A former high-ranking Facebook executive outlined the failure process of the company's stablecoin and blockchain project Diem (formerly known as Libra), which ultimately led many team members to turn to other blockchain projects.
According to David Marcus, the former head of Diem and former board member of Coinbase, the political machinations behind the scenes were the project's downfall, which he described as a "100% political killing" in a lengthy post on X.
"The government or regulators no longer have any legal or regulatory means to terminate the project. This is 100% a political killing—executed by intimidating banks that are subject to the government."
According to Marcus, despite "...working tirelessly and making modifications for two years to appease lawmakers and regulators," and receiving limited support from some members of the Federal Reserve, including Chair Jerome Powell, the Diem project still faced strong opposition politically from Treasury Secretary Janet Yellen, who reportedly warned Powell in a biweekly meeting that allowing the project to move forward would be tantamount to "political suicide," and that she would not support him politically.
Marcus stated that although he is skeptical about the rumor, he still believes that Yellen's opposition was the fatal blow that led to the failure of the Diem project, "...this was actually the moment Libra was killed."
Marcus then stated: "Shortly thereafter, the Federal Reserve organized a conference call with all the participating banks, and the Fed's General Counsel read a prepared statement to each bank, saying: 'We cannot stop you from continuing to advance and launch, but we are uncomfortable with you doing so.' And that was it; everything ended."
How Libra Was Killed. I never shared this publicly before, but since @pmarca opened the floodgates on @joerogan’s pod, it feels appropriate to shed more light on this. As a reminder, Libra (then Diem) was an advanced, high-performance, payments-centric blockchain paired with a…
— David Marcus (@davidmarcus) November 30, 2024
In January 2022, the Diem Association sold its intellectual property and assets related to the payment network to the now-defunct crypto-friendly bank Silvergate, which abandoned the project a year later and wrote down its related investments as losses. (Politico) At the time, reports indicated that Facebook's business model (which would allow the company to control a significant portion of the financial system) raised significant concerns among regulators.
A regulatory report on stablecoins released by the Financial Markets Working Group led by the U.S. President in November 2021 noted: "The combination of stablecoin issuers or wallet providers with commercial companies could lead to excessive concentration of economic power."
Many former members of the Diem team later joined Aptos and Sui, two Layer 1 blockchains built using the programming language Move, originally developed by Facebook for its stablecoin project. David Marcus is leading his own cryptocurrency startup Lightspark, aimed at expanding the capabilities of the Bitcoin Lightning Network.
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