Facebook’s crypto ambitions are taking a big turn as plans for US dollar-backed stablecoins
The Facebook-backed Diem Association announced it was testing a stablecoin backed by the US dollar, but did not provide any further details.
Facebook’s long-delayed cryptocurrency plans took a small step forward on Wednesday (May 12) when Project Diem announced it would launch a dollar-backed stablecoin. Initially, consumers on a select network of companies can use digital tokens at a rate of 1: 1 USD.
The plan is a dramatically scaled-down version of the ambitious goal Facebook first promoted in the summer of 2019 when the company announced it would partner with financial heavyweights like Visa and PayPal to create a global cryptocurrency that competes directly with government-backed fiat currencies. However, the original plan was quickly faltered when tight government controls forced large partners to flee and key executives migrated.
When announcing the stablecoin, the Diem Association also announced that it was moving its base of operations from Switzerland to the United States, a move designed to simplify plans for the digital currency it now calls the United States. The Diem Association also said that Silvergate Bank, a California bank that serves a number of crypto companies, will be the sole issuer of the stablecoin.
“Forming this partnership is an important step in preparing for the Diem USD pilot,” the Diem Association said in a statement, but did not specify when the pilot will start or when consumers can start it.
Diem Association was once known as Libra, but renamed itself last December, in part to part with the project’s original global ambitions.
The turmoil on the project was underscored by the departures of its senior founders, including fintech visionary David Marcus, and almost all of the original executives, including strategy, product, marketing and finance directors. Last month, Executive Vice President Dante Disparte left the company to join the USDC stablecoin issuer Circle.
The Diem Association no longer lists their partners on their homepage, but those who haven’t announced their departure include Uber, Shopify, Spotify, and Coinbase. When Diem USD actually hits the market, these companies will likely form the core of a Facebook-powered network that will allow consumers to pay through messaging apps like WhatsApp and Messenger.
It’s not clear how Facebook is contributing to the project. When Facebook first announced the plan, CEO Mark Zuckerberg got involved in the marketing effort, leading some to nickname the currency “Zuck Bucks”. But on May 12, Facebook didn’t even mention the new stablecoin – a possible sign the company had to accept behind the scenes to avoid the attention of U.S. lawmakers who weren’t interested in the new stablecoin from the project.
The Diem Association itself, meanwhile, is struggling with the dynamics of development. Yesterday the project stated that it was based in Geneva, while their Twitter account has been inactive since December.
If the Diem Association were to launch their stablecoin, the team could be in a game of catching up. In the time since Facebook first announced the project, a growing number of other companies, including PayPal, have launched stablecoins or indicated that they will in the near future.