Meta’s cryptocurrency ambitions end with sale of Diem assets to Silvergate

1 Feb 2022

Image: © Ascannio/Stock.adobe.com

Originally called Libra when it was launched by Facebook in 2019, Diem has faced setbacks and resistance from regulators.

After years of setbacks, the cryptocurrency project started by Facebook is coming to a close. The group behind Diem has sold its intellectual property and technology assets to Silvergate Bank for $182m in cash and stock.

Diem Association CEO Stuart Levey confirmed that the group will be winding down in the coming weeks, ending a journey that began in 2019 when Diem was originally called Libra.

Future Human

The group planned to launch a stable-value digital currency – or stablecoin – designed to make payments and transfers cheaper and faster, but faced pushback from regulators.

“Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead. As a result, the best path forward was to sell the Diem Group’s assets,” Levey said in a statement yesterday (31 January).

Silvergate Bank said it gained a familiarity with the network after partnering with Diem, and will use the acquired assets to enhance its own stablecoin initiatives.

“Through conversations with our customers, we identified a need for a US dollar-backed stablecoin that is regulated and highly scalable to further enable them to move money without barriers,” Silvergate CEO Alan Lane said.

“It remains our intention to satisfy that need by launching a stablecoin in 2022, enabled by the assets we acquired today and our existing technology. Silvergate is committed to continuing to foster the open-source community that supports the technology, and we believe that existing contributors will be excited about our vision going forward,” he added.

David Marcus, the former Facebook executive who helped create Libra, said those behind the project were “mission driven and were in it for the right reasons”.

“We all gave our whole hearts, blood, sweat and tears to what I will always call Libra,” Marcus said on Twitter.

A controversial journey

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

Meta, formerly known as Facebook, first announced the cryptocurrency initiative in 2019. The company planned to launch Libra in 2020, but faced difficulty when US politicians came out in opposition of the move.

There were plans to legitimise the project and distance it from Facebook with the formation of the Libra Association, but this faced a setback after major payments services PayPal, Visa, Mastercard and Stripe pulled out.

At a US Congress hearing in October 2019, Mark Zuckerberg admitted: “I actually don’t know if Libra is going to work.”

The Libra Association changed its name to Diem in 2020 and had been seeking a licence in Switzerland, where the organisation was based and from which it would operate, but moved all its operations to the US last year.

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Leigh Mc Gowran is a journalist with Silicon Republic

editorial@siliconrepublic.com