The digital currency Diem (formerly known as Libra) proposed and dominated by social giant Facebook is expected to be launched later this year.
On April 20, CNBC quoted a report from a person familiar with the matter that the Diem Association plans to start piloting Diem, a stable currency project linked to a single U.S. dollar in 2021.
CNBC reported that since the details have not yet been made public, the pilot scale is small and mainly focused on transactions between individual consumers. The above-mentioned people also said that users can also choose to purchase goods and items. However, the release date has not yet been determined, so the release time may change.
Diem was first proposed in June 2019 and was originally called Libra. The original idea was to become a universal digital currency linked to a basket of sovereign currencies such as the US dollar and the euro. But after being strongly opposed by global regulators, the project lost major supporters including Visa and Mastercard.
Finally, in the 2.0 version of the white paper released in April 2020, Libra made major changes, shifting its focus from anchoring a basket of currencies to anchoring a single currency. According to a report from the Financial Times on November 27, 2020, Libra will initially only issue a single currency pegged to the U.S. dollar.
On the evening of December 1, 2020, Facebook’s official website announced that Libra had been renamed Diem. Reuters reported in this report that the change is to emphasize the independence of the project, thereby obtaining regulatory approval.
Reuters quoted Diem Association CEO Stuart Levey as saying that the name was changed to emphasize a simpler and more complete structure. Diem means “day” in Latin, and the goal now is to launch a digital currency anchored only to the U.S. dollar.
According to CNBC reports, Diem is currently negotiating with the Swiss financial regulator to obtain a payment license, which will greatly promote the smooth start of Diem.
CNBC reported that Ran Goldi, CEO of Digital Assets Group, stated that Diem technology “has undergone tremendous changes in the past year and a half, from simple blockchains to very complex blockchains, and it is trying to answer the regulation. Some issues raised by the agency”. The company is building infrastructure to allow merchants to accept Diem as a payment method.
CNBC also quoted Michael Gronager, CEO of blockchain analysis company Chainanalysis, as saying: “I think Diem will break through regulatory resistance this year. If not, it will be a missed opportunity.”
In fact, after Diem made major changes, its regulatory resistance has indeed decreased.
On January 4, the Office of the Comptroller of the Currency issued an explanation letter, clarifying the authority of Federal Registered Banks and the Federal Reserve Bank of the United States to participate in the Independent Node Verification Network (INVN) and use stable currencies for payment activities and other bank-approved functions. This department is subordinate to the U.S. Department of the Treasury and is the regulatory agency for federally registered banks in the United States.
In this regard, the Guosheng blockchain research team believes that the new document will help pave the way for relevant banks to support cross-border payment networks such as Diem initiated by Facebook, and will help relevant banks to issue their own stablecoins.
Bank for International Settlements President Agustín Carstens stated at the Hoover Institution Policy Symposium on January 27 that the credibility of Diem will be higher for Bitcoin. However, if a private entity issues currency on its own, it is also responsible for maintaining its asset backing, which poses serious governance risks. Therefore, private stablecoins cannot be used as the basis for a sound monetary system. In order to maintain credibility, they still need to be strictly regulated and built on the foundation and trust provided by the existing central bank.
Li Bo, deputy governor of the Central Bank of China, stated at the Boao Forum for Asia on April 19 that many countries, including China, are currently studying the regulatory rules for Bitcoin and stablecoins to ensure that they will not cause serious financial risks. If any stable currency wants to become a widely used payment tool, it must be subject to strict supervision, just like banks or quasi-bank financial institutions are subject to strict supervision.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.