- The Facebook-backed Libra project was touted as the next best thing to happen
- Due to regulatory roadblocks, the project was rebranded as Diem
- Unlike Libra, Diem is more similar to a stablecoin
- The Diem Association has 27 members, including Facebook
- The project is expected to launch in early 2021
When Libra was first announced in June 2019, there was a lot of hype surrounding it. Libra was billed to be the next big step for the crypto industry. The Facebook-backed crypto, Libra was billed to launch in 2020. However, due to regulatory pressure, there is a lot of uncertainty around Libra?.
The Hype Behind the Facebook Backed Libra
The initial plan involved launching an actual blockchain-based crypto in partnership with the non-profit Libra Association. The original Libra tokens were intended to be a cryptocurrency and a direct competitor to the global fiat market.
The expectations behind Libra were due to the great prospects the project had. The idea behind Libra was a peer-to-peer payment system that cuts across FB messenger and then eventually WhatsApp and Instagram.
On the project were the likes of payment giants; Visa, MasterCard, PayPal, and Stripe. On paper, Libra looked like the next big crypto project billed for instant success. However, the government attacked the project with regulations.
The project was threatened with lawsuits from both the United States and the U.K. governments. In March 2019, House of Representative member, Maxine Waters, wrote to Facebook;
Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action.
In March of 2020, Facebook announced that due to the pressure, it was reviewing the project. The project was reviewed in December when Facebook announced that Libra has been rebranded as Diem. According to Facebook, the project will support both existing government-backed currencies, Diem.
On the Flipside
- The financial watchdog of Dubai, the Dubai Financial Services Authority (DFSA) has announced that it will be releasing consultation papers for a crypto regulatory framework.
- The announcement was part of its 2021-2022 business agenda released this week.
- According to the DFSA, the papers which will be released in the first quarter of 2021 seeks to expand on the existing rules and would include the regulation of crypto issuers and trading platforms.
What is Diem?
Diem is a permission blockchain-based payment system that will launch with private currency implemented as a cryptocurrency. Backing the project is the Diem Association, which consists of 27 members, of which Facebook is one.
Unlike Libra which was intended to be a direct competitor to the global fiat market, Diem has a softer mandate. The Diem tokens are designed to complement domestic currencies and not replace them. To put in simply, Diem is actually a ‘stablecoin.’
At launch, the monetary value of Diem will be tied to the U.S. dollar – so one Diem will be equal to one USD. Although a step down from what many expected from the Libra project, the potential use of Diem is immense.
On paper, the Diem project aims to ‘build a trusted and innovative network that empowers people and businesses around the world’. Facebook has 2.7 billion users from all over the world.
Diem would grant them access to a digital currency that they could use to pay for things instantly. Diem believes it could provide a viable alternative for the unbanked and help them to save money.
The crypto will be launched with an associated digital wallet, Novi. Using Novi, users will be able to purchase Diem with their local currency, convert it back to their local currency when they want to withdraw, and trade with it online.
When Will Diem Launch?
After a protracted wait, Diem is billed to launch in Early 2021. However, there are reports that the first launch will be limited to a select few countries. The success of that will determine the future global rollout.
Given the expectations and the hype backing Facebook’s debut in the crypto space, there have been bold claims by crypto enthusiasts who believe that Diem will be the one to transform the financial services industry.