What you need to know about Facebook’s Diem cryptocurrency

  • On May 12, the Diem Association announced plans to launch a stablecoin backed by the US dollar.
  • Contrary to popular belief, Diem isn’t the first time Facebook has launched digital currencies.
  • Mark Zuckerberg acknowledged that it would also make the company’s ad network more lucrative and expensive.

Social media giant Facebook’s upcoming cryptocurrency may have been opposed by many, but it is moving forward nevertheless. Originally called Libra, the cryptocurrency is now known as Diem and many expect it to become the blueprint for US’ central bank digital currency (CBDC), eventually. Here’s where Diem stands as of now.

Dollar-backed stablecoin

On May 12, the Diem Association announced plans to launch a stablecoin backed by the US dollar. The Diem Association is a body that Facebook created, which comprises 26 financial firms and non-profit associations, which govern the cryptocurrency in question. The association also said it’s relocating from Switzerland to the US, withdrawing the payment licence application it had submitted with the Swiss financial regulator.

Stablecoins are cryptocurrencies that are backed by stable assets, in this case — the US Dollar, which keeps their prices from changing erratically. This is a major shift from the company’s earlier plan for Diem in which it was supposed to be a global cryptocurrency. This faced pushback from many regulators, experts and countries, who were worried about the amount of power it would give Facebook over a global currency. Diem is partnering with leading American
crypto bank, Silvergate Bank, to launch the US stablecoin.

“Under this partnership, Silvergate Bank (“Silvergate”) will become the exclusive issuer of the Diem USD stablecoin. The association is also announcing a strategic shift to the United States, resulting in a move of Diem’s primary operations from Switzerland to the United States,” the Diem Association said in a blog
post. Swiss authorities confirmed the move too, saying the system will “initially” focus on the US.

Might launch in 2021
According to a December 2020
report by The Financial Times (FT), the Diem project could have launched as early as January this year. While we know now that the same didn’t happen, it could mean that the Diem Association will start its currency sometime this year.

Interest in CBDCs have been growing over the past year, driven primarily by the overall interest in cryptocurrencies that the pandemic brought about. Indian central bank, the Reserve Bank of India (RBI), also discussed plans to issue a CBDC recently, as have other central banks. Experts expect that the first CBDCs will start popping up by the end of 2021, partly to deter companies like Facebook from trying to take over the global currency system. The FT report cited above had also said that Diem would have a one to one relationship with the dollar.

Advertisement



This isn’t Facebook’s first digital currency

Contrary to popular belief, Diem isn’t the first time Facebook has launched digital currencies. The company used to have something called “Credits”, which were used to make payments for games inside Facebook. While credits were obviously not the same as
crypto, it gives us an idea of the interest Facebook could draw out of Diem. In theory, a cryptocurrency like this could allow Facebook to build a worldwide financial system within itself. Facebook co-founder Mark Zuckerberg himself had acknowledged that it would also make the company’s ad network more lucrative and expensive.

SEE ALSO:

After ditching Bitcoin, Elon Musk is now working on making Dogecoin efficient

Four reasons why cryptocurrency Ethereum has been on a bull run

Even small initiatives during a pandemic can help save a thousand lives, these people are doing their bit

This news is republished from another source. You can check the original article here

Be the first to comment

Leave a Reply

Your email address will not be published.


*