Mark Zuckerberg’s crypto dreams of dying as Diem is sold

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Mark Zuckerberg’s cryptocurrency dreams are officially dead.

Meta-backed cryptocurrency firm Diem said Monday night that it had sold its assets to Silvergate Capital, a California-based crypto-focused bank, after regulators including the Federal Reserve objected. to the project.

The sale was worth about $200 million, The Wall Street Journal and Bloomberg reported.

Meta reportedly controlled about a third of Diem, which launched in 2019 as Libra and was also backed by Uber, Shopify and venture capitalists such as Andressen Horowitz and Union Square Ventures.

The group’s plan had been to issue a so-called stablecoin: a cryptocurrency that would have been pegged to the US dollar. Proponents of stablecoins claim they can revolutionize finance by offering the lightning-fast transaction speeds of cryptocurrencies without the price volatility of bitcoin or ethereum.

The Federal Reserve helped kill Diem’s ​​plans to issue a stablecoin.Getty Images

But regulators and politicians had objected to a cryptocurrency backed by a scandal-ridden company like Meta playing a key role in the global financial system.

In November, a U.S. Treasury report with contributions from the Fed, Securities and Exchange Commission, and Commodity Futures Trading Commission called on Congress to regulate stablecoin issuers like banks, warning they pose risks such as “destabilizing races, disruptions in the payment system and concentration of economic power.

The nail in Diem’s ​​coffin appears to come from the Fed.

Crypto bank Silvergate reportedly purchased Diem’s ​​assets for $200 million. SOPA/LightRocket images via Gett

In a series of meetings in 2021, Federal Reserve officials told Diem and Silvergate — who then planned to help Diem issue his stablecoin — that they couldn’t guarantee they would let the project go. forward, Bloomberg reported.

Diem and Meta did not immediately respond to requests for comment on the sale.

In a Twitter thread on Monday, Diem co-creator Christian Catalini suggested that Silvergate would continue with plans to issue a stablecoin.

11/13 Today we hand over to Silvergate. They were one of the first Federal Reserve member banks to understand the potential of crypto and are now in a great position to bring a stablecoin to market that follows the PWG framework.

— Christian Catalini (@ccatalini) January 31, 2022

“Today we are passing the baton to Silvergate. They were one of the first Federal Reserve member banks to understand the potential of crypto and are now in an excellent position to bring a stablecoin to market that follows the framework. PWG,” Catalini wrote, referring to stablecoin regulatory recommendations issued by federal regulators in November.

Another Diem co-creator, former Facebook executive David Marcus, appeared to suggest that politicians had unfairly targeted Diem because of his association with Zuckerberg and Meta and that the project would have been approved had it been backed by a less controversial undertaking.

“Here is another chapter with a possibly more ‘acceptable’ promoter moving the vision forward,” wrote Marcus, who left Diem in 2021. “I will have plenty of time in the future to properly reflect on the behavior of some politicians and regulators along the way, but for now…onward!

Here’s another chapter with a possibly more “acceptable” promoter pushing the vision forward. I will have plenty of time in the future to properly reflect on the behavior of some politicians and regulators along the way, but for now… onward!

– David Marcus – dmarcus.eth (davidmarcus) January 31, 2022

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