Bloomberg: After Over 600 Days of Struggle and Effort, Zuckerberg's Cryptocurrency Dream Is Finally Shattered

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Mark Zuckerberg's controversial cryptocurrency project Diem, which he defended in front of Congress, is unraveling under regulatory pressure.

Original Title: " Mark Zuckerberg’s Stablecoin Ambitions Unravel With Diem Sale Talks "

Original Source: Bloomberg

Original Translation: Unitimes

Mark Zuckerberg's controversial cryptocurrency project, which he defended in front of Congress, is unraveling under regulatory pressure.

According to sources familiar with the matter, the Diem stablecoin project led by Meta (formerly known as Facebook), with the backing of the Diem Association, is considering selling its assets as a way to return capital to its investor members. Sources say Diem is in discussions with investment bankers on the best way to sell its intellectual property and find new homes for engineers who developed the technology, realizing the remaining value of the once ambitious Diem stablecoin investment project. As the discussions are not public, the source requested anonymity.

In 2019, when Meta's predecessor Facebook first introduced the idea of its stable digital currency Libra, they partnered with dozens of other companies aiming to revolutionize global financial services. However, the consortium was not able to shield the project from global regulatory scrutiny. Some partners abandoned the project after Zuckerberg was called to testify before the U.S. Congress, leading to rebranding the project from Libra to Diem. Subsequently, the ambitions of the Diem project were scaled back, and its founder David Marcus also left Meta last year. Sources indicate that the Association had reached an agreement with Silvergate Capital Corp. to issue the Diem stablecoin, but resistance from the Federal Reserve dealt a final blow to these efforts.

In May of last year, Diem indicated that its subsidiary, Silvergate Bank, would become the issuer of the Diem USD stablecoin. A stablecoin is a type of cryptocurrency pegged to the U.S. dollar, typically used to trade other cryptocurrencies. The source indicates that after lengthy discussions between Diem supporters and regulators, Federal Reserve officials ultimately informed Silvergate last summer that they were uncomfortable with the stablecoin plan and could not assure the bank that such activity would be allowed.

Due to a lack of approval from banking regulators, Silvergate was unable to confidently launch the new asset, as it was unclear whether the Fed would take harsh action, rendering Diem's efforts futile.

A Fed spokesperson declined to comment on the institution's negotiations with Diem supporters. The Diem Association also declined to comment. Meta did not immediately respond to a request for comment.

It remains unclear how potential buyers will assess Diem's intellectual property and how they will assist the engineers developing that intellectual property. The source cautioned that discussions are still early, and there is no guarantee that Diem will find a buyer.

According to one source, Meta owns about a third of the joint venture, with the rest owned by other members of the association. The source added that association members include some venture capital and tech companies who agreed to invest and pay to join the organization at its inception. It is currently unclear which companies, besides Meta, ultimately invested in the stablecoin project.

Diem's website shows that its partners include venture capital firms Andreessen Horowitz, Union Square Ventures, Ribbit Capital, and Thrive Capital, as well as Singapore's state-owned investment firm Temasek Holdings Pte, among others. The website also lists companies focused on cryptocurrency like Coinbase Global Inc., as well as ride-sharing company Uber Technologies Inc. and e-commerce platform Shopify Inc.

In November 2021, U.S. federal regulators finally clarified their stance. The President's Working Group on Financial Markets in the U.S. stated in a report that for stablecoins to be used as a means of buying and selling things, the stablecoin issuer should be a regulated bank. These regulators expressed concerns about the potential consequences if a large user network of a tech company suddenly started transacting in a new currency, as well as the possibility of economic power concentration if a stablecoin issuer teamed up with a large corporation.