Diem is dead, but Meta is still pursuing blockchain-based payments

FEB 09, 2022

NEW DELHI: Meta, formerly Facebook, may have abandoned the Diem cryptocurrency project, but it isn’t quite done with blockchain-based payments yet. In a filing with the US Securities and Exchange Commission (SEC), the company said some of its initiative, including digital wallet Novi, may use “blockchain-based assets" like USDP stablecoin issued by Paxos Trust Company.

“Our future initiatives to support commerce in the metaverse also may use blockchain-based assets in digital payments. Use of blockchain-based assets in payments are a relatively new and unproven technology, and the laws and regulations surrounding them are uncertain and evolving," the filing said.

According to Meta, such digital payments efforts “have drawn scrutiny from governments and regulators" in different jurisdictions, which the company expects will continue. The filing added that Meta is “participating in responses" to such inquiries related to its digital payments initiatives and noted that adverse actions from regulators and governments may “adversely affect" its reputation and “harm" its business.

To be sure, the company noted that market acceptance of its digital payments products are subject to “significant uncertainty" and hence the company couldn’t be sure that such products will be offered in “a timely manner, or at all".

Meta’s first cryptocurrency project, Diem, was shut down earlier this month. The Diem Association, which was in charge of the project and functioned as an independent body, announced that its intellectual property and other assets related to running the Diem Payment Network were sold to Silvergate Capital, the holding company for California-based Silvergate Bank.

"As we undertook this effort, we actively sought feedback from governments and regulators around the world," said Stuart Levey, chief executive of Diem, in a statement. "Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead," he added.

On 1 February, Stephane Kasriel, who heads the Novi wallet at Meta, said in a tweet that the company will be “continuing to execute" on its “existing fintech plans" as it builds its future metaverse focused products. Kasriel’s statement came via a series of tweets on the same day as Levy’s.

The Diem project began in 2019 and was called Libra at the time. The project faced pushback from many who saw it as an effort by Meta to muscle into global financial ecosystems. Some even said it would give the company too much power, especially given the tussles the firm has had over rules and regulations enforced on platforms like Facebook and Instagram.

The Libra cryptocurrency project originally had participation from large payments firms like Visa, PayPal, eBay, Mastercard and more, but most of them left the project following the above mentioned criticism.