Regulatory headwinds topple Facebook's cryptocurrency initiative
Facebook's plans to be an early power in the rise of cryptocurrency appear to have collapsed, as reports are pouring in that its Diem Association (formerly Libra Association) stablecoin initiative is winding down and selling off its assets.
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The company's plan began in 2019 when Mark Zuckerberg revealed Libra, positioning it as a new form of cryptocurrency that could be used as a payment method within the Facebook Messenger and WhatsApp platforms. Initial partners in the project included major payment card players like Visa and Mastercard, as well as retailers like eBay.
The plan was to let these partners and others handle Libra's blockchain management, with all transactions being verified and processed by them. Facebook also planned to back the coin with traditional currency, making it a "stablecoin," or a form of cryptocurrency that inexorably ties its value to an external asset, like the US Dollar or gold prices.
The Libra Association was almost immediately set upon by concerned regulators that worried its anonymous nature could explode online criminal activity and that its member partners could violate US finance laws by circumventing traditional currencies.
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Over the next couple of years, Libra would undergo a name change to Diem (as would Facebook's parent company) and would continue attempting to appease regulators, but to no avail. The initiative eventually lost some of its largest backers before taking yet another blow from a US Treasury report on stablecoins said a commercial firm also acting as a cryptocurrency issuer would "lead to an excessive concentration of economic power."
The writing was essentially on the wall at this point, with Facebook's Diem efforts having largely gone dark in recent months. So, it wasn't particularly surprising when Bloomberg reported that Facebook and its remaining partners were shopping Libra's assets around to potential buyers.
Despite sites like Ars Technica claiming there was "not much to sell," The Wall Street Journal now says Facebook and the remaining stakeholders are planning to sell Libra's assets to Silvergate Capital for $200 million. Silvergate, it's worth noting, is the same bank Facebook had intended to team with for the issuance of its Diem/Libra stablecoin.
It's unclear exactly what Silvergate may be acquiring and what its plans for those assets might be. However, it has called itself a "leading back for business & crypto," meaning any valuable assets relating to cryptocurrency would likely be of interest.