Despite concerted efforts to gain approval from financial regulators, Facebook has yet to fully launch its ambitious digital currency payment project Diem.
Diem has trouble smoothing out regulatory wrinkles with senior policymakers in the Biden administration, The Washington Post reported on Friday.
It still hasn’t been possible to launch the digital currency project even with Facebook’s full lobbying power in Washington.
According to reports, David Marcus, head of Facebook Financial (F2), met with regulators earlier this month. During the meeting, Marcus argued for the importance of crypto in broadening access to financial products while emphasizing the advantages of Diem’s Novi payment app, according to anonymous sources.
Several changes in design have been made to the project, according to Diem representatives quoted by The Washington Post. It is true that Diem has undergone a number of changes to its original mandate from 2019.
A global payment system was originally planned for the Facebook-backed venture under the name Libra, including a “Facebook Coin” backed by fiat currencies.
The project aims to launch fiat-pegged digital currencies beginning with a USD-pegged stablecoin under the Diem paradigm. A major concern for Diem is the regulation of money laundering.
Yet, a number of Washington officials have indicated that they are opposed to privately issued stablecoins, including Treasury Secretary Janet Yellen. As Senator Elizabeth Warren recently observed, crypto is the new shadow bank since stablecoins are viewed as currency that’s backed by a central bank.
It is possible that the growing concern associated with crypto within the context of money market funds outside of the legacy banking system framework might undermine Diem and other private stablecoin projects.
In the meantime, legacy finance stakeholders continue to call for fast-tracking the development of CBDCs.