Diem, formerly known as Libra, is a blockchain-based authorized payment system created by one of the world’s best-known companies, Facebook, Inc. A planned cryptocurrency supporting this system, as well as an experimental network, are expected to appear in 2020. However, until April 2021, we haven’t seen anything concrete except rudimentary experimental code.
When Facebook parted ways with Diem (formerly Libra), it naturally generated a lot of attention and speculation about how this might threaten privacy on a global scale. Are these claims justified? When do we get to see the cryptocurrency that would come out in 2020? Read on to find out everything you need to know about Diem.
History and currency
Facebook’s Diem project was originally an individual project. Morgan Beller, a Facebook employee, worked on cryptocurrencies and blockchain at Facebook in 2017. It wasn’t until May 2018 that the Blockchain division was created, with David A. Marcus (VP of Facebook) moving from Facebook Messenger to this new division. In February 2019, it was reported that more than 50 engineers were working on the project.
Speculation that Facebook was working on its own cryptocurrency began in June 2018 and was confirmed by Facebook a full year later – with plans to call it GlobalCoin or Facebook Coin. It was officially announced as Libra in June 2019 and is scheduled for release in 2020.
However, this plan to come out before 2020 will not materialize because the Libra Association (we’ll come back to the former Libra Association later) has run into several legal hurdles, causing big names like PayPal, eBay and Mastercard to pull out of the project, and other delays reportedly due to regulatory reasons.
One of the biggest regulatory problems concerned the proposed Libra cryptocurrency. The original plan was for Libra to be a stable fund backed by a variety of financial assets, including a basket of currencies and US government bonds, to avoid volatility. This has proven to be a prescriptive nightmare for the scale, and many see it as the main reason for the delay. This project would have been abandoned from January 2020 in favour of one stall, linked to one currency.
One important aspect of this whole project that has caught the attention of the blockchain world is the fact that Libra, unlike other cryptocurrencies, uses a licensed and centralized blockchain. This would make the weighting association a de facto central bank based on trust, which has been further elaborated.
Only in December 2020 was this Libra piece renamed Diem and the Libra Society was also renamed Diem Society. According to Stuart Levey, executive director of the Diem Association, this initiative is seen by many in the community as an effort to support legislative approval efforts: The original name referred to a first iteration of the project that was heavily criticized by regulators. We’ve changed that sentence drastically (since then).
Money and regulatory issues seem to go hand in hand, as the first opposition appeared within minutes of the launch announcement. Bruno Le Maire, the French finance minister, has publicly stated that the balance sheet cannot become a sovereign currency and will need strong consumer protection. He also warned the French parliament of his concerns about Libra because of data protection issues, possible money laundering and terrorist financing. Since then, he has publicly stated that France would not allow scales to develop in the EU, as they are considered a threat to state sovereignty.
German MEP Markus Ferber warned of Facebook’s potential as a shadow bank. This opinion is also shared by Euro MP Stefan Berger, who sees Libra as a threat to the economic stability of the Eurozone.
U.S. regulators and politicians were quick to express concern, with the most prominent criticism coming from former President Donald Trump, who said that if Facebook and other companies want to become banks, they must apply for the new banking charter and comply with all banking rules.
Since then, several parties have pulled out of the projects in late 2019, and Diem is still working to resolve the regulatory issues.
In addition to the self-regulatory issues, Diem has also faced a host of legal challenges since the June 2019 announcement. The problem came in the form of a name (Libra) and a logo for a currency already in use in several countries.
For example, a lawsuit was filed in New York against Facebook, Inc. and employees of Finco Services, Inc. for trademark infringement based on logos. Libra also faced five opponents in its application to the European Intellectual Property Office, including Lyra Network, Libra Internet Bank, Libri GmbH and Advanced New Technologies Co. However, with the change of name from Libra to Diem, these disputes would have been settled out of court.
Facebook’s scaling up has also not been well received by the public, as Facebook has faced serious privacy issues. With the whole Cambridge Analytica episode, as well as the data and privacy hacks for Facebook, it’s safe to say that the whole project is coming under heavy criticism in the crypto world.
Because Facebook operates Diem on an approved blockchain, only Diem members can make transactions. This is obviously not to the liking of crypto currency and banking enthusiasts, as it would essentially pave the way for Facebook to become a central bank and further influence the global political scene. Finance Watch describes Libra as a major risk to the monetary sovereignty of states and argues that Libra is a bad idea – for users, for the stability of our financial system, and most importantly for our democracy.
Things got worse for Diem when Bloomberg News writer Elaine Ou tried to compile code to put fake coins in a wallet. For many in the community, it was shocking that Facebook would release the project in such a state.
Many see the renaming of the Libra piece to the Diem piece as an attempt to distance themselves from Facebook. Asked about this, Levy said: We’re not trying to cut all ties. The change of name means that the association acts autonomously and independently. Public opinion is divided on whether they are truly autonomous or independent, and believes that Facebook remains a core member of the association.
Dressing of diem
Diem currently has 27 members, including technology companies, payment gateways, venture capital firms and non-profit organizations. Main Title: Novi Financial (a subsidiary of A facebook), PayU, Iliad SA, Uber, Shopify, Mercy Corps, Union Square Ventures, Coinbase, Xapo and Anchorage. Diem stated his intention to increase the number of voting members to 100.
Originally, when it was formed as the Libra Association, it had seven other members, namely Booking Holdings, eBay, Mastercard, Mercado Pago, PayPal, Stripe and Visa Inc, who eventually left the association, presumably due to regulatory issues.
Vodafone is another key member, having joined in October 2019. However, this collaboration was short-lived as Vodafone left it to develop its mobile banking subsidiary, M-Pesa. The press and members of the blockchain community were quick to note the absence of Apple Pay, Google Pay, Amazon and banks, further fueling the negative speculation surrounding Diem. Bank executives around the world are hesitant to join the system due to regulatory uncertainty and the feasibility of the system.
Facebook Diem: Concluding remarks
Facebook or any other company controlling our currency is certainly a scary thought. This is especially highlighted by the fact that we blockchain enthusiasts strongly believe in decentralization and democratization of money. This project, a licensed and centralized crypto-currency, seems to be doing the exact opposite. However, if Facebook can overcome regulatory hurdles and launch an effective payment system, the impact on the crypto world will be huge. While it may not look like it at first glance, it would be an important step towards global acceptance, a sort of middle ground between the current system and the future of crypto.
But I wouldn’t hold my breath. The project has received a lot of criticism from all sides, and rightly so. You can learn more about Facebook Diem on their website and in the white paper.
. He is one of the early proponents of blockchain and cryptocurrencies in India. After being in the field for several years, he founded IBC in 2016 to help other early adopters learn about the technology.
Before joining CBI, Hitesh founded 4 companies in the field of cyber security and IT.
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