Facebook is about to ‘poke a leg’ into the virtual currency market, with a move to launch stablecoins in the US

Digital currency group Diem Association, formerly known as Facebook’s Libra project, plans to launch a USD-backed stablecoin, while scaling back its global issuance ambitions to focus on US market.

The association, which includes 26 financial firms and nonprofits, said it was moving its main operations from Switzerland to the US and withdrew its application for a payment system license with the regulator. Swiss Finance.

Diem Networks US, a unit of the Diem Association, will operate a blockchain-based payment system that enables the transfer of Diem stablecoins in real time and will register as a money services business with the Network. Treasury Department’s financial crime enforcement agency, the group said.

A stablecoin is a digital currency that is linked to and simulates a fiat currency such as the dollar or euro. They allow users to convert value quickly and cheaply while maintaining price stability. California-based Silvergate Bank will issue the Diem USD stablecoin and manage the Diem USD reserve. The organization said it would launch a trial of stablecoins, but did not say when.

Diem is the renamed Libra cryptocurrency.

“We are committed to providing a secure payment system for consumers and businesses, making payments faster and cheaper,” the association said:

In a statement, the Swiss Financial Market Supervisory Authority confirmed Diem’s ​​decision to withdraw his application for a payment license.

“Diem is planning to deploy the payment system in the US in the early stages because this will be the target market of this project,” a representative of this agency said.

Facebook first announced plans for Libra in June 2019, part of an effort to expand its business beyond social networks, into e-commerce and global payments. The company said Libra, along with partners such as payment companies and credit card companies, will create a digital token backed by multiple currencies and short-term government debt.

The social media giant said it hopes Libra will accelerate transactions between consumers and businesses globally, while providing even more people with access to financial services.

But the project immediately faced fierce opposition from policymakers around the globe, who fear it could erode their control over the monetary system, triggering crime. and compromise user privacy.

In April 2020, Libra and its partners abandoned their plan to hold a basket of sovereign currencies and debt, in favor of stablecoins backed by major currencies, and sought approved by Swiss regulatory authorities.

Last December, Libra rebranded itself as Diem in a fresh attempt to gain regulatory approval, with its scope scaled back to a single backed digital currency. most in USD.

Currently, Facebook’s Novi cryptocurrency wallet is one of 26 members of Diem and is only a minority investor.

Refer to Reuters