- Libra Association is rebranded as Diem Association to distance from Facebook.
- The project underwent massive transformations to please regulators.
Facebook has rebranded its cryptocurrency from Libra to Diem Dollar. The company behind the project development has been renamed from Libra Association to Diem Association. The news was announced on the official Twitter account of the project.
Libra Association changes its name to Diem Association
The new name contains the Latin word Diem, which stands for “day”. For example, it is used in a popular Latin expression, Carpe diem, meaning “seize the day”, “enjoy the present and stop worrying about the future”.
The team pointed out that the new name marks a new chapter in the project’s development and reinforces its vision of creating a secure and reliable payment system in full compliance with the regulatory requirements.
However, the experts believe that the actual purpose of the rebranding is to further distance the project from Facebook and the initial structure of the global stablecoin presented in June 2019.
Commenting on the news, Stuart Levey, the Diem Association’s CEO, said in the press release:
We are committed to doing so in a way that promotes financial inclusion – expanding access to those who need it most, and simultaneously protecting the integrity of the financial system by deterring and detecting illicit conduct. We are excited to introduce Diem – a new name that signals the project’s growing maturity and independence.
He also noted that the technical part of the project was ready, but the developers continued making tests and implement improvements. The stablecoin will go live as soon as the company gets the green light from the Swiss Financial Market Supervisory Authority FINMA.
A history of Libra’s transformations
Libra project was launched in June 2019, when Facebook first published its white paper and revealed its plans for building a global payment system based on blockchain technology. The company promoted the idea of financial inclusiveness and the need to modernize financial infrastructure.
Both the cryptocurrency community and global regulators meet the project with hostility. Its independence and security raised many questions, especially in the context of the recent Facebook–Cambridge Analytica data scandal, where millions of Facebook users’ personal data were sold to third parties without the users’ consent.
In October 2019, Mark Zuckerberg, Facebook’s CEO, was invited to the US Congress to answer a couple of questions about his Libra project. Republican and Democratic lawmakers alike grilled him for data privacy issues and said that Facebook was not reliable enough to provide financial services to its 2.4 billion users.
Zuckerberg tried to sell the skeptical US lawmakers an idea that Libra would lower the cost of cross-border payments and open up the global financial system to more people.
The global regulators went after Zuckerberg and his new project, saying that the Libra could undermine the sovereignty or threaten the stability of the global financial system.
Randal Quarles, the head of the global Financial Stability Board, forwarded a letter to G20 finance ministers, where he expressed concerns about the project. According to Quarles, global “stablecoins,” such as Libra, pose a host of challenges that need to be addressed before the project goes live. He summarized the fears of the global authorities that global digital stablecoins could become a substitute for domestic currencies and deprive central banks of their powers.
Libra Association was supposed to be governed by 28 members. However, many of them decided to quit the project even before it was launched. Visa, Mastercard, PayPal, Uber and other prominent withdrew their support, citing regulatory hostility as the crucial factor behind the decision.
Unloved Libra had to adapt
Libra project timeline has been quite eventful in 2020:
In April 2020, Facebook changed the concept of the project to wade off the criticism from regulators. The team said that the project would support multiple Libra stablecoins, mostly backed by fiat currencies. The new digital assets would be like a digital version of a country’s existing currency.
In May 2020, Facebook rebranded its cryptocurrency wallet from Calibra to Novi. While Libra is a non-profit organization governed by numerous companies around the globe, Novi would develop and controlled by Facebook. The cryptocurrency wallet would be used to send, receive and store coins. The company promised strict KYC (Know Your Customer) and no hidden fees for the operations with Libra coins.
Also, in May 2020, Libra Association hired Steward Levy, the former legal chief of HSBC and George W Bush-era terrorism finance tsar, to distance itself from Facebook and partially relieve the regulators’ concerns. In October, the company acquired another HSBC executive, Ian Jenkins, as a CFO of the digital payment system.
In November 2020, Libra took another step to please regulators and make sure that it is not associated with the social media giant. The knowledgeable sources revealed to the Financial Times that the project would go live in January 2021 in a limited format. The company had to downgrade its vision to gain regulatory consent.
The association wants now to issue only one coin pegged to the US dollar. The support for other currencies may be rolled out later.
The coin is no longer named Libra. The evolution of the project has been dictated by regulatory pressure.
The evolution of the project results from constructive ongoing engagement with governments, regulators and other key stakeholders, Levey said.
It remains to be seen whether these transformations can save the project from regulatory scrutiny or make it successful on the global scale.
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