No Longer Global Ambition? Facebook's Digital Currency Project Moves to the United States to Launch a US Dollar Stablecoin

Diem, the digital currency project association backed by Facebook and spun off from its Libra project, said on Wednesday it plans to launch a dollar stablecoin, shifting from a global plan to focus on the U.S. market.

The association is made up of 26 financial companies and non-profit organizations. Diem said it would move its main operations from Switzerland to the United States and withdrew its application for a payment system license submitted to the Swiss financial regulator.

Diem Networks US, a subsidiary of the Diem Association, will operate a blockchain-based payment system that allows real-time transfers of Diem stablecoins and will register as a money services business with the U.S. Treasury Department’s Financial Crimes Enforcement Network.

Stablecoins are digital currencies that are anchored to fiat currencies. California-based Silvergate Bank will be responsible for issuing Diem's ​​dollar stablecoins and managing Diem's ​​dollar reserves. Diem said it will soon launch a stablecoin pilot, but did not disclose the specific time. "We are committed to building a payment system that is safe for consumers and businesses, making payments faster and cheaper," Diem said.

The Swiss Financial Market Supervisory Authority confirmed in a statement that Diem has decided to withdraw its application for a payments license.

Focus shifts to launching a US dollar stablecoin

Diem said, “Diem plans to launch the payment system in the United States in the first phase, as the initial project will focus on the United States as a target market.”

Facebook first announced the Libra project in June 2019 as part of its efforts to expand from social networking to e-commerce and global payments. The company has said that the Libra project will work with partners such as payment companies and credit card companies to develop a digital token pegged to multiple currencies and short-term government bonds. The social media giant hopes that the Libra project will promote transactions between consumers and businesses around the world and provide financial services to more people.

However, the project immediately faced strong opposition from global policymakers, who worried that it could weaken their control over monetary systems, enable financial crime and compromise user privacy.

In April 2020, the Libra project and its partners had to abandon plans to link to a basket of currencies and sovereign bonds, and instead sought to launch stablecoins anchored to major currencies and hoped to obtain approval from Swiss regulators. In December last year, the Libra project was officially renamed Diem to facilitate regulatory approval, and its project scale was further reduced to focus on digital currencies backed only by the US dollar.

Currently, Facebook's digital wallet Novi is one of Diem's ​​26 members and a minority shareholder.