David Marcus, a former Meta executive and head of its now-defunct blockchain project Diem, has revealed how political opposition, rather than regulatory issues, led to its demise.

In a post on X, Marcus described the project as a “political kill,” halted by behind-the-scenes pressure on banks and resistance from high-ranking officials.

Political Pressures Undermined Regulatory Efforts

Launched as Libra before its rebranding to Diem, Meta’s stablecoin project aimed to revolutionize global finance. However, despite years of intense modifications to meet regulatory demands, Marcus claims that the project was ultimately thwarted by political resistance.

Treasury Secretary Janet Yellen played a decisive role, warning Federal Reserve Chair Jay Powell about the political fallout of allowing the project to proceed. Marcus pinpointed this as the moment the venture unraveled, stating, “Effectively, this was the moment Libra was killed.”

Following Yellen’s intervention, the Federal Reserve reportedly pressured participating banks during private calls. Marcus shared that the Fed’s general counsel delivered a statement to banks, saying, “We can’t stop you from moving forward and launching, but we are not comfortable with you doing so.” This subtle but clear warning led to the project’s unraveling.

In January 2022, Meta sold Diem to Silvergate Bank, which abandoned the initiative a year later, citing unsustainable prospects and writing off its investment entirely.

Diem’s Legacy: New Horizons in Blockchain

Although Diem failed to materialize, its influence persists through the blockchain talent it nurtured. Many former team members transitioned to Aptos and Sui, two innovative Layer 1 blockchain projects utilizing Move, a programming language originally developed for Diem.

Meanwhile, Marcus has shifted his focus to Lightspark, a startup enhancing Bitcoin’s Lightning Network. The collapse of Diem underscores the tensions between private-sector innovation and public-sector control in the financial landscape.

Regulators were especially concerned about the concentration of power. A 2021 report by the President’s Working Group on Financial Markets warned that combining a stablecoin issuer and a corporate giant like Meta could result in an “excessive concentration of economic power.”

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