This blog is written by Sanskriti, a first year student of DSNLU, Jabalpur
On 1st December 2020, Facebook rebranded its cryptocurrency Libra as Diem. After facing worldwide backlash and scrutiny due to its regulatory and legal issues, the social media giant re-launched its digital coin as Diem in a new manner to gain regulatory approval by stressing the project's independence.
In 2019, Facebook announced launching its digital coin in the market of cryptocurrencies. Its mission was to enable a simple global payment system and financial infrastructure that will empower billions of people.[i] It wanted to create a more inclusive and innovative financial system to provide digital payment facilities, especially to those 1.7 billion people who do not have access to any bank facilities. This predicted that the initiative would also help to create millions of jobs for people, especially in developing countries. The Libra Association, formed to regulate the working of Libra, was supposed to be independent and would not be involved with any banking and governmental regulations. Many players from the financial and payment sector joined Facebook's project. To stabilize the coin further, Libra formed a basket with help of several other currencies that would prevent fluctuations in the value of the coin.
Libra was originally planned to launch within the first half of 2020 but the plans slimmed down after regulators and central banks raised concerns about its privacy policies and the structure of its digital coin. The US house committee on financial service held meetings with the CEO of Facebook and with Facebook's financial supervisor. It expressed widespread mistrust of Facebook's cryptocurrency plan, saying that the company's attempt at entering into financial services was troubling and should be broken.[ii] Several countries in Europe also jointly condemned the initiative of Facebook's entering into the financial and monetary sector. This worldwide regulatory scrutiny led to various launch partners, such as Mastercard, VISA, eBay, etc, dropping out of the project.
But this time rebranding means that the company wants to emphasize a new simpler and revamped structure. The name Diem is originally a Latin word that means Day, which will replace Libra coin. Apart from rebranding the digital coin, Facebook has also changed the name of its wallet from Calibra to Novi, which is derived from two different Latin words – “Novus” means new and “Via” means way. It would be responsible for building a digital wallet to hold Diem cryptocurrency. Changing the name of the wallet also ends the legal issues of trademark infringement that were filed against Calibra and the last change was from the Libra association to the Diem association which currently consists of 27 members. Initially Libra targeted to attract around 100 companies to invest in it but now it has left this target and is now focussing and working towards a new start. Apart from rebranding its digital coin, Facebook has reduced its influence on the project as the lawmakers wanted organizational independence from the social media network giant if the project is ever to gain trust to win regulatory approval.[iii] Now Facebook will also work like any other member of the Diem Association.
Diem Association has declined to comment on the date for the launch but it is expected to launch this year. Diem would be a single dollar-pegged stable coin unlike the concept of Libra that was aiming to become a stable coin backed by several other government-issued currencies. It now aims to set itself apart from others by its focus on aspects of concern to regulators and western governments including sanction controls and financial crime. "The Diem project will provide a simple platform for fintech innovation to thrive and enable consumers and businesses to conduct instantaneous, low-cost, highly secure transactions," Stuart Levey, Diem Association CEO, [iv]said in a press release. This project would also develop policies on anti-money laundering, terrorist financing, sanction compliance and has ditched earlier plans to allow anyone to join its network. But it will still stand on its commitment to build a safe, secure, and compliant payment system.[v]
There are still plenty of concerns regarding privacy issues and their functioning that are needed to be addressed by the Association. And for that, Diem has also appointed several world-class professionals as the Board of Directors and experts in its executive teams to help Diem Association and its network to achieve regulatory approval from governments and regulators. This includes the appointment of Dahlia Malkhi as the Association's Chief Technology Officer, Christy Clark as Chief of Staff, Steve Bunnell as Chief Legal Officer, and Kiran Raj as Executive Vice President for Growth and Innovation and Deputy General Counsel.[vi] They will also carry out management and representation of the company. Therefore, now with a proper team in place, Diem is diligently working towards the development of its technology and mode of operation.
[i]Welcome to the official white paper, DIEM, (Jan. 8,2021, 8:17 PM),https://www.diem.com/en-us/white-paper/
[ii]Campbell Kwan, Libra changes name to Diem for organizational independence, ZD NET, (Jan.8,2021, 8:31 PM), Libra changes name to Diem for 'organisational independence' | ZDNet
[iii]David Hamilton, what is Diem – A detailed analysis, SECURITIES, (Jan. 9,2021,9:01 PM),https://www.securities.io/investing-in-diem-facebooks-libra-project-everything-you-need-to-know/
[iv]Facebook-Backed Digital Coin Libra Renamed Diem to Gain Regulatory Approval, GADGETS 360, (Jan.9,2021, 9:31 PM),https://gadgets.ndtv.com/internet/news/facebook-libra-diem-rename-rebrand-cryptocurrency-digital-coin-regulatory-approval-2332928
[v]Nikhilesh DE, Libra rebrands to diem in anticipation of 2021 launch, COIN DESK,(Jan.09,2021,9:11 PM),https://www.coindesk.com/libra-diem-rebrand
[vi]Facebook cryptocurrency project Libra changes name to Diem Association, BUSINESS STANDARD, (Jan.12,2021, 9:05 AM)https://www.business-standard.com/article/technology/facebook-cryptocurrency-project-libra-changes-name-to-diem-association-120120200232_1.html
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