive.'' I would have thought it would be okay if I had sincerity. '

Diem announced on January 31, 2022 that it will sell its intellectual property and other assets to Silvergate Bank for about $ 200 million. At the time of writing, when you visit Diem's official page, you'll see a statement from CEO Stewart Levy regarding the sale of assets to Silvergate by the Diem Group.

Home Page | Diem Association
https://www.diem.com/en-us/



In a tweet to sell Diem, Marcus said, 'I would like to congratulate my former colleagues, friends, and Silvergate Bank. We all call Libra heart, blood, sweat, and We cried. We were mission-led and involved with Libra for the right reason. '' This is the next chapter by perhaps a more 'acceptable' promoter to move the vision forward. In the future. It's time to look back at the actions of certain politicians and regulators, but for now ... it's about to come! '



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in Note, Posted by log1h_ik