Facebook Diem Cryptocurrency (formerly Libra)

2022: Project Closure

More than two years after the first announcement, the project, formerly known as Libra, closes. The Diem Association, formed by Facebook to manage digital tokens, is selling off its assets after regulators harshly opposed this initiative and made it clear that it cannot be implemented in any form. This became known on January 26, 2022.

When Facebook introduced Libra in 2019, it intended to create a single global currency tied to the same basket as dollars, euros or treasury bills. This plan was met with a flurry of criticism from politicians and regulators, worried that Libra would usurp part of the power of central banks, which use the tool of creating money as a lever of influence and protection of markets. There was also a fear that a single currency would be used for money laundering.

Now the Federal Reserve Fund has dealt the last blow to the project, pressuring, bank Silvergate partner Diem (the last name of cryptocurrency the FB project), with which the Association tried to issue digital currency throughout 2021. According to Diem Association spokesman Michael Crittenden, there are "some factual errors," but he declined to comment further.

In January 2022, the cryptocurrency project was officially closed. The Diem Association sold its intellectual property and other assets related to its payment network to Silvergate Capital Corp.

It was reported that Silvergate agreed to buy Diem's assets for about $200 million. Diem did not disclose the terms of sale.

If Diem does sell off assets, this may indicate the impossibility of further development of cryptocurrency. Initially, Libra was supposed to be a digital token that is supported by a currency basket from around the world, but regulators quickly froze this idea. Then a simplified version was created - the Diem token tied to the dollar. But this idea was suppressed by the authorities.

There were other signs that the Diem project would not be implemented. Facebook, which changed its name to Meta, recently launched a digital wallet, which was originally created for Diem, but with another crypto currency. And David Marcus, one of Facebook's directors, who originally promoted Libra, left the company at the end of 2021 after most of the project team left.

Meta intends to join the NFT boom through its two key products - Facebook and Instagram. The IT giant is developing a full-fledged NFT platform that will be integrated into social networks. Through the new service, registered users will be able to share assets with friends, as well as mint, sell and buy unimaginable tokens^[1].

2020

Renaming Steablecone to Diem

On December 1, 2020, it became known that Libra Association, created by Facebook in 2019, is rebranding in an attempt to distance itself from the original concept of the Libra stablecoin. According to the statement of the association, it changes its name to Diem Association, and the project itself was called Diem (lat. "Day"). The name symbolizes the new beginning and readiness of steablecone for launch in 2021.

Facebook introduced Libra in June 2019. At that time, the project provided for the launch of steablecoin, which will be provided with a basket of fiat currencies. The Libra concept was criticized by regulators, after which several companies left the Libra Association. In particular, regulators considered Libra to be a threat to the traditional banking industry and demanded that all developments related to the project be stopped until lawmakers could develop appropriate regulation and ensure that there were no risks to financial stability.

Later, Libra announced plans to release several steablecones, each of which will be provided with only one fiat currency.^[2]

Diem Association is ready to release its first stablecoin, Diem Dollar with a peg to the US dollar, after receiving a license from the Swiss Financial Market Operations Supervision Authority (FINMA). Therefore, the exact launch dates are not known. Initially, Libra management planned to submit the project in the first half of 2020, but due to problems with regulators, this could not be implemented.

According to the CEO of the association Stuart Levy (Stuart Levey), Diem will comply with international standards, including the rules of the Financial Action Task Force (money laundering FATF), which will ensure the protection of users. He also added that the organization interacts with global regulators on how widely each coin can handle, and what fiat currency it can be tied to. Further action by the Diem Association will depend on a number of factors, including the favor of regulators.

The developers said that at the technical level the project is already ready for launch, but continue to test it and implement improvements. Despite the changes and rebranding, the project will still work on the basis of the blockchain. First of all, Diem will be used for international transfers, as well as for paying for goods and services. Levy does not see the need to launch a Diem coin immediately with support for a whole basket of steeblocks, but does not exclude this possibility in the future.

"We will not launch a multi-currency stablecoin, as we first plan to launch stablecoins, each of which will be provided with a certain currency. This is the advantage of programmable money, when you can create a multi-currency stable coin with various steablecones tied to different fiat currencies, "said Stuart[3].

British telecommunications conglomerate leaves Libra Association

British telecommunication the conglomerate Vodafone left the Association in early 2020, Libra which is responsible for the development of cryptocurrencies Facebook^[4]

The reason for the release of Vodafone is the decision to invest in the M-Pesa project and is not associated with possible problems with financial regulators. The representative of the telecommunications company added that a return to cooperation is possible in the future, but now the funds will go to the development of their own digital initiative.

"From the very beginning, we said that Vodafone's desire is to make a real contribution to increasing financial accessibility... We will continue to monitor the development of the Libra Association and do not exclude the possibility of future cooperation, "he explained.

The decision of the conglomerate to leave the project was commented on by the head of Libra's policy and communications department, Dante Disparte. According to him, changes in the structure will not affect the efficiency and plans of the Association.

In addition to Vodafone, seven more companies refused to participate in Libra, including Visa, Mastercard and Paypal. The reason for this was the criticism of the project by financial regulators.

2019

Prohibition in Europe

In early December 2019, it became known about the ban on Libra in Europe. The finance ministers of the EU countries decided not to allow the circulation in the EU of any steablecone - cryptocurrency tied to reserves of ordinary currencies or physical goods (the development of Facebook refers to them).

No agreement on the use of stablecoins can be launched into the European Union until the legal, regulatory and supervisory problems associated with them are determined and eliminated, "the Reuters minister said with reference to a joint statement.

During the meeting, they announced the need to create laws that will regulate the circulation of cryptocurrencies in the Union. The corresponding work has already begun, said EU Commissioner for Financial Affairs Valdis Dombrovskis.

EU ministers recognize that innovations like cryptocurrencies can bring great economic benefits to the financial sector. Stablecoins can become a means of cheap and fast payments, especially cross-border payments. At the same time, this creates multifaceted problems and risks related, for example, to consumer protection, confidentiality, taxation, cybersecurity and operational sustainability, money laundering, terrorist financing, market integrity, governance and legal certainty, they warn.

Libra is banned in Europe

In parallel with this, in December 2019, the European Central Bank in Brussels continued to develop its own digital currency, which should become a legitimate European alternative to cryptocurrencies from private companies. However, it will find application only if ordinary bank settlements become too expensive, experts are sure.

After the decision of the European authorities, the release of Facebook cryptocurrency, scheduled for June 2020, was threatened. In addition, several major partners came out of the project, including Mastercard and Visa, but the rest of the participants announced their determination to continue the development of Libra.^[5]

Central Bank: the launch of Facebook cryptocurrency will spawn a wave of fraud and financial pyramids

In mid-September 2019, the Central Bank of the Russian Federation warned that the  launch of Facebook and Telegram cryptocurrencies would generate a wave of fraud and financial pyramids.

According to RIA Novosti with reference to the head of the department for countering unscrupulous practices of the Bank of Russia Valery Lyakh, criminals can launch sales of digital currencies even before real entry into the ICO, Lyakh said.

The Central Bank announced fraud threats before the official launch of Facebook and Telegram cryptocurrencies

I fear that the next wave, which will be associated with financial products, may be due to the fact that they will try to sell allegedly Telegram cryptocurrencies and Facebook cryptocurrencies before they actually come out. These are well-known company names, and fraudsters can use it, "he explained.

Abroad, attackers have already tried to  take advantage of the hype around the Libra steablocaine. In July 2019, The Washington Post talked about dozens of fraudulent resources that are trying to sell Libra steeblocks.

Journalists found fake sites, Facebook groups and Instagram profiles that use Libra brand symbols and colors to deceive potential victims. Fraudsters impersonate official representatives of Facebook, offer to buy stablecoins at a discount or for another cryptocurrency.

In the same month, the American Congress asked  Facebook to "immediately stop" work on the Libra cryptocurrency.

It is necessary that the company and its partners immediately suspend the development of their cryptocurrency until regulators and Congress study the issue and take action, the Facebook leadership said in a letter.

In July 2019, the Japanese cryptocurrency exchange Liquid  conducted the  sale of rights to the yet-to-be-issued cryptocurrency - Gram. The sale of tokens began on July 10 and ended ahead of schedule in 60 hours.^[6]

European FAS is concerned about Facebook cryptocurrency

The European Union Antimonopoly Service will check Facebook because of its plans to create its own Libra cryptocurrency. This was reported in August 2019 by Bloomberg, citing a document from the European Commission^[7]

Earlier, dissatisfaction with the creation of cryptocurrency was expressed by the president. USA Donald Trump In his opinion, Facebook should first receive a banking license, and then carry out such operations - as in the case of ordinary currencies (note that they banks do not have the right to issue currencies, central banks do this).

It is important to note that Bitcoin does not have an owner who could regulate the issue and number of coins, which cannot be said about most altcoins, which include Libra from Facebook, emphasizes the head of the financial marketplace development department FinLeo Mark Raysky. In his opinion, the pros and cons of each altcoin can be discussed for a long time, but all of them are based on the presence of an idea and a software supplement that solves certain problems.

"I believe that, unlike other altcoins, Libra has the prospect of competing with fiat money at the expense of a base of 2.7 billion Facebook users. In fact, users will receive a convenient alternative payment option, which has a facade with a sign of 'cryptocurrency' and fiat money rules, "summarizes Mark Raysky.

The world's largest cryptocurrency exchange launched an analogue of Libra

In August 2019, the world's largest cryptocurrency exchange Binance announced the launch of the Venus project, which should become an "independent regional version of Libra" or an analogue of the cryptocurrencies social network. Facebook More. here

Libra cryptocurrency announcement

On June 18, 2019, Facebook officially introduced its cryptocurrency - Libra. For its development, the world's largest social network has created Calibra,  which will focus on providing financial services based on Facebook's digital currency.

Calibra will create a wallet for Libra, which in 2020 will be integrated with Messenger and WhatsApp services, and will also be released as a separate application.

Facebook introduced its cryptocurrency

Facebook promises to make the digital wallet available to all users. In the future, it is planned to offer additional financial services to entrepreneurs and individuals: with the help of a digital wallet, they will be able to pay bills in one touch, pay for trips in public transport without carrying a travel card, or buy a cup of coffee without paying with a card or cash.

As explained on Facebook, the idea to launch their own cryptocurrency came to the company against the background that about 70% of small businesses in developing countries cannot use loans, 1.7 billion people in the world do not have accounts in, and the banks costs of migrants for transferring money to another country are measured at $25 billion per year.

Libra will be managed by the Libra Association consortium (it included Mastercard, Visa, Spotify, PayPal, etc.) - this differs from decentralized Bitcoin. At the same time, the blockchain code will be published in the public domain, which will allow third-party companies to create applications for it. Libra will be tied to real assets, among which bank deposits and valuable government securities are provided.

Thanks to Libra, users will be able to make money transfers "at a low price or for free," Facebook said. By June 18, 2019, the company is working on the distribution of cryptocurrency around the world.^[8]

Q1 GlobalCoin Launch Plan

On May 24, 2019, it became known that it Facebook plans to launch its own cryptocurrency in the first quarter of 2020. Using a digital currency under the working name, GlobalCoin social network users and applications included in its ecosystem (for example,) messenger Whatsapp will be able to make payments and make transfers without using a bank account.

More detailed information about the technology will appear in the summer of 2019, and its testing will begin towards the end of 2019. At the start, the currency will be available to users of the social network only from a short list of countries.

The functioning of cryptocurrency is based on blockchain technology.

Facebook's digital currency will need to overcome many technical and legal difficulties before it can be launched. Earlier, Facebook CEO Mark Zuckerberg (Mark Zuckerberg) met with Bank of England Governor Mark Carney, as well as with representatives Minfina USA to discuss the prospects and possible risks of launching another digital currency.

Facebook has no less serious work to do in India, where the attitude of the authorities to cryptocurrencies can be described as largely negative: in April 2019 it became known about the development by the Government of India of a law, if approved by the local parliament in the country, the purchase, sale and issue of cryptocurrencies will be prohibited. Citizens of India, in the presentation of the Facebook leadership, are one of the main potential users of the GlobalCoin. The launch of the digital currency will supposedly allow Indian workers abroad to send money to their families using the Whatsapp mesenger.

In addition, Facebook is also negotiating with Western Union to ensure the exchange of fiat (classic) funds for digital currency, bypassing banking structures, as well as with a number of participants in the e-commerce market in trying to convince them of the advisability of accepting payments in GlobalCoin.

As for the technical side of the issue, in April 2019, Facebook registered Libra in Switzerland, which will deploy the project's software and hardware infrastructure, create and support financial services, and analyze data, that is, it will turn into a kind of financial hub of the Facebook ecosystem.

Facebook plans to tie GlobalCoin to a currency basket based on the US dollar, the euro and the Japanese yen in order to reduce the volatility of the young cryptocurrency and thus ensure confidence in it by users of the social network. However, efforts to stabilize the course of this means of payment may not be enough for this, since the reputation of the social network as a reliable service was undermined by Facebook itself as a result of a series of incidents that led to user data leaks of catastrophic proportions^[9].