Facebook’s Libra has been one of the main topics in 2019, since the project was announced, and even in 2020, when the major tech company struggled with all the regulatory pressures emerging.
In the meantime, the project has been rebranded into Diem and on top of that, the Diem Association had withdrawn its application for a payment system license, from the Swiss Financial Markets Authority, now shifting its operations to the United States, as fortune.com had reported several weeks ago.
Diem – a new major stablecoin?
There has been a lot of enthusiasm emerging in the cryptocurrency market, when Facebook announced it wants to launch its own digital token, driving crypto valuations impulsively higher. That has faded gradually, due to regulatory concerns coming from both government and central banks’ officials, not only in the US but all around the world.
At first a stablecoin backed by several different currencies, Diem now plans to be a stablecoin, backed entirely by the US dollar. Facebook users will be able to exchange USD into Diem tokens and use it for purchases on the platform or to send money abroad fast.
Source: https://www.cnbc.com/2021/04/20/facebook-backed-diem-aims-to-launch-digital-currency-pilot-in-2021.html
The Diem Association, includes 25 companies alongside Facebook and has also announced a partnership with Silvergate Capital Corp, in order to issue the stablecoin. Whether or not it will manage to benefit from the trust of a large audience, is still to be seen, but in the meantime, regulation might continue to be a roadblock.
Regulatory pressures still an issue
With operations based in the United States, how the US Congress or the Federal Reserve will view Diem plays a critical role in the well-being of the project. Facebook’s CEO Mark Zuckerberg and other high-ranking officials, have already been grilled by Congress members during several hearings, which communicates there is still reticence from the government when it comes to privately-own cryptocurrencies.
Even though the crypto market has grown exponentially over the years, and people now can use trading platforms, like Global Solution to trade, in the case of Facebook’s Diem the situation is completely different, since the cryptocurrency will be available to a +2 billion audience of people, with major implications for the global financial system.
Cryptocurrency trading is popular
Markets are no longer focused on the Facebook projects and due to regulatory concerns, a lot of retail and institutional players have shifted towards cryptocurrency-based derivatives. When using Global Solution or other trading platforms, users don’t have physical exposure to cryptocurrencies, but instead are using derivatives to take advantage of price movements.
Such an approach is expected to be popular, until there will be more clarity in terms of how governments want to regulate cryptocurrencies. It is yet to be seen if the laws will be friendly and foster long-term growth, or whether regulation will be designed to favor central bank digital currencies, issued by central banks. China is already testing the digital yuan, and the ECB or the FED are expected to follow on a similar path in the next several years.
