Facebook, or Meta as the social media’s holding company is now called, appears to have admitted defeat in its ambitious plans to launch its Libra cryptocurrency project with reports suggesting The Diem Association is being wound down. The association was established in 2019 as an independent body that would “govern” Libra, which Facebook hoped would be used for frictionless digital payments made via applications including its own.
The Diem Association was formed of 27 partner companies interested in the Libra project, including Uber, Spotify, MasterCard, Visa and Vodafone as well as representatives from NGOs. The idea was to convince regulators and the general public that Meta itself was not in complete control of the cryptocurrency.
The Wall Street Journal yesterday reported Diem is now selling the assets and technology developed as part of the project to the boutique Californian bank Silvergate Capital, which serves cryptocurrency and blockchain companies. The Diem Association had also been working with the bank, with whom the WSJ said price negotiations are still ongoing. However, it is believed the IP won’t fetch much more than $200 million.
Neither Diem, Silvergate nor Meta offered a comment to the New York-based newspaper.
With a reputation for playing fast and free (to put the most positive spin on it) with user data, Facebook always faced trust issues around Libra both from potential users and regulators and politicians. Convincing regulators that users’ financial data would be sufficiently protected was always going to be an issue.
As was answering the question of whether Libra wouldn’t give social media company too much power. Several of the project’s most prominent early backers were also quick to pull out of the Association, initially named the Libra Association before being rebranded as Diem following mass defections.
In an attempt to appease U.S. regulators, the Diem Association moved operations from Switzerland to the USA and agreed to revise plans for the cryptocurrency to backed by a basket of currencies and instead make it a stablecoin backed 1-to-1 by the U.S. dollar. However, regulators were still far from convinced and it would appear Meta has now given up hope that they might be.
The seeming end of Libra comes with Bitcoin having dropped 45% from its November record high and concerns the cryptocurrency bubble is on the verge of popping if it hasn’t already.