Diem’s push to launch stablecoins and a payment system to serve the entire world suffered from another development of anti-crypto sentiment among major US policymakers. Facebook came up with an ambitious digital currency payment project that they called Libra.
However, after criticism and opposition from the policymakers, the currency was rebranded to Diem but it is yet to get off the ground despite major and calculated attempts to win over all financial regulators in the US.
Based on a September 10 publication by The Washington Post, Diem is currently facing difficulties smoothening regulatory challenges with most of the senior policymakers in the Biden administration. Even with the full backing of Facebook’s considerable lobbying power in Washington, the digital currency project is yet to get off the ground.
Reports state that Facebook Financial (F2) head, David Marcus, met with various regulators in Washington earlier this month. Based on reliable but anonymous sources that were present at these meetings, Marcus insisted on the importance of crypto widening access to financial products while simultaneously commenting on the benefits of Diem’s payment mobile app Novi.
The Diem representatives quoted by The Washington Post say that regulators are now pleased with some of the design changes that were made by the project. Diem has now gone through massive alterations to its original mandate published back in 2019.
Originally introduced as Libra, the Facebook-backed project was at first designed to be a global payment system that featured a ‘Facebook Coin’ that would be backed by a basket of fiat currencies.
In the Diem space, the project aims to launch individual fiat-pegged digital currencies, starting with a US dollar-pegged stablecoin. Diem has also sought to address regulatory fears about money laundering.
Nonetheless, feelers from Washington are convinced that key policymakers including Treasury Secretary Janet Yellen and many other members of Congress are now against privately issued stablecoins. Senator Elizabeth Warren recently referred to cryptocurrency as the new shadow bank while expressing his fears over stablecoins.
For the case of Diem and other private stablecoin projects, the increasing fears over cryptocurrency within the context of money market funds away from the legacy banking system infrastructure may result in severe regulatory hurdles.
In the meantime, the legacy finance stakeholders continue pushing for quick central bank digital currency (CBDC) development.