Meta’s former stablecoin project, Diem, originally known as Libra, came to an end after facing extensive political and regulatory challenges in the United States. David Marcus, co-founder of Diem, recently disclosed the reasons behind the project’s termination in a social media post, highlighting the significant impact of political considerations.
Initially conceived as a global payment network supported by a basket of international currencies, Libra garnered support from major financial institutions such as Visa, MasterCard, and PayPal. However, the project quickly attracted scrutiny from US lawmakers and regulators who expressed concerns about its potential implications on monetary sovereignty, financial stability, and Meta’s overall influence in the global financial system.
Following the launch of Libra, Meta executives, including David Marcus, testified before Congress to address these concerns. Lawmakers raised issues regarding risks to sovereign currencies and cited Meta’s past privacy controversies as further obstacles to gaining public trust. Consequently, key early supporters withdrew their backing, leading Meta to rebrand the project as Diem in 2020.
Despite efforts to pivot and focus on a US dollar-backed stablecoin, as well as relocating operations to the US, regulatory hurdles continued to impede progress. David Marcus revealed that initial discussions with Federal Reserve officials hinted at potential limited approval, but changing political circumstances hindered any advancements.
Marcus stated, “There was no legal or regulatory angle left for the government or regulators to kill the project. It was 100% a political kill—one that was executed through intimidation of captive banking institutions.”
In an attempt to salvage the project, the Diem Association collaborated with Silvergate Capital to introduce a dollar-denominated stablecoin. However, in late 2021, US Senators urged Meta to halt its Novi digital wallet pilot program due to lingering concerns about regulation and consumer protection.
Ultimately, in January 2022, the Diem Association announced the sale of its assets to Silvergate, signaling the end of the project. Stuart Levey, the then CEO of Diem, attributed the decision to the insurmountable regulatory challenges despite diligent efforts to address compliance and security risks.
Following the closure of Diem, many team members transitioned to other blockchain initiatives, such as Aptos and Sui. David Marcus has since shifted his focus to Lightspark, a company exploring the utilization of Bitcoin’s Lightning Network for payments.
Reflecting on Diem’s journey, Marcus underscored the significance of neutrality and decentralization in developing future blockchain projects. The project’s history underscores the intricate balance between innovation, policy, and regulation within the crypto industry.