Meta sells stablecoin project Diem to bet the Metaverse is in the right direction?

Recently, the technology giant Meta (formerly Facebook) announced the sale of its digital currency project Diem, which has attracted the attention of the crypto market and the technology circle. Facebook, which once firmly chose to bet on encrypted stablecoins, chose to sell Diem after many setbacks. How will Meta continue its layout in the encryption field?On the other hand, after Facebook officially transformed into Meta, its financial report showed that the Metaverse performance was not satisfactory, and the loss of business operations continued to increase. Next, taking advantage of Metaverse’s Dongfeng Meta, where will the Metaverse business direction go? ?

After several failures, Diem was finally sold

On January 31, 2022, Meta Platforms Inc. (formerly Facebook) officially announced that it will sell intellectual property and other assets of its encrypted payment network Diem (formerly Libra) to Silvergate Capital Corporation, including those used to run blockchain-based blockchains. Development, deployment and operation of infrastructure and tools for the payment network, with a total value of $182 million.

On February 1, the acquisition was officially delivered. The Diem Association and crypto bank Silvergate announced that Silvergate has confirmed that it will acquire intellectual property and other assets of the Diem stablecoin project. They will also receive “proprietary software elements critical to running a regulatory compliant stablecoin network,” according to Silvergate’s statement. Separately, Bloomberg reported that the Diem Association was considering selling their assets as a way to return funds to its investor members and cash in on any remaining value in the project, according to people familiar with the matter.

When it comes to the Diem project, it can be said that it has been ill-fated after several failures. As early as June 2019, Meta released Libra’s white paper, planning to launch a stable currency anchored to a package of fiat currencies, as well as a global payment network. However, since Libra was proposed, it has been subjected to a series of regulatory “encirclement and suppression”, so that the Libra project almost “aborted”. Later, Meta had to make compromises, curb its ambitions, and renamed the project Diem in December 2020. It was only used as a stable currency project anchored to the US dollar, but it was still not welcomed by regulators. To this day, Diem was eventually sold to Silvergate Bank. So, what is the origin of Silvergate, which acquired Diem? Why did Meta choose to transfer Diem to this bank?

Silvergate is a Federal Reserve member bank established in 1988 in La Jolla, California, USA. As a member of the Federal Reserve, Silvergate is regulated by the Federal Reserve, but the bank has already been involved in the field of encryption and has become a partner of Diem. In January 2014, Silvergate became one of the first banks willing to open an account for cryptocurrency trading. The bank currently serves 750 cryptocurrency exchanges, and its clients include some well-known crypto asset exchanges such as Gemini and Circle, as well as investment firms such as Polychain Capital.In 2017, Silvergate also launched a 7*24 real-time payment network Silvergate Exchange Network (SEN) for crypto trading, allowing investors to move funds between cryptocurrency exchanges around the world. According to the data, in the fourth quarter of 2021 alone, SEN processed more than $200 billion in transactions.

Meta sells stablecoin project Diem to bet the Metaverse is in the right direction?

The CEO of Silvergate, Alan Lane, also bought the first Bitcoin in 2013 and began to lead Silvergate to continue to provide related services in the field of digital assets. The above background of Silvergate is the main reason why Meta chose to work with them in the first place. After the compromise of the Diem project last year, it was still subject to a series of regulatory obstacles. On May 12, 2021, the Diem Association announced that it would abandon its registration plan with the Swiss Financial Supervisory Authority (FINMA) and announced that it would cooperate with Silvergate to make Silvergate its Exclusive issuer of the stablecoin Diem USD. Meta may think that working with Silvergate will help it gain regulatory approval.

However, in November last year, the U.S. President’s Working Group on Financial Markets said in a report that collaborations between stablecoin issuers and wallet providers or commercial firms could lead to an excessive concentration of economic power, a combination that could adversely affect competition. This is one of the reasons why Meta finally made the choice to sell Diem.

Is betting on the Metaverse the right direction?

For this move by Meta, Block founder and former Twitter CEO Jack Dorsey expressed his views. On February 2nd, Jack Dorsey was interviewed by Michael Saylor (MicroStrategy CEO) at the “2022 Enterprise Bitcoin” conference of Bitcoin “whale company” MicroStrategy. Dorsey said Meta’s failed crypto project Diem “wasted energy and time” and that it should have used an open protocol like Bitcoin instead of trying to create its own currency.

It has been more than two and a half years since the announcement of the Diem project plan, but it has been unable to advance and launch due to the obstruction of various regulatory authorities. Before officially selling Diem, Facebook announced that it would change its name to “Meta”, and announced that it would transform into a Metaverse company within five years. It will be committed to integrating Facebook and its Instagram and other social media platforms to create a new Meta platform. This means that Meta has opted to bet fully on the Metaverse business, and the sale of Diem may not be a sudden move.

Meta sells stablecoin project Diem to bet the Metaverse is in the right direction?

But now it seems that Meta’s Metaverse business has not achieved ideal results for the time being. On February 2, 2022, local time, Meta released its fourth quarter 2021 financial report, which disclosed the financial situation of its Reality Labs division for the first time. Data shows that Reality Labs will lose more than $10 billion in 2021 alone, with a net loss of $10.19 billion on revenue of $2.27 billion (revenue includes hardware such as the Meta Quest virtual reality headset).Although Reality Labs has been losing money for the past three years, the annual rate was very large last year. Compared with 2019 ($4.5 billion) and 2020 ($6.62 billion), the net loss increased by 126% and 53.9% respectively.

This is the first time Reality Labs has reported financials as an independent unit, and it is also the first Metaverse financial report released by Facebook after changing its name to Meta. Reality Labs is the original AR/VR division of Facebook. Founded in 2018, it mainly researches VR/AR technologies and products. The division is responsible for realizing Meta’s Metaverse vision. In addition to the loss, the financial report shows that the company’s daily active users decreased by 1 million during the period, which is the first consecutive decline in quarterly daily active users since the company was established. The market also reacted to these core data disclosed in the financial report. On February 3, local time, the stock price of Meta plummeted by more than 26%, and about 237 billion US dollars (about 1.5 trillion yuan) of market value evaporated. In this regard, Meta Chief Financial Officer Zuckerberg said that in 2022, Meta’s “Metaverse” business operating losses will continue to increase. Without Reality Labs’ losses, Meta’s full-year profit could have been $56 billion.

Judging from the current situation, Meta’s Metaverse start has not been smooth. Many investors have questioned Facebook’s plans to transform the Metaverse. As Meta shifted its focus from flagship products to stablecoin projects to building a Metaverse platform, its platform user growth began to stagnate.

As the most popular field at present, will the Metaverse be the right direction for Meta to bet on? It is still too early to give an answer. After all, the Metaverse is still in the initial stage of development, and deep technological precipitation and time accumulation are required before the real explosion. It has only been three months since Facebook announced that it has changed its name to the Metaverse, and there will be many challenges on the way to transform the Metaverse in the future.

Even though Meta’s main focus will be on the Metaverse, Meta’s crypto ambitions will not end with the sale of Diem. On January 25 this year, Meta submitted to Brazil’s National Institute of Industrial Property (INPI) “software for the design, development and implementation of third-party verification services for digital currency transactions, including (but not limited to) involving bitcoin currency transactions.” trademark registration application. This trademark application for Meta was filed from Jamaica as early as October 5, 2021.

Meta sells stablecoin project Diem to bet the Metaverse is in the right direction?

This means that Meta will also provide other services related to Bitcoin transactions in the future, and there is still a determination to explore in the field of encryption. As the world’s leading technology giant, will Meta’s Metaverse plan become an industry benchmark like the first stablecoin project Diem was launched? While exploring the Metaverse, will Meta’s encryption road surprise us beyond our expectations?

Posted by:CoinYuppie,Reprinted with attribution to:
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