Sebastian Sinclair

<div id="highlights-block_61f20829d7753" class="highlights">
 <ul>
 <li>The Diem Association is reportedly selling off its crypto infrastructure for a sum of $200M</li>
 <li>A holding company for crypto-focused bank Silvergate has picked up the ticket</li>
 </ul>
 
</div>



Facebook&#8217;s brief foray into crypto is reportedly coming to a close.



According to a report by the <a href="https://www.wsj.com/articles/facebooks-cryptocurrency-venture-to-wind-down-sell-assets-11643248799" target="_blank" rel="noreferrer noopener">Wall Street Journal</a> on Wednesday, the Facebook-led Diem Association&#8217;s blockchain and crypto infrastructure is being sold off to a Californian bank for around $200 million. 



Facebook, now known as Meta Platforms Inc., did not immediately respond to Blockworks&#8217; request for comment.



The bank, Silvergate Capital Corp., previously reached a deal with Diem to issue the association&#8217;s stablecoin, but those efforts were blocked by the Federal Reserve, <a href="https://www.bloomberg.com/news/articles/2022-01-25/zuckerberg-s-stablecoin-ambitions-unravel-with-diem-sale-talks?sref=ctSjKj2N" target="_blank" rel="noreferrer noopener">according to Bloomberg</a> reporting. 



Silvergate Capital is a holding company for its crypto-focused bank which provides financial infrastructure and services to digital asset participants.



The move is viewed as a means to return capital to its investor members. Facebook parent Meta Platforms Inc. owns around a third of the association, according to the reports. The other two-thirds belong to a consortium of the association&#8217;s members.



From the outset, the Diem project formerly known as Libra was derided and railed against over its plans to introduce a stablecoin — a crypto asset generally pegged to a commodity or fiat currency — to billions of users worldwide.



Meta unveiled the ambitious project back in June 2019, much to the chagrin of US regulators and politicians. The association was formed alongside payments giants PayPal, Stripe and Visa and also included a long list of some of the world&#8217;s largest companies.



Concerns were raised in Washington a month later when Facebook&#8217;s CEO, Mark Zuckerberg, had to explain to congress how the initiative wouldn&#8217;t undermine global finance. Following funding cuts to the project, as well as the Meta-owned Novi crypto wallet and regulatory pressure, development stalled.



Meanwhile, David Marcus, who oversaw Libra from the beginning as well as the development of Novi, quit Facebook in December citing a need to pursue his own personal projects.


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Facebook-led Crypto Project Diem to Be Sold Off for $200M: Report

Luke Conway

<div id="highlights-block_61f169ffc3148" class="highlights">
 <ul>
 <li>Meta’s Diem Association, formerly known as Libra, has been plagued by regulatory and social backlash</li>
 <li>The association n is seeking to sell assets to pay back investors, sources familiar with the matter reportedly say </li>
 </ul>
 
</div>



Meta’s (formerly Facebook) “Diem” stablecoin cryptocurrency project seems to be crumbling after years of social and regulatory pressures, Bloomberg <a href="https://www.bloomberg.com/news/articles/2022-01-25/zuckerberg-s-stablecoin-ambitions-unravel-with-diem-sale-talks" target="_blank" rel="noreferrer noopener">reported</a>. The project, formerly known as Libra, is reportedly seeking to sell its assets in order to return capital to investors and association members. 


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Facebook’s Libra cryptocurrency was slated to launch in 2019, but backlash from regulators forced the association to hold off until it received appropriate <a href="https://www.banking.senate.gov/imo/media/doc/Marcus%20Testimony%207-16-19.pdf" target="_blank" rel="noreferrer noopener">approvals</a>. In October 2019, several companies, including PayPal, eBay, Mastercard and Stripe, left the Libra Association, increasing doubt that the project would ever work. 



In a <a href="https://www.theguardian.com/technology/2019/oct/07/paypal-pulls-out-facebook-libra-cryptocurrency#:~:text=It%20said%20in%20a%20statement,financial%20services%20for%20underserved%20populations." target="_blank" rel="noreferrer noopener">statement</a> from 2019, PayPal noted why it was leaving the project:



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">&#8220;PayPal has made the decision to forgo further participation in the Libra association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations.&#8221;</blockquote>



Since then, PayPal has made its own <a href="https://newsroom.paypal-corp.com/2020-10-21-PayPal-Launches-New-Service-Enabling-Users-to-Buy-Hold-and-Sell-Cryptocurrency" target="_blank" rel="noreferrer noopener">entry</a> into the cryptocurrency space, letting its users buy, sell and hold cryptocurrency on its platform. 



Concern over the Diem project stemmed from both Facebook’s history with data and also the fact that Libra would be a permissioned and private system that could potentially undermine existing monetary systems should it become popular. 



After so much backlash from regulators, the Libra Association <a href="https://www.diem.com/en-us/updates/diem-association/" target="_blank" rel="noreferrer noopener">changed</a> its name to the Diem Association in 2020, just as Facebook would later change its name to Meta after becoming synonymous with unethical data practices.



The new version of Diem would also depart from its prior concept of a stablecoin backed by the International Monetary Fund&#8217;s SDR, a basket of top currencies including USD, EUR, CNY, JPY and GBP, and instead use a USD-only backed stablecoin issued by a major bank. But Diem couldn&#8217;t seem to shake the regulatory and social pressures.



To add more uncertainty to the project, Diem&#8217;s head David Marcus, announced his departure from Meta and Diem through a series of Tweets in November of last year. 



<figure class="wp-block-embed aligncenter is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Personal news: after a fulfilling seven years at Meta, I’ve made the difficult decision to step down and leave the company at the end of this year. (1/7)&mdash; David Marcus &#8211; dmarcus.eth (@davidmarcus) <a href="https://twitter.com/davidmarcus/status/1465740041339092994?ref_src=twsrc%5Etfw">November 30, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Sources say that it is unclear whether or not Diem will find a buyer for its assets, a third of which is owned by Meta.



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Is Facebook’s Diem Stablecoin Falling Apart?

Casey Wagner

<div id="highlights-block_611d2cd9fe2e8" class="highlights">
 <ul>
 <li>Facebook payments and stablecoin projects have been unfairly scrutinized, the head of Facebook Financial writes </li>
 <li>The tech giant says it will be at the forefront of revolutionizing the payments system </li>
 </ul>
 
</div>


<div id="highlights-block_611d2bd7fe2e5" class="highlights">
 
</div>



Facebook wants a ‘fair shot’ at rebuilding today’s broken payments system, according to David Marcus, head of the financial services branch of the technology company.&nbsp;



Facebook Payments, launched in 2009, has enabled more than $100 billion in payments volume, Marcus wrote in a <a href="https://medium.com/@davidmarcus/good-stablecoins-a-protocol-for-money-and-digital-wallets-the-formula-to-fix-our-broken-payment-f11f59fc92d7">memo Wednesday</a> about Facebook’s role in improving financial systems. The platform and Facebook’s other financial services projects, Marcus said, have faced unfair resistance from traditional financial players and regulators, but the company is ready to be taken seriously.&nbsp;



“I’ve repeatedly heard variations of the argument that the payments and financial services industry shouldn’t let Facebook be part of these innovations,” Marcus wrote. “I’ve heard multiple conversations about how this proposal would be so great if only Facebook wasn’t involved.”&nbsp;



The pushback Marcus refers to was largely centered around Novi, Facebook’s planned digital wallet that would allow for quick, and oftentimes free, money transfers. The tech giant intended to pair Novi with Facebook-initiated stablecoin project Libra, but ran into regulatory constraints. 



In 2019, former President Donald Trump said that Libra would lack “standing and dependability” and that stablecoins will never be recognized as ‘real’ currencies. European Central Bank board member Benoit Coeure also raised concerns in 2019 about Libra posing a threat to the US dollar supremacy.&nbsp;



The opposition has positioned the tech giant, with roughly 2.89 billion users as of the second quarter of 2021, as a dark horse, Marcus said.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“One of the core tenets of our value system is the promise of a level playing field,” Marcus wrote. “This idea that any person or company bringing a solid solution to a problem will have a fair shot.”</blockquote>



Facebook rebranded the Libra project as Diem following the opposition. Diem is now overseen by the Diem Association, a nonprofit group looking to address government and regulatory concerns.&nbsp;



“I understand and accept the need for extra scrutiny due to our scale,” Marcus wrote.&nbsp;



<h3 class="wp-block-heading">The regulatory approach</h3>



In May 2021, <a href="https://cms.blockworks.co/facebook-led-digital-currency-pivots-to-us-dollar-stablecoin/" target="_blank" rel="noreferrer noopener">Facebook announced a partnership</a> with Silvergate Capital where the bank holding company will be the exclusive issuer of Diem USD stablecoin. The move is largely seen as a way to appeal to regulators, some say.&nbsp;



“Libra had a fair amount of pushback, and subsequent to that, Facebook decided to say, ‘okay, we&#8217;re going to go to the regulatory approach, we&#8217;re going to we&#8217;re going to do everything by the book, we&#8217;re going to go get whatever state money transfer licenses we need with Novi,’” said&nbsp; Michael Del Grosso, research analyst at Compass Point Research and Trading. “And with Diem, as opposed to going to a less regulated stablecoin issuer, we&#8217;re going to go through a member of the Federal Reserve of California, a state-chartered bank, which is Silvergate.”&nbsp;



Facebook is a “challenger” in the financial payments industry, Marcus said. The Novi wallet will allow users to send and receive US dollars, Euros and other fiat currencies free of charge.&nbsp;



“So why not just do that and call it a day?” he wrote. “Well, we might.”



But Facebook isn’t quite ready to give up on the incorporation of stablecoins, Marcus said. A closed payments system using only fiat currencies is &#8220;not going to cut it,” he wrote. 



A secure, well-designed stablecoin truly backed one-to-one by fiat currency, a feature many <a href="https://cms.blockworks.co/more-capital-flowed-into-stablecoins-than-muni-bonds-in-2021/" target="_blank" rel="noreferrer noopener">projects today lack</a>, would offer consumers stronger protection and options in payments, Marcus said.&nbsp;&nbsp;



Facebook is committed to reaching this goal while adhering to regulations. The Novi wallet has licenses or approvals in most US states, Marcus said. Additionally, he said, the Diem stablecoin project “has addressed every legitimate concern.”



“Change is long overdue. It’ll happen one way or another. Novi is ready to come to market,” Marcus wrote. “It’s regulated, and we’re confident in our operational ability to exceed the high standards of compliance that will be demanded of us.”&nbsp;



Marcus’ statement, Del Grosso said, reflects the work Facebook has done and wants to show regulators.&nbsp;



“Facebook is trying to appease the regulators by playing their game,” Del Grosso said. “And I think that that&#8217;s what David is saying in this post today. He&#8217;s saying that they have gone out, done their homework, and they deserve their place in the marketplace today.”&nbsp;



Want more investor-focused content on digital assets?&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a>&nbsp;September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.