Picture: GETTY IMAGES/CHESNOT
Picture: GETTY IMAGES/CHESNOT

Libra Association, a cryptocurrency project started by Facebook that drew regulatory blowback worldwide, is hoping a new name offers a fresh chance to win over regulators and gain a foothold in the emerging market.

The group will now be known as Diem Association, named for the word “day” in Latin, with its subsidiary Diem Networks serving as the payment system operator. It’s readying a currency that will be called the Diem Dollar.

“We like the connotation of it kind of being a new day for the project,” the group’s CEO, Stuart Levey, said in an interview. “We wanted a new start.”

Almost immediately after Libra launched in June 2019, politicians and regulators raised concerns about the effort. They worried about privacy, money laundering and companies such as Facebook taking power away from central banks. Supporters like PayPal and Visa fled the project, which initially hoped to attract 100 members before launch.

The new Diem, which has 27 participants today, has abandoned the 100-member goal by launch and is taking things more slowly. The group plans to issue a stablecoin — a digital currency pegged to an outside asset —  that’s tied to the US dollar. Later, Diem may pursue additional fiat-based cryptocurrencies, Levey said.

Initially, Libra had proposed creating a cryptocurrency supported by a basket of government-issued fiat currencies and securities.

The group no longer needs 100 members to launch, though it’s still hoping to expand its ranks, Levey said.

The association also no longer plans to eventually transition to a so-called permissionless blockchain, which would have let anyone participate in verifying transactions.

Other inner workings of the project may have changed as well. Levey declined to comment on whether investors in the association will end up receiving a special governance coin, as per an earlier plan.

With the project’s ambitions scaled down, its appeal may have dwindled. There’s plenty of competition from existing US dollar-based stablecoins, such as Tether and USD Coin. One rival, called Celo Dollar, is also governed by an association, which attracted many of the same companies that initially flocked to Libra.

Facebook has more than 2-billion users, some of whom may be persuaded to give Diem a try. But the social-networking giant has previously worked to distance itself from Libra. In May, it renamed its Calibra blockchain group Novi to make it sound less like Libra.

The Novi team is building a digital wallet that will eventually hold Diem coins, Levey said.

The Diem effort is waiting to be issued a licence by Swiss regulators to launch, Levey said. Diem is also in talks with US federal and state regulators, but isn’t waiting for any specific licenses or approvals from them, he said.

To satisfy regulators, Diem’s system will honour Western sanctions and regulatory reporting requirements.

“All of these design features we think make for a project we think that regulators will welcome,” Levey said, adding that he hopes central banks may wish to use the infrastructure in the future to issue their own digital currencies.

Bloomberg

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