SAN FRANCISCO (AFP) – The Facebook-backed digital currency project Diem announced on Monday the winding down and USD182-million sale of its technology, capping a years-long initiative that drew significant concern from regulators.
Facebook’s announcement in 2019 of plans to design a cryptocurrency and payment system raised immediate red flags for global finance officials, who expressed a barrage of criticism about the security and reliability of a private network.
“The idea of Facebook doing a cryptocurrency was a bridge too far for regulators,” said Enderle Group Analyst Rob Enderle.
“They have made it clear they don’t trust Facebook with what they are doing now, so sure as heck were not going to let it go into the money business.”
Diem Networks’ United States (US) CEO Stuart Levey said in a statement that the initiative made progress, but “it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead”.
“Over the coming weeks, the Diem Association and its subsidiaries expect to begin the process of winding down,” the association’s statement said.
The technology was bought by Silvergate Capital Corporation in California that is a go-to for crypto projects, and which put the sale price at USD182 million.
Silvergate bought development, deployment and operations infrastructure, as well as tools for running a blockchain-based payment network for payments as well as cross-border wire transfers.
“As far as I can tell, Diem is dead,” Enderle said. “As we undertook this effort, we actively sought feedback from governments and regulators around the world, and the project evolved substantially and improved as a result,” the Diem association’s statement said.
Facebook developed the technology, initially named Libra, and then entrusted control of the project to an independent entity based in Geneva.
After the defection of several major partners such as PayPal, Visa and Mastercard, the organisation scaled back its ambitions, before renaming itself Diem at the end of 2020.
The so-called stablecoin – a type of digital money tied to other kinds of assets – never launched. It was not clear what will become of related plans for Facebook-parent Meta to build a virtual wallet for holding cryptocurrency.