Cryptocurrencies have been around for more than a decade. In the course of their rise and fall, they have faced much scrutiny and renewed interest by the public and large organisations. Back in 2018, Facebook announced its plans of stepping into the crypto world. Facebook came together with 27 other organisations to launch a non-profit Libra association to bring out its new cryptocurrency. However, it faced quite a lot of backlash from various international regulatory boards.
Even before the announcement of their entrance into digital currency, Facebook faced backlash due to concerns on data privacy, post which their reputation took a toll. So when they announced the launch of their stablecoin, there was great some concerns. Because of this, Libra had to rebrand, revise the whitepaper and remove Facebook from the governing body. Libra has now been rebranded as Diem – which means ‘day’ in Latin, and will be launched in 2021.
But before we talk about the reputation of the stablecoin, let’s find out what Diem is. We will also talk about its launch date and use cases.
What is Diem? Is Facebook Still Involved?
Diem, or previously known as Libra, was announced by Facebook back in June 2019, after a year of secretive development and research work. The project aimed to create a stablecoin backed by a basket of international fiat currencies that could be used worldwide. This led to a backlash by international regulatory boards because of the concern that Facebook could create destabilisation in the financial system by creating inflows of capital into Diem, thereby affecting the lending ability of banks and distorting government bond markets and monetary policy.
Many original members departed, citing these regulatory risks even before the project began. However, in November 2019, Libra’s governing body was formed with the project’s scope tightened. This reduced the role of Facebook in the governance of the cryptocurrency to distance the project from Facebook.
The leadership team now consists of CEO Stuart Levey, Managing Directorion James Emmett, Chief Compliance Officer Sterling Dianes, Chief Financial Officer Ian Jenkins, Chief Technology Officer Dahlia Malkhi and General Counsel Saumya Bhavsar. And the association has been renamed as the Diem Association.
Instead of launching one coin backed by multiple fiat currencies, the project leaders announced to launch a series of stablecoins, each pegged to a fiat currency. The primary use case of Diem will be international remittances and merchant payments.
Diem and other cryptocurrencies’ main difference is that it is a stablecoin backed and will be managed by the Diem Association, an independent membership organisation. Diem will be a centralised cryptocurrency integrated with Novi, the digital wallet on Facebook.
Diem’s New Launch Timing & the Role of Facebook
“Diem” was due to launch in April 2020, but got pushed back due to regulatory hurdles.
The original whitepaper released in June 2019 emphasised that Facebook had more control – it also mentioned Facebook six times. But the revised whitepaper released in December 2020 mentioned Facebook once – “While Facebook teams played a key role in the creation of the Association and the Libra Blockchain, they have no special rights within the Association.”
Libra now plans to launch the first stablecoin “Diem”, as soon as this entity gets licensed through the Swiss Financial Market Supervisory Authority (FINMA in 2021). However, the exact launch time frame is unpredictable as. When the coin launches, it will have to be compliant with international regulations.
At a technical level, the stablecoin will be backed by 1:1 by the US dollar. A blockchain still backs the project due to its technological and governance advantages.
The Libra organisation is engaging with worldwide regulators to clarify how each token circulates and which fiat currency the next crypto coin will be pegged to. Diem CEO, Levey mentioned that several factors would go into these considerations, including the regulators’ comfort. Levey also said that he doesn’t feel the urgency to launch a multi-currency stablecoin yet which would be more complex, but this can be a possibility once there are individual single currency stablecoins.
Diem Use Cases & More
Diem aims to enhance international remittances and merchant payments for the world. Users can make digital payments with just a smartphone and Novi
The digital stablecoin can help make payments over Facebook’s WhatsApp and Messenger, as well as on a standalone app. There will be no hidden charges to add, send, receive or withdraw money and transfers will arrive instantly. All Novi customers will be verified using government-issued ID, and fraud protections will be built in throughout the app.
Furthermore, Diem will enable digital payments on various services such as Uber, eBay, Spotify, Mastercard, etc.
Just like how Visa and Mastercard are accepted for almost all payments, Diem would be too. It may expand until customers can pay for their coffee and public transit via digital currency. Such mass adoption of digital currency can prove to be a boon for the billions of unbanked individuals.
Diem will be quite easy to purchase, as well. You can buy Diem from crypto exchanges in the future, Facebook Messenger, WhatsApp, and via Visa, MasterCard or PayPal.
Facebook Diem’s Future and What It Means for Finance
As the whitepaper mentioned, Diem is not out to replace fiat currencies or our traditional financial system. It is aimed at providing an alternative for traditional forms of money transfer. This is mainly beneficial for those who have no access to financial institutions.
With just a smartphone, users can send and receive money digitally. This will open up a lot of financial opportunities for individuals and businesses alike. The value of Diem will not fluctuate as much as cryptocurrencies, due to it being a stablecoin pegged with the US dollar.
And while data privacy remains a concern, Diem is reportedly no longer under the control of Facebook as per the revised whitepaper released in December this year. Diem is a non-profit organisation owned by 27 different member firms.
Our traditional financial system is yet to open its gates for digital cash. Although cryptocurrencies have been around for more than a decade, not everyone shown interest or invested in it. Diem can be the right step towards digital currency adoption.