Meta Platform, Inc. (FB) stablecoin project Diem could be shut down. According to a Bloomberg report, the project is looking for a buyer for its intellectual property (IP). The report, which cites anonymous sources, does not specify the contents of Diem’s IP portfolio or the price a buyer might be willing to pay for it. The company also supports engineers from the project with internships.
The report states that pressure from the Federal Reserve, unhappy with project partner Silvergate Bank Inc.’s plans to issue a Diem stablecoin, turned out to be a “final blow” to Diem. An official Diem spokesman told online publication The Vergine that the Bloomberg report contained “some factual errors”.
The central theses
- Meta’s crypto project Diem is looking for a buyer for its IP assets, according to a Bloomberg report.
- Launched in 2019, the project has gone through several iterations and weathered several controversies in its short life.
- Diem’s closure is unlikely to have a major impact on the crypto ecosystem or on Meta’s business, which has already evolved into a Metaverse platform.
Diem’s bloody fate
When it was launched in June 2019, Diem was known as Libra. Its original design envisioned a digital currency backed by a basket of fiat currencies to be used on the social media giant’s network.
But the project sparked anger from regulators and economists around the world. Some have argued that the network effects available to Meta through its social network could increase its circulation and undermine fiat currencies of weak economies. Others raised antitrust concerns that Meta could become a crypto leader by forcing advertisers on its social networking platform to use Diem in their transactions with the company. Regulators in the United States were also concerned about the cryptocurrency’s privacy implications, given previous breaches by Facebook, Meta’s former avatar.
Opposition to the project forced Meta to make changes. Calibra, the project’s wallet, became Novi, and the project was renamed Diem. The project transitioned from its original goal of a global stablecoin to a stripped-down version of multiple stablecoins backed by local currencies. Meanwhile there has been an exodus of partners from the project. Well-known payment processors such as Visa Inc. (V) and Mastercard Incorporated (MA) left the project partly because of its regulatory entanglements. There has also been significant turnover at the project’s senior management level, culminating in the departure last November of David Marcus, who has led the project since its inception. Diem was supposed to start a pilot in 2021, but there were no updates.
What’s happening now?
Given the problems and limited reach of the project, a potential Diem demise is unlikely to have a major impact on the crypto ecosystem. In fact, despite all the headlines, Meta’s Diem managed to raise awareness about the potential of cryptocurrencies in the financial ecosystem. Even as Diem faced pressure from regulators around the world, the price of bitcoin and crypto markets skyrocketed during the pandemic. Stablecoins – which were part of Diem’s original design – have become a market in their own right, and governments around the world are exploring their use in an economy.
Meanwhile, regulators are also getting used to the idea of cryptocurrencies within the existing financial infrastructure. While meta-executives were grilled during their appearance before Congress, lawmakers have taken the crypto industry’s recent forays comparatively warmer.
The closure of Diem is also not expected to have a major impact on Meta’s business. According to Bloomberg, the company only owns about a third of the project, with the rest being held by its partners, including venture capital firms like Thrive Capital, Union Square Ventures and Ribbit Capital.
Also, Meta seems to have already left its crypto ambitions behind. Even as the company launched Libra, it was preparing for an anticipated push into the Metaverse. When Meta unveiled its stablecoin project in 2019, the company amassed a significant number of patents (up 64% year over year), and most of them related to augmented reality — a key technology underpinning entry into the Metaverse. More recently, the company has rebranded itself to Meta Platforms to hint at its metaverse future.