As a seasoned crypto investor who has witnessed the rise and fall of numerous projects, I can’t help but feel a sense of déjà vu reading about Meta’s abandoned Diem project. The political pressure exerted by U.S regulators on this groundbreaking initiative is a stark reminder of the challenges we face in our industry.
Previously, the leader of Meta’s (formerly Facebook’s) Diem digital currency payment system has disclosed that the initiative was terminated due to excessive regulatory pushback from U.S. authorities.
According to Diem co-creator David Marcus, there were no remaining legal or regulatory reasons for the government or regulators to halt the project. Instead, he stated that it was a political decision, enforced by intimidation of banks that were essentially controlled by the authorities. (Nov. 30 X post)
Initially called Libra, Meta’s Diem project was designed to create a payment system based on decentralized technology and backed by US dollars through stablecoin integration, which it started in June 2019. It gained notable backing from companies like Visa and PayPal, with Patrick Gus solomon Marcus, who previously held the position of President at PayPal, being among its supporters.
In his current role as CEO of Lightspark, a company utilizing Bitcoin and its secondary network, the Lightning Network, Marcus stated that such a system could potentially address large-scale international payment issues.
Two weeks following the announcement of the project’s commencement, Marcus found himself summoned to speak before both the Senate Banking Committee and the House Financial Services Committee. He describes this event as the beginning of an unrelenting workload and modifications necessary to satisfy legislators and regulatory bodies.
According to reports, after dealing with various regulatory issues such as money laundering and consumer protection, it was said that the chair of the Federal Reserve Board of Governors, Jerome Powell, was prepared to allow the project to progress in a more restricted or limited fashion.
However, according to Marcus, Janet Yellen, the Treasury Secretary at the time, warned Powell that proceeding with the project could be considered “political self-destruction.
The final blow came when it was reported that the Federal Reserve expressed unease towards several banks about their involvement in the project.
In January 2022, Meta relinquished the Diem project following the sale of its related knowledge and possessions to Silvergate Capital. Unfortunately, Silvergate Capital initiated a voluntary liquidation process in March 2023 and subsequently filed for bankruptcy in September.
Marcus stated that he decided to share this information following a conversation by Marc Andreessen, co-founder of the venture capital firm Andreessen Horowitz, about the political challenges the tech sector has encountered on the podcast hosted by Joe Rogan.
Fortunately, Markus left the failed Libra project with one key takeaway.
“If you’re trying to build an open money grid for the world—eventually moving trillions of dollars a day, designed to be here 100 years from now—you have to build it on the most neutral, decentralized, unassailable network and asset.”
And that is, “hands down,” Bitcoin, Markus said.
Big Questions: How can Bitcoin payments stage a comeback?
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2024-12-02 02:39