Facebook’s Diem exits Switzerland in latest shake-up

14 May 2021

Image: © Ascannio/Stock.adobe.com

The cryptocurrency project has met much resistance from global regulators and is now relocating to the US.

Facebook’s cryptocurrency ambitions have taken another notable turn as the project has relocated from Switzerland to the US.

The initiative, originally called Libra, has faced its fair share of stumbling blocks. Announced in 2019, the social network’s efforts to launch a cryptocurrency were met with immediate resistance from regulators and lawmakers.

Officials flagged concerns over a Facebook-helmed financial network and what impact the creation of a new currency that isn’t linked to any central bank would have on the global financial market.

The original idea for Libra/Diem was the creation of a blockchain-based payments network using a stablecoin. That is, a cryptocurrency whose value is tied to a ‘basket’ of fiat currencies including the dollar, euro, pound and yen.

Since then, the plans were altered to create individual stablecoins for each currency rather than a complex mix of them all.

Diem had been seeking a licence in Switzerland where the organisation was based and from which it would operate. Now, however, the organisation has packed its bags and moved all operations to the US.

Based in Washington, DC, Diem has partnered with Silvergate, a California-based bank, in its effort to launch its token, which will be pegged to the US dollar.

“While our plans take the project fully within the US regulatory perimeter and no longer require a licence from (Swiss authority) FINMA, the project has benefited greatly from the intensive licensing process in Switzerland, and the constructive feedback from FINMA and more than two dozen other regulatory authorities from around the world convened by FINMA to consider the project,” Diem chief executive Stuart Levy said in a statement.

It’s a significant change from the ambitious plan presented by Facebook two years ago. At the time, it was backed up by several partners in the Diem Association, including Mastercard, Visa and Stripe. But they and others exited the project soon after. Spotify, Coinbase and Uber are still involved.

When Diem will launch its much-awaited pilot using its first token remains to be seen. All the while, stablecoins have attracted attention in other quarters, especially around the concept of central bank digital currencies. China has led the charge on the front with a digital yuan that has expanded into more advanced trials.

Jonathan Keane is a freelance business and technology journalist based in Dublin