Diem, the digital payments project led by Facebook, plans to launch a US dollar (USD) stablecoin as it scales back its global ambitions to focus on the United States.
The association, which comprises 26 financial firms and non-profits, said it would relocate its main operations from Switzerland to the US and withdraw its application for a payment system license from the Swiss Financial Markets Authority, noting that the license wasn’t necessary as it pursues its new model.
Stablecoins are cryptocurrencies that peg their value to more stable assets, often a government-issued currency. The USD stablecoin will be issued by California-based Silvergate Bank, which will also manage the Diem USD reserve. Diem said it would launch a pilot of the stablecoin, but it did not reveal the time.
Diem Networks US, a unit of the association, will run a blockchain-based payment system that allows real-time transfer of Diem stablecoins and will register as a money services business with the US Department of the Treasury’s Financial Crimes Enforcement Network.
“We are committed to a payment system that is safe for consumers and businesses, makes payments faster and cheaper,” the association said.
Facebook first unveiled plans for Libra in 2019, as part of its effort to expand into eCommerce and global payments. The social media giant said Libra, alongside partners like payment firms and credit card companies, would create a digital token backed by a wide mixture of currencies and short-term government debt. But the project immediately ran into fierce opposition from policymakers globally, who worried it could erode their control over the money system, enable crime, and harm users’ privacy.
Last year, Libra and its partners abandoned plans to hold a basket of currencies and sovereign debt in favor of stablecoins backed by major currencies and sought the Swiss regulator’s approval. In December, Libra rebranded as Diem in a renewed effort to gain regulatory approval, with its scope scaled back further to a single dollar-backed digital coin.
