Facebook’s Digital Currency Program Moves to the U.S. to Push Dollar Stable Coin

Focus shifts to launch of US dollar stablecoin

Facebook's Digital Currency Program Moves to the U.S. to Push Dollar Stable Coin

Diem, the Facebook-backed association of digital currency projects, said Wednesday it plans to launch a dollar-stable coin, shifting from its original global plan to focus on the U.S. market.

Diem said it would move its main operations from Switzerland to the United States and withdrew its application to the Swiss financial regulator for a payment system license.

Diem Networks US, part of the Deim Association, will operate a blockchain-based payment system that will allow real-time transfers of Diem stablecoins and will be registered with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) as a money services company.

Stablecoin is a digital currency anchored to fiat currency. California-based Silvergate Bank will be responsible for issuing the Diem U.S. dollar stablecoin and managing Diem’s U.S. dollar reserves. diem said it will soon launch a pilot of the stablecoin, but did not disclose the exact timing. “We are committed to creating a payment system that is secure for consumers and businesses alike, making payments faster and cheaper,” Diem said.

Diem has decided to withdraw its application for a payments license, the Swiss Financial Market Supervisory Authority (SFMA) confirmed in a statement.

Focus shifts to launch of US dollar stablecoin
Diem said, “Diem plans to launch the payment system in the U.S. first in the first phase, as the initial project will focus on the U.S. as the target market.”

Facebook first announced its Libra program in June 2019 as part of its efforts to expand from social networking to e-commerce and global payments. The company has said that Project Libra will work with partners such as payment companies and credit card companies to develop a digital token tied to multiple currencies and short-term government bonds. The social media giant hoped that Project Libra would facilitate global consumer and business-to-business transactions and provide financial services to more people.

However, the project was immediately met with strong opposition from global policymakers who feared it could weaken their control over the monetary system, lead to financial crime and compromise user privacy.

In April 2020, Project Libra and its partners had to abandon plans to peg a basket of currencies and sovereign bonds and instead sought to launch a stablecoin anchored to major currencies, with the hope of gaining approval from Swiss regulators. Last December, Project Libra officially changed its name to Diem to facilitate regulatory approval, and its project was further scaled down to look at digital currencies backed only by U.S. dollars.

Currently, Facebook’s digital wallet Novi is one of Diem’s 26 members and one of the minority shareholders.

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