Diem’s innovative goal was to create an interconnection between users of the world to transact without the need of a financial intermediary (banks). Anonymity was also a selling point of the brand, although it sustained opposition from Washington.
The decision to close off the project appears to relate directly to regulatory pushbacks, suggesting that transactions of digital assets will be prone to heavy regulations in the near future. Over the past year, U.S regulators have become increasingly concerned about the regulations of digital assets. With the increasing correlation of cryptocurrencies with traditional assets like stocks, spillovers and shocks are bound to cause a tremendous ripple effect on the world’s financial markets.
When the project was announced in 2019, Facebook partnered with a consortium of notable partners including PayPal and Visa. The association was named Libra Association – established to create instantaneous payments through mobile devices without access to formal banks. During the same time, Facebook’s Libra received perturbations from members of the Congress and regulators relating to money laundering, consumer protection and other financial risks.
Libra was then rebranded into Diem two years later, highlighting the fact that the stablecoin would be pegged to the US dollar for better stability. Nevertheless, Meta’s strategy was met with even greater resistance from Washington.
Facebook’s plan to step into the world of the virtual can be argued to hinge on Diem, as the stablecoin would be the virtual currency used in Meta. This failure would certainly push back plans for a virtual metaverse.
In recent months, Diem’s key personnels have left the company – including project founder Kevin Weil and David Marcus. Meta will also now sell Diem’s assets to the Californian bank Silvergate Capital which has served bitcoin and other blockchain firms.
With the rise of cryptocurrency use, other tech giants are also investing into the space. Google, for instance, hired a team of engineers to work on the technology underpinning cryptocurrency: blockchain.