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Summary
The Diem Association aims to launch a pilot for a single-currency stablecoin pegged to the U.S. dollar in 2021, according to a person familiar with the matter.
The Facebook-backed digital currency project, formerly known as Libra, has faced backlash from regulators and lost several key backers and executives.
Meanwhile, Diem has undergone a complete makeover and is now negotiating with the Swiss financial regulator for a payments license.
Facebook once wanted to revolutionize finance with a global digital currency — and then regulators came along.
First proposed under the name Libra in June 2019, the project was originally intended to be a common currency pegged to a basket of sovereign currencies such as the U.S. dollar and the euro.But the Libra Association, which oversees the project, went to key backers including Visa and Mastercard after a backlash from global regulators. the organizationfinally revised the plan
The project, now called Diem, is expected to launch later this year, albeit in a more limited form. When it finally arrives, Diem wont be the fanfare and controversy that social media giant Facebook envisioned almost two years ago.
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Stablecoin Pilot
Switzerland-based nonprofit Diem Association plans to launch a pilot for a single-currency stablecoin pegged to the U.S. dollar in 2021, according to people familiar with the matter.
The pilot is small and focused on transactions between individual consumers, the person said, details of which have not been made public. Users can also choose to buy items and shop. However, a pilot launch date has not yet been set, so timing may change.
“It really stands out in a surprising way,” Michael Casey, CoinDesk’s chief content officer and former financial journalist, told CNBC.
Diem was heavily scrutinized when it was first announced. Given Facebooks vast reach (2.8 billion monthly active users in the fourth quarter of 2020), central bankers and politicians in many countries worry that Facebook may threaten currency stability and may cause money laundering problems. Facebooks involvement also means there are concerns about how it will protect users privacy.
Its an astounding challenge to the international order, and it sparked a very strong backlash, Casey said.A big concern, Casey noted, is that Diem poses a threat to dollar dominance. Two Months After Facebook Announced Libra Project, Former Bank of England GovernorMark Carney proposes
A new digital currency based on a global basket of goods that could undermine the dollars status as the worlds reserve currency.
Ran Goldi, CEO of Digital Assets Group, said that Diems technology has changed dramatically in the last year and a half, from a simple blockchain to a very mature blockchain, and you can see that it is Trying to answer some questions from regulators.” It is reported that Digital Assets Group is building infrastructure to help merchants accept Diem as a payment method.
“I think it will be recognized this year. If not, it will be a missed opportunity,” said Michael Gronager, CEO of blockchain analysis firm Chainalysis.
Gronager added, “At the same time, this is one of several initiatives that are going on, similar to Tesla’s purchase of $1.5 billion in cryptocurrency. This is just part of a larger move, not new.”In fact, Diem (or Libra) could be. But bitcoin and cryptocurrencies have gained momentum over the past year, with bitcoin recently surging to an all-time high of more than $60,000, and big companies like Tesla and Square are betting on cryptocurrencies. Meanwhile, crypto exchange Coinbase listed on Nasdaq in a landmark direct listing.
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Whats next for Diem?
In the nearly two years since its debut, numerous members and executives of the Diem Association have departed.
Visa, Mastercard and Stripe were the first to leave the association. Others, including PayPal, eBay and Vodafone, then left. Meanwhile, some key executives from the project have left, from Kevin Weil, head of Novi, Facebooks planned digital wallet, to Dante Disparte, head of public affairs at Diem.At the same time, Diem underwent a complete transformation,Renamed from Libra late last year
Undertake a rebrand and bolster its leadership team by hiring, among others, chief executive Stuart Levey (formerly HSBCs chief legal officer).
Diem is currently negotiating with the Swiss financial regulator to obtain a payments license. This is a key step that will allow the organization to further advance its digital currency project.
An important development in our dialogue with regulators is the phased start of the programme, Diem chief economist Christian Catalini said last month.
“We will gradually introduce different functions and use cases, applications in different areas.” He added that all members, regardless of size, must undergo strict anti-money laundering checks.
Although the organization is starting with a limited pilot program, it plans to eventually bring in merchants and other partners. For now, its keeping tight-lipped about who will be involved.
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Network Effects
A key advantage of a Facebook-backed Diem is the network effect the social media giant brings. Diem Association is still supported by major companies such as Shopify, Spotify and Uber.
Gronager said, “By supporting a stablecoin with an institution like Facebook, you can achieve better distribution. You can put it in the application, add it to a lot of other places, and I think it will be powerful.”
He added, “We’ll wait and see when it’s launched and how it plays out. But interest in cryptocurrencies is also speculative for many right now. It’s going to basically make it easier for more people to get into crypto.” .”
But it also raises concerns about user data, an issue that has clouded the project due to Facebooks history of privacy scandals. But Diem itself claims to take privacy concerns very seriously.
Diem itself will not have private information about customers, and some of our members have committed to data separation for social and financial data, Catalini said.
Still, one of Diem’s achievements has seen central banks around the world race to develop their own digital currency strategies. Chinas central bank is leading the way, trialing a digital yuan in several cities, while the Bank of England is exploring whether to issue its own digital currency. Some experts say Diem shouldnt be counted just yet.
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