It was once promoted as a new financial system that would transform how money is transferred around the world, but Facebook’s ambitious cryptocurrency project has ended in failure.
The Diem Association, which was launched by Facebook in 2019 and was supposed to govern a new cryptocurrency that the social media group would create called libra, is said to be winding down and selling its assets.
The technology and assets developed within the association are set to be sold to a small Californian bank called Silvergate Capital for only $200 million, according to The Wall Street Journal. The bank serves bitcoin and blockchain companies and had been working with the Diem Association. Sale negotiations are not concluded, but sources have confirmed that the project is being wound down.
Diem and Silvergate declined to comment. Facebook, which recently renamed its parent company Meta, also declined to comment.
The idea for libra was that people would use it to buy items online or as a way to transfer money to friends and family through the company’s platforms, such as WhatsApp and Facebook Messenger.
To show that Facebook would not be in charge of the whole project, the company secured the partnership of 27 other groups, including MasterCard, Visa, Uber, Spotify and Vodafone, which agreed to form an independent association that jointly would control and govern the libra currency. Facebook also created a subsidiary called Calibra for the currency, which also would be the name of the digital wallet that would hold libra for users.
However, Facebook faced very tough scrutiny from regulators and politicians around the world, who expressed huge reservations about the company being able to sufficiently protect users’ financial data. They also questioned the influence that Facebook would wield with a currency of its own.
Several prominent companies then dropped out of the Libra Association, which changed its name to Diem at the end of 2020, while Calibra changed its name to Novi.
To placate American regulators, the association agreed to switch from libra being backed by a basket of currencies to launching a cryptocurrency backed one-for-one by the dollar, known as a stablecoin. It also moved its operations from Switzerland to the United States. However, the project still did not get approval from American regulators.