There have been so many twists and turns in this project initiated by the giant Facebook as long ago as June 2019! The old social network with 2.80 billion users will finally be launching its Diem project in 2021. Find out here about the latest decisions taken and the changes involved.
The project still needs to be approved by Finma, the Swiss financial market supervisory authority. Finma has to approve the project, and received the application for payment system authorisation last April. Diem is expected to make its debut at the end of 2021, along with its Facebook wallet. In reality, the currency should only be tested this year, and we do not yet have a timetable for the launch of the platform and its currency.
The creation of the project
The original name of this Facebook project, Diem, was Libra, but since then it's not just the name that has changed. In fact, Diem is a project that has undergone numerous changes, and according to CNBC it should finally see the light of day in 2021. Through Diem, Facebook hopes to create a cryptocurrency network with a virtual currency attached to it. There are currently around a hundred players actively involved in the project. Diem has joined forces with a number of associations and companies, each of which has invested nearly 10 million dollars.
Creating your own virtual currency is risky, but not for the big group that is Facebook. It recently doubled its net profit in 1 year. In the first half of the year, it made a profit of 9.5 billion dollars. This great success is due to major investment in advertising products, helping it to weather the health crisis with flying colours.
Diem's partners
Diem Association aims to bring together a whole host of players, organisations and companies. The concept includes nearly 28 companies and NGOs. So Diem has its back to the wall with these many fruitful partnerships. Here is a list of some of these partners and their areas of activity:
Lyft (mobility)
Ribbit Capital (asset management company)
Coinbase (crypto-currencies)
Farfetch (e-commerce)
PayU (payment)Heifer International (NGO)
Mercy Corps (NGO)
iliad (telecoms)
Creative Destruction Lab (start-up programme)
Kiva (loans)
The founder
David Marcus, the successful French entrepreneur, is the founder of Libra Association and, by extension, Diem Association. He was one of the first major entrepreneurs to use the telephone as a means of payment. He is also the former Chairman of Paypal and the former Vice-Chairman of Facebook Messenger. His many years of experience in the online payment sector are therefore more than beneficial to the launch of his virtual currency project.
Changes to Diem
Initially, this new currency, the Diem, was to be a single stablecoin. A stablecoin is a cryptocurrency whose price is, by definition, more stable. This is because stablecoins are pegged to other currencies. The price of these currencies is more volatile: cryptocurrencies, commodities and fiat currencies. There was to be a stablecoin backed by multiple currencies. When a stablecoin is backed by a fiat currency or a precious metal, it represents a value controlled by an institution. This may be by central banks or it may be held in "real" form, such as gold.
The project was due to be launched in 2020 before running into regulatory problems, notably with the SEC (the US financial markets authority). Finally, in the face of numerous requests from financial regulators, it was decided to create a single stablecoin. This Diem stablecoin is based solely on the US dollar, and is known as diemUSD. The Diem created will therefore be very similar to the two major stablecoins already in existence. Based on the dollar, these two large stablecoins are USDC (created by Coinbase and Circle) and USDT.
The objectives of the new cryptocurrency
Diem Association's main objective is to facilitate trading in order to curry favour with financial regulators. There is therefore no question of the new crypto-currency competing with and short-circuiting the activities of currencies that already exist on the market. Diem does not replace fiat currencies, so 1DiemEURO is worth 1 Euro.
Exchanges using Facebook's virtual currency will be almost immediate and very simple. In fact, they will not go through a banking network or an intermediary. What's more, the creators stipulated in the project's white paper, shared on 18 June 2019: "Libra's mission is to develop a simple global currency and financial infrastructure to serve billions of people".
The Diem blockchain
This is not a decentralised protocol like many of its competitors such as Bitcoin. The Diem blockchain protocol requires permission to access the protocol. Each request must therefore be validated by a participant. However, Facebook hopes in the near future to make its blockchain more open and decentralised. For the time being, however, it is difficult to achieve this because it could create too much instability and does not guarantee sufficient security for its billions of users.
Where will this currency be available?
The virtual currency will be available on Facebook's many platforms. These include WhatsApp, Messenger and Instagram. So Diem will be able to arouse the curiosity and interest of billions of users around the world. Every month, more than 2.8 billion people around the world visit at least one of Facebook's platforms. What's more, Diem Association will be able to count on the many loyal customers of these partners. Diem will also be used to settle payments for the company's major partners. These include Uber, Spotify and Lyft.
Transaction fees
When it comes to possible transaction fees, the designers of blockchain are trying to keep them as low as possible. In fact, the white paper details that interest from reserve assets will be used to pay for multiple network expenses. The interest collected has four objectives: to pay the costs of the network, to reduce transaction fees, to pay a share to the investors and partners who helped Diem get off the ground and finally to help the currency develop.
Concerns
However, the fact that the currency is available to so many users and available on so many social platforms is of great concern to governments. Indeed, the issue of control of this currency by government and financial institutions is the number one concern of this project. The global consequences that the currency could have are attracting fierce criticism. This is why a number of financial companies, including Visa, Mastercard and eBay, disassociated themselves from Libra at the very start of the project in October 2019. One thing is certain: Diem guarantees that it will not collect or store the personal data of blockchain users and customers.
