Facebook-backed crypto project Diem to launch U.S. stablecoin in major shift



By Tom Wilson and Pete Schroeder

WASHINGTON, May 12 (Reuters) - Digital currency group Diem Association, formally known as Facebook Inc FB.O 's Libra project, plans to launch a U.S. dollar stablecoin as it scales back its global ambitions to focus on the United States, the group said on Wednesday.

The association, which comprises 26 financial firms and non-profits, said it was relocating its main operations from Switzerland to the United States and withdrawing its payment system license application with the Swiss financial regulator.

Diem Networks U.S., a unit of the Deim Association, will run a blockchain-based payment system that allows real-time transfer of Diem stablecoins and will register as a money services business with the U.S. Department of the Treasury's Financial Crimes Enforcement Network, the group said.

Stablecoins are digital currencies pegged to a fiat currency. California-based Silvergate Bank will issue the Diem USD stablecoin and manage the Diem USD reserve. Diem said it would launch a pilot of the stablecoin, but it did not say when.

"We are committed to a payment system that is safe for consumers and businesses, makes payments faster and cheaper," the association said.

Facebook first unveiled plans for Libra in June 2019, part of an effort to expand beyond social networking into e-commerce and global payments. It said Libra, alongside partners like payment firms and credit card companies, would create a digital token backed by a wide mixture of currencies and short-term government debt.

The social media giant said it hoped Libra would power transactions between consumers and businesses around the globe, and offer more people access to financial services.

But the project immediately ran into fierce opposition from policymakers globally, who worried it could erode their control over the money system, enable crime, and harm users' privacy.

In April 2020, Libra and its partners abandoned plans to hold a basket of currencies and sovereign debt, in favor of stablecoins backed by major currencies and sought the Swiss regulator's approval.

In December, Libra rebranded as Diem in a renewed effort to gain regulatory approval, with its scope scaled back further to a single dollar-backed digital coin.

Currently, Facebook's digial wallet Novi is one of Diem's 26 members and a minority investor.
Writing by Michelle Price; Editing by Aurora Ellis

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.