Facebook’s digital currency Diem — once seen as a force that could undermine financial stability and rival currencies — is now on life support after word got out last week that the association behind it is in talks with a small California bank to sell its assets for some €200 million.
But the announcement may not be a setback at all in the global crypto boom. In fact, Diem may have needed to die so that crypto can live. Some see Diem as the catalyst that galvanized policymakers on both sides of the Atlantic to take crypto seriously and regulate the market. And that’s a good thing, in the view of some industry players.
“Diem did bring quite a lot of public awareness and force regulators to take crypto seriously, given Facebook has such massive scale,” said Mathieu Hardy, chief development officer at OSOM, an Estonian-based fintech company that offers a crypto wealth manager with portfolios managed by artificial intelligence. “It might have been a very expensive experiment from Facebook … but it did stir things up.”
“[It] probably accelerated the regulatory work that might have taken longer had a player of Facebook’s size not gotten involved,” he added.
Not so fast
Given that international institutions, central bankers and policymakers once feared Diem (initially dubbed Libra) could overwhelm their regulatory reach, €200 million looks like a measly sum.
To advocates of tougher regulation like MEP Stefan Berger, Diem’s demise signals that even the mightiest players — in this case Mark Zuckerberg, CEO of Facebook’s parent company Meta — will fall in the face of fierce political opposition and red tape.
“Zuckerberg’s attempt to become a central bank has not been successful,” quipped Berger. “Facebook has tried to reach for the stars with a project which cannot meet the necessary regulatory requirements when nothing less than the stability of the financial system is at stake.”
Berger, a German conservative, is shepherding an EU bill through the European Parliament that will regulate markets in crypto assets (MiCA) and is likely to come into force by 2024. He’s among the many legislators who perceived Diem’s plans as a threat to monetary sovereignty, given that Facebook has 2.9 billion users across the world. Anyone using Meta’s other apps, such as Instagram, Messenger and WhatsApp, would also eventually have gained access to Diem.