Facebook-backed digital currency project, Diem Association, is launching a pilot later this year, CNBC reported. The pilot will be launched with a single stable coin pegged to the U.S dollar. It will be based largely on payments between individual consumers, potentially with the option for users to buy goods and services.
- First proposed in June 2019 with the name libra, the token was initially intended to be a universal currency tied to a basket of sovereign currencies such as the U.S. dollar and the euro. But after facing strong opposition from regulators around the world, the organization overseeing the project lost major backers including Visa and Mastercard.
- The group eventually watered down its plans, opting for multiple “stable coins” backed one-to-one by different government-backed currencies, as well as one multi-currency coin. Now known as Diem, the Facebook-backed digital coin is expected to launch later this year, albeit in a much more limited form.
- Diem was met with intense scrutiny when it was first introduced. Given Facebook’s wide reach — it had 2.8 billion monthly active users in the fourth quarter of 2020 — central bankers and politicians feared the currency could threaten monetary stability and potentially enable money laundering. Facebook’s involvement also meant that there were concerns over how it would protect users’ privacy.
- According to a recent report by the Citi Group, Diem could become a white label central digital currency (CBDC) provider. “Diem is also designed to enable a very high degree of interoperability between different participants, whether these are banks, financial institutions, service providers, like wallet providers to consumers, payment service providers, etc.”
- Currently, the Libra association is awaiting permission from Swiss regulators to launch a dollar-backed stable coin. “I don’t think what we are asking for is just immediate trust. I think … what we’re asking for is at least to have the benefit of the doubt,” David Marcus, head of Facebook Financial said. The Financial Times had earlier reported that Facebook planned to launch its cryptocurrencies in January 2021. The company had originally planned to launch the proposed currency and wallet over the summer of this year.