The logo for Diem, formerly known as Libra, appears on a smartphone screen with a Facebook logo in the background.
Pavlo Gonchar | SOPA pictures | LightRocket via Getty Images
LONDON – Facebook-sponsored digital currency project Diem announced on Wednesday that it has withdrawn its application for a Swiss payment license and will instead be relocating its operations to the US.
The Diem association, which oversees the development of the digital currency Diem, had sought a license for a payment system with the Swiss FINMA watchdog. Diem has now dropped plans to gain Swiss approval while its U.S. subsidiary worked with Silvergate, a state-chartered California bank, to issue the token.
“While our plans cover the project completely within the US regulatory area and no longer require a license from FINMA, the project has benefited greatly from the intensive licensing process in Switzerland and the constructive feedback from FINMA and more than two dozen other regulatory authorities in the area The world was called in by FINMA to reflect on the project, “said Stuart Levy, CEO of Diem, in a statement.
Diem said it plans to move its operational headquarters from Geneva to Washington, DC, where its US unit is located.
FINMA declined to comment when contacted by CNBC.
Formerly known as Libra, Facebook’s vision for a digital currency encountered fierce backlash from regulators when it was first announced in June 2019. Central bankers and politicians feared they could undermine national currencies such as the dollar, facilitate money laundering and violate users’ privacy.
The organization has since lost several key supporters – including Visa, Mastercard, and PayPal – and has suffered a number of notable executive departures.
Diem originally proposed a universal currency tied to a basket of major currencies and national debt. After much regulatory opposition, the group then focused on several “stablecoins” supported one-to-one by different currencies, as well as a multi-currency coin.
Currently, Diem only plans to issue a US dollar-backed stablecoin called the Diem USD. Unlike Bitcoin, which uses a public ledger system and is not controlled by a single agency, Diem’s technology is only open to a few participants, such as: B. Facebook and other members of the Diem Association. Stable coins are also designed to avoid the price fluctuations that occur with cryptocurrencies like Bitcoin.
Silvergate will be the exclusive issuer of Diem USD and will manage its dollar currency reserve. Silvergate has become a go-to place for cryptocurrency companies that traditional lenders shun.
Diem is preparing to launch a pilot with its dollar-pegged stablecoin later this year, a person familiar with the matter told CNBC in April. The pilot will be small and mainly focus on transactions between individual consumers, the person said.
Thanks to a wild rally in Bitcoin and other digital currencies, digital currencies have been the topic of Wall Street lately. Institutional investors have shown a growing interest in Bitcoin, while big firms like Tesla and Square have placed big bets on the digital coin.
At the same time, the central bankers are also grappling with the concept of digital currencies. The People’s Bank of China has carried out trials with its digital yuan in various cities. And the US Federal Reserve was increasingly being asked to develop a digital version of the dollar.
However, some in the crypto industry believe that digital innovation when it comes to currencies could best be left to the private sector.
“Governments can help set the rules of the road and ensure that monetary policy and financial crimes can be foiled, but the government shouldn’t be concerned with building technologies,” said Jeremy Allaire, CEO of crypto firm Circle CNBC in an interview last week.
Dante Disparte, Diem’s former chief public affairs officer, joined Circle last month. Circular and crypto exchanges Coinbase helped introduce a stable coin called the USD Coin, which has since gained increasing acceptance with Visa and now supports payment processing using the token. A controversial stablecoin, Tether is currently valued at over $ 57 billion, according to CoinMarketCap data.