Facebook-backed Diem is moving from Switzerland to the US

Diem is cushioned by many assets, such as most major currencies and instruments of government debts. The Diem Association, a cryptocurrency initiative once known as Libra backed by Meta Platforms Inc., is weighing a sale of its assets as a way to return capital to its investor members, according to people familiar with the matter. The Diem saga started in 2019 when Facebook announced a new digital currency called Libra. Facebook wanted to create a simple global payment system and empower billions of people who don’t have access to traditional financial systems.

Among these controls was a prohibition on anonymous transactions, which pose both a sanctions and money laundering risk. “Diem is planning to launch the payment system from the USA in a first phase because initially the project will focus on the USA as its target appc coin market,” it said. However, some in the crypto industry think that digital innovation around currencies might be best left to the private sector. Diem said it plans to move its operational headquarters from Geneva to Washington, D.C., where its U.S. unit is based.

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Earlier this week, Bloomberg also reported that Meta was working on selling Diem’s assets as a way to return some capital to the investors behind the project. Following Tuesday’s report that the Diem Association was looking to sell off its assets and intellectual property, The Wall Street Journal reports today that Silvergate Capital will buy its assets and IP for $200 million. Diem will not rely on cryptocurrency mining.[42] Only members of Diem Association will be able to process transactions via the permissioned blockchain. No matter how the Diem project pans out, it’s a statement that cryptocurrencies are the future of the global economy. Currencies that are decentralized and secure, like Bitcoin, aren’t really scalable.

Unlike bitcoin, which uses a public ledger system and isn’t controlled by any single authority, Diem’s technology will be open to only a few participants, such as Facebook and other members of the Diem Association. Stablecoins are also designed to avoid the price volatility seen in cryptocurrencies like bitcoin. The Diem Association, a consortium of companies working on a blockchain-based payment system, is selling its technology assets to Silvergate Capital for $200 million, according to a report from the WSJ.

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This implies that it would be available through digital asset exchange also, apart from its application or wallet. One of the major issues sought to be addressed by Diem in its Whitepaper is the cost incurred by people in developing countries to move money. Exorbitant fees are charged for money sending services in developing countries. Thus storing money cannot always be an advisable and feasible option in such countries. In addition, statistics show that around 1.7 billion adults fail to get access to a traditional bank.

Meanwhile, tether, a controversial stablecoin, is currently worth over $57 billion, according to CoinMarketCap data. The Diem Association, which oversees development of the Diem digital currency, had been pursuing a payment system license with Switzerland’s FINMA watchdog. Diem has now dropped plans to secure Swiss regulatory approval, while its U.S. subsidiary has partnered with Silvergate, a California state-chartered bank, to issue the token. Diem said in May that an affiliate of the firm, Silvergate Bank, was to be the issuer of the Diem USD stablecoin, a type of cryptocurrency pegged to the U.S. dollar that’s typically used to buy and sell other crypto.

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Similar to USDT, USDC, or TUSD, Diem stablecoin pegged to the US dollar will be connected to the USD. And the same logic will be implemented to other Diem stablecoins pegged to EUR, GBP, and other fiat currencies. Diem currency adhered to the regulatory requirements of global standards to fully secure against illegal abuse of all private information and finances. Libra (Diem) coin has become a payment network instead of becoming an alternative to the traditional finance system that has continued for a long time. As it has not yet arrived in the market, it might even change the entire dynamics of the cryptocurrency market.

• The analysis / stats on CoinCheckup.com are for informational purposes and should not be considered investment advice.
• Despite being highly decentralized, due to the high number of nodes, they are slow.
• Last July, however, the firms were informed that neither the Fed nor the Treasury Department were comfortable blessing the project, according to people familiar with the matter.
• This means all transactions are public and visible to everyone, but you can’t tell who sent what to whom, since Diem addresses are just random letters and numbers.

The Diem Investment Token is, in fact, a security token issued by the Diem Association which, unlike the Diem coin, can, and probably will fluctuate in value. The typical rationale behind a bank run is that a coin is only fractionally backed, and there isn’t enough hard cash to go around if everyone were to decide to cash out at the same time. Diem, on the other hand, is set for day-to-day use, which requires it to have a less volatile nature. That’s why for every Diem created there will be a set of stable and liquid assets backing it.

Will Facebook (Now Meta) have centralized control over Diem?

Silvergate has a similar mission to expand global payment options and will issue its own stablecoin to execute it. All investments come with inherent risks, and cryptocurrencies are no exception. Cryptocurrencies can even come with more risk than some traditional investments.

Facebook (Now Meta), along with the cryptocurrency Diem, has also launched a new wallet called Novi wallet. Moreover, it is a new digital wallet specifically designed to cater to the Diem payment system. Libra cryptocurrency (Diem) was designed to be an easy and simple medium of exchange across the globe. Price stability is also ensured by backing it with a basket of major currencies of the world. In January, the Diem Association announced it had sold its intellectual property and assets related to the Diem Payment Network to Silvergate.

So, naturally, there was early resistance to the project from regulatory authorities and traditional financial institutions. 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. Diem had initially proposed a universal currency tied to a basket of major currencies and government debt.

Silvergate Bank was to be the exclusive issuer of the diem stablecoin as the association underwent a strategic shift to the United States. As we undertook this effort, we actively sought feedback from governments and regulators around the world, and the project evolved substantially and improved as a result. In the United States, a senior regulator informed us that Diem was the best-designed stablecoin project the US Government had seen. Covers financial regulation and policy out of the Reuters Washington bureau, with a specific focus on banking regulators. Previous experience includes roles at The Hill newspaper and The Wall Street Journal. Received a Master’s degree in journalism from Georgetown University, and an undergraduate degree from the University of Notre Dame.

Diem’s website shows that its partners include venture capital firms such as Andreessen Horowitz, Union Square Ventures, Ribbit Capital, and Thrive Capital as well as Singapore state-owned investor Temasek Holdings Pte. Its website also lists crypto-focused companies like Coinbase Global Inc., and others such as ride-hailing company Uber Technologies Inc. and commerce platform Shopify Inc. Meta owns about a third of the venture and the rest of it is owned members of the association, according to one of the people. Association members, which include venture capital firms and technology companies, agreed to invest and pay to join when the group was formed, the person added. The controversial cryptocurrency project that Mark Zuckerberg once defended in front of Congress is unraveling after regulatory pressure.

• Also, you can use the same exchanges to trade CarpeDiemCoin (DIEM) against cryptocurrencies like BTC, ETH, LTC, ETC, XMR, USDT, BNB, etc.
• Diem, on the other hand, is set for day-to-day use, which requires it to have a less volatile nature.
• Since the Diem Investment Token is considered a security, it will be available only to founding members of the Diem Association and to accredited investors from the general public.
• So, naturally, there was early resistance to the project from regulatory authorities and traditional financial institutions.
• Facebook first unveiled plans for Libra in June 2019, part of an effort to expand beyond social networking into e-commerce and global payments.

Since the Diem Investment Token is considered a security, it will be available only to founding members of the Diem Association and to accredited investors from the general public. The yield from the reserve will be used to support the operating expenses of the Diem Association but will also be distributed to the holders of the Diem investment token. It’s important to note that while Facebook Inc. is indeed the initial founding member of the Diem project, it has the same commitments, privileges, and financial obligations as any other Founding Member.

The Diem Association states that in the early development of the Diem network, its founding members are committed to working with authorities and to address all regulatory concerns. Keep in mind that since the reserve is invested in very low risk – low yield assets, it’s planned to make a substantial profit only if the Diemproject were to truly take off. The reserve needs to be large enough to generate substantial profits even from low interest rate investments. The reserve funds I mentioned earlier will be invested in low-volatility, highly liquid assets like bank deposits and government bonds with low default probability and low inflation expectations.