What is Facebook crypto currency
Facebook Diem: Dollar-based cryptocurrency only for the USA - withdrawal from Switzerland
Surprising change of course at the Diem company: The initiative promoted by Facebook, formerly known as Libra, does not want to bring any global crypto money with the same name from Switzerland onto the market based on a basket of traditional currencies. It is now planning to launch its payment system from the USA in a first phase and to focus on this national target market. The cryptocurrency should also only be based on the US dollar.
Approval was imminent
With its announcement in 2019 that it would be issuing a crypto currency together with major partners, Facebook woke up the banking world and raised the alarm bells among regulators. The digital means of payment should be covered by a basket of currencies and short-term government bonds and thus be as stable as possible as a "stablecoin". However, experts quickly warned of a "colonization project" and a "systemic danger". Companies such as Mastercard, Visa, eBay, Paypal or the payment service provider Stripe quickly canceled their participation in the project.
In April 2020, the Geneva-based company Diem Networks submitted an application for a payment system to the Swiss financial market regulator Finma despite these setbacks. The approval process was already "well advanced", so approval was within reach, the authority announced on Thursday. The now withdrawn application originally pursued a currency basket-based approach, but was significantly revised in the course of the realignment of Diem.
Stablecoin "Diem USD"
The company itself announced on Wednesday that it had entered into a partnership with the Californian Silvergate bank. This should now exclusively release the stablecoin "Diem USD", which is only linked to the US dollar. In addition, only financial service providers in the USA would be connected to the means of payment for the time being. The main office will be relocated from Geneva to the US capital Washington.
Diem Networks will operate the Diem Payment Network (DPN) in the future, it continues. This is an approved blockchain-based payment system that enables the real-time transfer of Diem stablecoins between approved network participants. The new partnership is an important step in order to set up a corresponding pilot project for the issue of the crypto coins. Diem members who could experiment with virtual money include Facebook, companies like Checkout.com, Lyft, Shopify, Spotify and Uber.
"Intensive approval process"
"We are committed to a payment system that is safe for consumers and businesses, makes payments faster and cheaper, and takes advantage of blockchain technology to bring the benefits of the financial system to more people around the world," said Diem- Chef Stuart Levey. Diem Networks US will register as a money service company with the Financial Crimes Enforcement Network of the US Treasury Department.
Even if the Finma approval is no longer necessary, the project "benefited greatly from the intensive approval process in Switzerland" and the constructive feedback from the inspectors there and from more than two dozen other supervisory authorities from all over the world, Levey emphasized.
Criticism from the European Central Bank
An increasing demand for electronic payments and the advance of large service providers have meanwhile intensified the considerations of central banks around the world to issue digital currencies themselves. At the European Central Bank (ECB), for example, the idea of issuing a digital euro is maturing. At the same time, there is sharp criticism of the attempts by Internet companies to introduce global private means of payment. They planned to bypass the traditional and well-secured financial service providers "through their control over social media, online marketplaces and mobile technologies," criticized ECB director Fabio Panetta recently. Such data-driven models could endanger privacy.
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