Remember back in November when Meta lost its cryptocurrency tsar and we said it put the future of the Facebook-led Diem cryptocurrency project in doubt? It turns out that we were right: the consortium behind the currency is reportedly abandoning it.
The Diem Association, founded by Facebook in 2019, is winding down and selling its assets to crypto-focused bank Silvergate Capital for $200m, according to sources familiar with the firesale speaking with The Wall Street Journal.
The news may mark the end for Mark Zuckerberg’s cryptocurrency dreams. Meta had first unveiled its plans to launch Diem in 2019, back when the company was still called Facebook and the digital dosh project was named Libra.
At the same time, Zuck’s internet giant also announced plans to launch a digital wallet called Calibra, which would be able to process payments with the cryptocurrency. Calibra was renamed Novi in 2020 about the same time as Libra had its name-change.
Facebook wasn’t going it alone with Libra/Diem, however: the company recruited other technology, ecommerce and financial behemoths to the Libra Association, later renamed the Diem Association. Meta’s plan was to roll out both Diem and Novi in the summer of 2020.
However the proposals attracted a barrage of criticism from politicians, regulators and pundits, many of whom suggested that the cryptocurrency could cause irreparable damage to governments’ ability to control their national finances. They feared the repercussions of a private entity holding the world’s financial fate in its hands.
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The subsequent senate hearings, investigations and negative headlines saw founding members of the Diem Association – such as Visa, Mastercard, eBay, Mercado Pago and Stripe – abandon the project.
The Diem Association has scaled down its ambitious plans over the years to focus on the US, re-imagining the crypocurrency as a US dollar-pegged stablecoin.
As part of this, the Diem Association entered into a partnership with Silvergate Bank in May 2021 to become the exclusive issuer of Diem USD. However, the Federal Reserve threatened to ice Silvergate, effectively dealing a final blow to Meta’s ambitions.
The project hit another setback at the end of last year when PayPal veteran David Marcus, who had spearheaded the Diem project for Meta, left Facebook, moving on to something “new and exciting”.
I now look forward to having more free time in the months to come before I start building something new and exciting again. Onward! (7/7)
— David Marcus ⚡ (@davidmarcus) November 30, 2021
Now with the news that the Diem Association may be about to sell off its assets, one could be forgiven for thinking that Meta would be entirely out of the fintech game. But that would be premature.
Meta has long been looking for other ways to tap into the payment space and to take advantage of its huge user base across the world.
In 2019, it rolled out its Facebook Pay payment service to enable users to send and receive money across Facebook, Messenger, Instagram and WhatsApp.
In August 2020, the company established a new financial group Facebook Financial – internally called F2 – to run its payment projects.
In December 2021, Meta launched Split Payments, a new feature enabling its messenger app users to calculate and split expenses in group chats.
GlobalData’s researchers have interpreted Meta’s fintech plans as proof of its ambitions to become a super app, a digital one-stop-shop for all consumer and social needs.
It is also unclear what the Diem Association’s potential sale of its Diem assets will mean for Novi. Last year, Meta launched a Novi trial on WhatsApp in the US. The pilot programme enabled a limited number of users to send and receive money within the chat using the stable coin Pax Dollar.