Silvergate Bank, which is known for its crypto-friendly policies, was already working with Diem, but neither organisation got regulatory green light and permission to launch the Libera stable coin.
“In the United States, a senior regulator informed us that Diem was the best-designed stablecoin project the US Government had seen,” Diem’s Levey stated. “Despite giving us positive substantive feedback on the design of the network, it became clear from our dialogue with federal regulators that the project could not move ahead. As a result, the best path forward was to sell the Diem Group’s assets,” he added.
Finally, on Monday, Jan 31, 2022, Meta announced that the story of the Diem project was over, and Mark Zuckerburg’s stablecoin project was shut down.
Meta and 20 partner organisations formally joined the digital currency project during a meeting in Geneva in October 2019. They announced that they were getting to the unregulated cryptocurrency as Libra and created a consortium of companies called the Libra Association. Together, they were supposed to launch the Libra cryptocurrency, LibraUSD, as a stablecoin.
After making the Libra decision, Meta faced strong opposition from many central banks since they feared Libra would become a quasi-sovereign currency in some countries. Thus Meta announced that they would not launch the currency until all regulatory concerns were solved.
A few months later, the Libra Association announced some changes and the project was rebranded to the Diem Association. Meta's digital currency Diem was seen as a force that could undermine financial stability and rival currencies.
Since governments, banks and regulators had expressed fears that Libra would negatively affect the traditional financial system, they wanted to strictly control the Libra Association for fear of its private influence on monetary policy and the economy as a whole.
Despite strict legal requirements, many of the largest companies joined the Libra Association. However, due to rising pressure on the project from the authorities and government and fear of spoiling relations with financial regulators, a number of companies soon left the consortium.
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