Diem, a Facebook-backed crypto project, sold after a pushback

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Facebook-backed digital currency project Diem on Monday announced the liquidation and sale of $182 million (roughly Rs. from regulators.

Facebook’s 2019 announcement of plans to design a cryptocurrency and payment system immediately raised red flags for global finance officials, who voiced a barrage of criticism over the security and reliability of the device. a private network.

“The idea of ​​Facebook making a cryptocurrency was a bridge too far for regulators,” said analyst Rob Enderle of Enderle Group.

“They’ve made it clear that they don’t trust Facebook with what they’re doing now, so they’re definitely not going to let him into the money business.”

Diem Networks’ U.S. CEO, Stuart Levey, said in a statement that the initiative has made progress, but “it nonetheless became clear from our dialogue with federal regulators that the project could not move forward.”

“During the next few weeks, the Diem association and its subsidiaries plan to begin the liquidation process,” the association’s statement said.

The tech was bought by Silvergate Capital Corporation in California, which is a go-to for crypto projects, and set the sale price at $182 million (roughly Rs. 1,360 crore).

Silvergate purchased development, deployment, and operations infrastructure, and tools to manage a blockchain-based payment network for payments as well as cross-border wire transfers.

“As far as I know, Diem is dead,” Enderle said.

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“As we undertook this effort, we actively sought feedback from governments and regulators around the world, and the project has evolved and improved significantly as a result,” the Diem Association statement read.

Facebook developed the technology, initially named Libra, then handed over control of the project to an independent Geneva-based entity.

After the defection of several major partners such as PayPal, Visa and Mastercard, the organization lowered its ambitions, before renaming itself Diem at the end of 2020.

The so-called Stablecoin – a type of digital currency tied to other types of assets – was never launched. It was unclear what would happen to related plans for Facebook parent Meta to build a virtual wallet for holding cryptocurrency.

“The combination of a stablecoin issuer or wallet provider and a commercial enterprise could lead to excessive concentration of economic power,” US regulators said in a 2021 report.

“These policy concerns are analogous to those traditionally associated with the blending of banking and commerce, such as the benefits of accessing credit or using data to market or restricting access to products,” the report says.

Facebook, which rebranded itself as Meta in October, has come under fire for its dominance online, but it’s not the only powerful organization interested in crypto.

Creative Strategies analyst Carolina Milanesi wondered if Libra-turned-Diem was, from the start, part of Facebook’s vision to be a platform for the metaverse.

“Cryptocurrency is going to enter the metaverse one way or another,” Milanesi said.

“Maybe that’s what Facebook is counting on and decided to leave the headache to someone else.”

People are already buying real estate in immersive virtual worlds called metaverse.

The European Central Bank officially launched a pilot project in July to create a “digital euro”, in response to the growing popularity of electronic payments and the rise of cryptocurrencies.

Central banks are also responding to increased demand for digital payment options as cash usage continues to decline, a trend fueled by the pandemic and the desire to avoid all contact.

“There’s a lot of mistrust around cryptocurrency, and a lot of us in the industry are convinced that this is a big Ponzi scheme,” Enderle said.

The sale of Diem’s ​​assets “is another red flag on crypto,” he added.


Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting Founder Alok Jain on Orbital, Gadgets 360 Podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get it. your podcasts.
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