Remember when it looked like Facebook would help control the flow of cryptocurrency around the world? Facebook launched the Libra/Diem cryptocurrency initiative in June 2019 to great fanfare, but today, its assets were sold to Silvergate Capital Corporation.
Companies had initially rushed to join the initiative to find out what it was, perhaps also motivated by the fear of missing out. But some quickly re-thought the decision – PayPal pulled out of the association only 4 months later, for example, even though it has since embraced cryptocurrency.
By December of 2020, the Libra Association rebranded to Diem Association.
In a statement on Monday (January 31, 2022), Diem CEO Stuart Levey said one of its highest priorities in designing the Diem Payment Network had been to build in controls to protect it against misuse by illicit actors. “We addressed that concern in ways that are novel in the industry, implementing numerous controls that were recognized as innovative by regulators. Among these controls was a prohibition on anonymous transactions, which pose both a sanctions and money laundering risk.”
However, he wrote, “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with (US) federal regulators that the project could not move ahead. As a result, the best path forward was to sell the Diem Group’s assets, as we have done today to Silvergate.”
Christian Catalini, co-creator and Chief Economist of Diem Association and founder of the MIT Cryptoeconomics Lab, wrote about the sale of Diem in a post on LinkedIn.
Catalini said Diem was ready to go live multiple times in its regulatory journey, but was held back at the 11th hour.
He called Silvergate Capital “one of the first Federal Reserve member banks to understand the potential of crypto” and said it was in a “great position to bring a stablecoin to market that follows the PWG framework.”
Catalini added, “My hope is that the Libra/Diem journey, research papers, and open source code will be useful for entrepreneurs and developers writing the next chapter of crypto.”