The crypto hype seems to be as big as never before. Two years ago, Facebook also announced its own digital currency. It was to be called Libra. But then nothing happened for a long time. Now the plans are thawing out again. Libra has now become Diem.
In June 2019, Facebook revealed its plans for its own cryptocurrency Libra on a big stage. Mark Zuckerberg announced wholeheartedly that the financial system was outdated and no longer up to the digital age.
The idea sounded promising and revolutionary. Facebook wanted to back Libra with various currencies and government bonds. The cryptocurrency was to be tradable worldwide. But then the project went quiet.
Libra: Facebook was too naive
Regulators objected for data protection reasons. Potential partners such as Visa and Mastercard distanced themselves. Chief economist Christian Catalini, one of the project’s co-founders, described the plans in an interview as “extremely naive” in retrospect.
But Facebook apparently never completely buried its plans for its own cryptocurrency. Because already at the end of 2020, the project reappeared under a new name. Libra became Diem. Now things are moving again.
Libra becomes Diem
The hashtag #cryptocrash is now regularly trending on Twitter. The prices of numerous digital currencies are subject to enormous price fluctuations and collapses. Tighter regulations are also imminent from the government side. Nevertheless, Facebook wants to push ahead with its plans for its own cryptocurrency.
The original plan was to hedge the Libra digital currency with the US dollar, euro and Japanese yen, among others. For the sake of independence, Facebook opted for a location in Switzerland. Tech group has left all this behind. Under the new name Diem, Facebook has moved the cryptocurrency to the US.
Will Diem launch this year?
In contrast to the announcement of two years ago, the plans now sound more modest. According to Diem CEO Catalini, Facebook is only planning to start with a single currency that will be pegged to the U.S. dollar.
Diem should thus be much more stable and can develop naturally. In addition, he said, the company is already talking to the regulatory authorities about a gradual introduction. This could even be the case this year with a pilot project.
Facebook users will then be able to exchange US dollars for Diem. In turn, transactions would be possible with the help of Facebook’s Novi app. In the long term, however, Facebook would also like to establish Diem outside its network – for example, as a means of payment at the supermarket checkout.
Critics reassured but still skeptical
Critics are reassured by Facebook’s more restrained plans in terms of cryptocurrency. Nevertheless, the development should be viewed skeptically. With more than 2.8 billion users, Facebook has a lot of power and potential.
It is true that the social network’s reputation has suffered in the recent past. However, Facebook could ultimately emerge as a winner. Central banks around the world are facing the challenge of offering their own digital currency to counter unstable currencies like Bitcoin, Ethereum and others.