Diem: The Rise and Fall of Meta’s Stablecoin Project
Meta’s former stablecoin project, Diem, originally launched as Libra in 2019, came to an end due to significant political and regulatory hurdles in the US, as revealed by Diem’s co-founder, David Marcus.
Regulatory and Political Challenges
- Libra was initially designed as a global payment network backed by a basket of international currencies.
- Early support for the project came from major financial players like Visa, MasterCard, and PayPal.
- US lawmakers and regulators expressed concerns about the project’s impact on monetary sovereignty, financial stability, and Meta’s influence in the global financial system.
- Meta executives, including Marcus, testified before Congress to address these concerns, but faced challenges related to privacy controversies and risks to sovereign currencies.
- The project was rebranded as Diem in 2020, with a shift towards a US dollar-backed stablecoin.
Struggles and Pivot Attempts
Despite efforts to scale back and pivot, regulatory challenges persisted for Diem. Early discussions with Federal Reserve officials hinted at limited approval, but political conditions made progress difficult.
“There was no legal or regulatory angle left for the government or regulators to kill the project. It was 100% a political kill — one that was executed through intimidation of captive banking institutions.”
In late 2021, US Senators urged Meta to halt its Novi digital wallet pilot program, leading to further scrutiny and challenges. Eventually, in January 2022, the Diem Association sold its assets to Silvergate, signaling the end of the project.
Conclusion and Moving Forward
Following the closure of Diem, team members transitioned to other blockchain initiatives like Aptos and Sui. Marcus shifted his focus to Lightspark, a company exploring the use of Bitcoin’s Lightning Network for payments.
Reflecting on Diem’s journey, Marcus stressed the importance of neutrality and decentralization in future blockchain projects, highlighting the complex interplay between innovation, policy, and regulation in the crypto industry.
