What you need to know about Facebook’s Diem cryptocurrency
- On May 12, the
DiemAssociation announced plans to launch a stablecoin backed by the US dollar.
- Contrary to popular belief, Diem isn’t the first time
Mark Zuckerbergacknowledged that it would also make the company’s ad network more lucrative and expensive.
On May 12, the Diem Association announced plans to launch a stablecoin backed by the US dollar. The Diem Association is a body that Facebook created, which comprises 26 financial firms and non-profit associations, which govern the cryptocurrency in question. The association also said it’s relocating from Switzerland to the US, withdrawing the payment licence application it had submitted with the Swiss financial regulator.
Stablecoins are cryptocurrencies that are backed by stable assets, in this case -- the US Dollar, which keeps their prices from changing erratically. This is a major shift from the company’s earlier plan for Diem in which it was supposed to be a global cryptocurrency. This faced pushback from many regulators, experts and countries, who were worried about the amount of power it would give Facebook over a global currency. Diem is partnering with leading American
Advertisement“Under this partnership, Silvergate Bank (“Silvergate”) will become the exclusive issuer of the Diem USD stablecoin. The association is also announcing a strategic shift to the United States, resulting in a move of Diem’s primary operations from Switzerland to the United States,” the Diem Association said in a blog post. Swiss authorities confirmed the move too, saying the system will “initially” focus on the US.
Might launch in 2021
According to a December 2020 report by The Financial Times (FT), the Diem project could have launched as early as January this year. While we know now that the same didn’t happen, it could mean that the Diem Association will start its currency sometime this year.
Interest in CBDCs have been growing over the past year, driven primarily by the overall interest in cryptocurrencies that the pandemic brought about. Indian central bank, the Reserve Bank of India (
This isn’t Facebook’s first digital currency
Contrary to popular belief, Diem isn’t the first time Facebook has launched digital currencies. The company used to have something called “Credits”, which were used to make payments for games inside Facebook. While credits were obviously not the same as crypto, it gives us an idea of the interest Facebook could draw out of Diem. In theory, a cryptocurrency like this could allow Facebook to build a worldwide financial system within itself. Facebook co-founder Mark Zuckerberg himself had acknowledged that it would also make the company’s ad network more lucrative and expensive.
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